Notice to LLC Owners

Good Paperwork Could Save Your MoneyA Timely Notice to Owners of Limited Liability Companies – Especially Those With Only One Member

Under the limited liability company statutes, multi-member limited liability companies provide limited liability for the members and managers of the company. However, single member limited liability companies do not automatically provide limited liability. Limited liability for single member limited liability companies is a facts and circumstances issue. Limited liability is more likely to be upheld if the LLC has proper structure of set-up and adequate evidence and records to verify that the company was properly operated under the limited liability company umbrella.

Guidelines for Preventing Piercing the LLC Veil for All LLC’s - Especially Single Member LLC’s

  1. A copy of the Articles of Organization.
  2. A copy of the Operating Agreement, usually included in the initial meeting minutes of the original Member(s).
  3. Documents evidencing the fact, amount and date of all member contribution in exchange for units of ownership, such as cancelled checks.
  4. Copies of any member agreements to which the limited liability company members are parties and any amendments to those agreements.
  5. Copies of all unit certificates issued by the limited liability company and or cancelled certificates.
  6. A registry of units owners, with the full legal name and address of each member, updates to record admissions of new members and dissociations of former members.
  7. A registry of units certificates, updated to record cancellations of old certificates and issuances of new ones.
  8. Copies of loan documents and similar documents formalizing loans from members to the limited liability company and from the limited liability company to members, managers and employees.
  9. Copies of any certificates of good standing the limited liability company has obtained.
  10. Copies of any annual reports statutorily required to be filed with the secretary of state and duly filed with the secretary.
  11. Copies of minutes of annual member meetings, signed by the manager, or consents instead of annual meetings, signed by all members.
  12. Copies of all agreements between members evidencing agreement by the limited liability company to make all payments for company assets that were purchased by the member using their credit since the limited liability company did not have sufficient credit to make the purchase initially.
  13. Do not use your LLC to commit fraud or to cover misconduct.
  14. Be sure to follow all formalities required by the LLC Act. Although the Act may not require formal meetings of members or other documenting of business activities, you should keep extensive written documentation of business activities and decisions, especially if you are a single member LLC.
  15. Adopt and use a formal accounting system and keep accurate and documented financial records. Open and use a bank account specifically for the LLC.
  16. Be sure to adequately capitalize the company and maintain adequate capitalization.
  17. When dealing with third parties be sure that they understand that they are not dealing with you but are dealing with an LLC.
  18. If you have more than one member do not refer to your fellow members as partners or associates, but as members or other owners.
  19. Do not treat LLC assets as your property to be used by you.
  20. If you are a single member limited liability company, consider having another member.

 

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