How To Maintain Your LLC

After you have received a Certificate of Organization from the Secretary of State and a Federal EIN from the IRS, you must properly maintain your limited liability company (LLC). Failure to maintain an LLC correctly may result in you being personally liable for the actions and debts of the LLC. Thus, you would not be able to utilize the asset protection abilities of the LLC.

Strong record keeping is essential when it comes to receipts for expenses; any deductions you will want to receive, and business assets (what you bought, what you paid, and its depreciation). Also, you need to make sure that you do not commingle funds by using business income to pay for personal items or vice versa. Failure to maintain accurate and separate accounting can result in the ability of a creditor to “pierce the corporate veil.” This phrase means that the layer of protection that is provided by your LLC will no longer be adequate to protect your personal assets.

Typically, personal liability is limited to what the individual personally invested, however that liability can be set aside with the alter ego doctrine. This is where the court holds individual members liable for the businesses’ debts. In order to avoid these processes, it is best to:

1.       File a separate tax return when necessary

2.       Sign documents in the name of the LLC

3.       Keep detailed records

4.       Comply with all annual filing requirements

5.       Adequately fund the LLC

6.       Keep separate bank accounts

There is a common misconception that when you form an LLC your personal liability will ALWAYS be protected, but this is not so. To achieve that full protection, your LLC must be properly maintained.

We always advise that you seek the assistance of a business attorney when it comes to properly maintaining your business. If you would like to discuss how to properly maintain your LLC, then please call us at 770-881-8081.