Many business owners choose to protect their business by forming a separate entity, such as a limited liability company (also known as an “LLC”). Often, forming an LLC for your business can hit the “sweet spot” of compliance concerns. This is because an LLC gives your business benefits like a formal structure, its own tax number, and some limited separation from yourself, while also avoiding many of the corporate formalities that are required with traditional corporations.
Many business owners take this lack of corporate formality to mean that their LLC has no recordkeeping requirements whatsoever. Unfortunately, this is simply not the case. Even with an LLC, there are some key documents you should make sure you have in order.
There are two big organizational documents your attorney is likely to talk to you about when you’re forming an LLC: your “Articles of Organization” and your “Operating Agreement.”
Your “Articles of Organization” are the formal formation document for your LLC, which in California is filed with the Secretary of State’s office. These Articles include the most basic information about the LLC, including its name, purpose, address, and contact information for the registered agent.
Meanwhile, your “Operating Agreement” gets into the nitty-gritty of running your LLC. Finalizing this document is an incredibly important part of forming your LLC, as this document governs such important details as who is permitted to make decisions on behalf of your LLC and the terms under which membership interest in your LLC may be sold. This agreement becomes even more important as more people are involved in the ownership and management of the LLC. In short, this is your business’s “road map” for future, unexpected events. As such, it’s incredibly important to work with your business attorney to make sure this agreement is well-drafted and kept in a safe place.
For multi-member LLCs, another document to make sure you have on hand is an up-to-date list of all current members’ names and contact information. If the LLC is managed by any managers, those managers’ contact information should be included as well.
While LLCs have less formal meeting requirements than traditional corporations, it’s still a good practice to take notes at any meeting of the LLC members and/or managers and to keep those notes in your business’s file. Important details in these notes include accurate records of the date, time, and location of the meeting, the names of the attendees, and any topics discussed and decisions made, as well as any other information that the members feel (or your attorney advises) needs to be contained in the official record. For instance, meetings about important employment financial, or other high-level business decisions may need to be recorded. Work with your business attorney to determine exactly the level of meeting documentation your LLC needs.
Another important category of records to make sure you have in tip-top shape is your LLC’s financial records. This includes copies of the documentation for your taxes and your tax returns for at least the past three years, in the event your business is audited. Make sure that your tax records include federal, state, and local tax returns, as well as records of employment and sales taxes where applicable. You should work with your tax advisor and your business attorney to identify exactly the sorts of financial records your business will need to keep.
If your business would like help keeping its records compliant, reach out to the team at Chase Law Group, P.C. Give us a call at (310) 545-7700 to set up a consultation today.