Limited liability companies have given many small businesses some of the tax advantages and liability protections formerly reserved for corporations. As you conduct business as an LLC, remember to keep the following in mind in order to avoid possible challenges to your LLC standing.
Although not a complete list, these are a few of the more important considerations:
- Present the company as an LLC, always. On every piece of paper that is signed, for every business account, down to the electric bill, make certain that the company name, followed by “LLC" is on the document. When entering into a contract, signatories should sign “LLC" with their appropriate title. Courts could deem the company a partnership without it.
- Protect the company’s standing/authority to sue. This is a matter of keeping good standing within the state by paying taxes, filing annual reports, and complying with all statutory requirements.
- Protect the corporate veil. Members should conduct the business honorably and in compliance with the company’s operating agreement in order to protect the “corporate veil," which protects members from individual liability.
- Honor the fiduciary duties of members and managers. There is a duty of full disclosure by LLC members to one another when the company acts. Members are required to be loyal to the LLC and not engage in transactions where the board is interested, but the act would be viewed as self-dealing or self-serving.