Limited liability companies (LLCs) are considered separate legal entities from their owners in the eyes of the law. Among other things, this grants LLCs the right to buy and sell stocks in their own name. This provides distinct advantages over sole proprietorships and partnerships, in which all assets are considered the personal property of owners. Limited liability companies can even be formed for the express purpose of trading stocks and performing other investment activities. The advantage of buying stocks on behalf of an LLC is the layer of personal liability protection LLCs provide to company owners.
1. Register your LLC in your state. Your LLC registration is the key to legally buying stocks on behalf of your company. All other steps in the process rely upon this foundation. Contact the Secretary of State's office in your state and request an LLC articles of organization template. You can create articles of organization on your own, but most Secretary of State offices can provide you with a template that ensures all required information is included. Mail in your articles of organization, along with the filing fee and wait for confirmation before setting up an account with a stock-brokerage firm.
2. Designate one or more of the founding members or a hired employee to make stock purchase decisions on behalf of the company. This is not a legal requirement, but it can be very helpful to clearly and formally set forth responsibility for researching and trading stocks.
3. Register for a trading account with an online brokerage. Use the company's name and information when registering to officially make the account the property of the company. Limit the number of people who have access to the trading platform by distributing passwords only to the person or people with formal responsibility for handling the company's stock holdings. Change the password on this account regularly to add an extra layer of protection and always change the password immediately after someone with access to the trading account leaves the company.
4. Have the designated company trader or traders use the company's account to buy and sell stocks through the brokerage firm. All stocks bought through the company's account will be the sole property of the LLC and can be used in whatever way the company sees fit, according to any decision-making guidelines set forth in the operating agreement. You may decide, for example, that selling more than 10 percent of the firm's holdings at once requires the consent of all LLC members to protect the account against unwarranted losses.
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