IS CORPORATE COMPLIANCE NEEDED FOR AN LLC?

As we are nearing the end of the year, I thought this would be a great time to discuss the benefits and purpose of proper compliance for your entities, whether it be and LLC or corporation that you currently own and operate for your business through.

We all hear about maintaining proper compliance for our entities but what does that really mean? And why is it necessary even for an LLC?

Proper compliance helps us maintain our “corporate veil of protection” which is the most important benefit that an LLC can provide us as business owners and Investors.

LLCs are considered to be separate individuals. The fact that it is viewed as its own person is where our separation and protection come from.
For this reason, LLC compliance is the process of following the rules that ensure a limited liability company (LLC) is a separate entity from its owners, which make compliance important for LLCs to have and maintain.

Many entrepreneurs structure their business as a limited liability company (LLC) because like corporations, LLCs offer personal liability protection for their owners. But unlike corporations, LLCs are not legally required to adhere to many of the same corporate formalities required of corporations which can make them more attractive many times.
Although the administrative requirements for an LLC are far less strict than for a corporation, you’ll still need to abide by some operational formalities if you want to maintain your personal liability protection. If you fail to adhere to these formalities, a court could remove the protective barrier shielding your personal assets, known as “piercing the veil,” leaving you personally liable to creditors, in the event of a judgment. 
 
Though formalities required for LLCs can vary by state, implementing and adhering to the following steps can help ensure your company stays compliant.

Here are some steps that can help you with keeping your LLC Compliant:

CREATE AN OPERATING AGREEMENT

Though many states do not legally require LLCs to have an operating agreement, it is still important that you have one in place, even if you’re the sole member or owner. An operating agreement provides the guidelines for how your company will be run, and more importantly establishes the business as a true separate legal entity.
 
Among other functions, an operating agreement details how the ownership, responsibilities, and profits are divided among the LLC MEMBERS OR OWNERS it establishes how the company will be managed.

CONDUCT ALL BUSINESS IN THE COMPANY’S NAME

To make people aware that they’re dealing with an LLC and not an individual, all business should be conducted in the company’s name, including adding your chosen limited-liability abbreviation. This means using the company letterhead on all correspondence, identifying your company on websites and social media, naming the company as a party in all legal agreements, as well as making all financial transactions in the company’s name, not your own.

CREATE AND MAINTAIN A SEPARATE COMPANY BANK ACCOUNT

As soon as your LLC formed and your EIN number is established, you should set up a bank account in the company’s name. Opening a business bank account helps to maintain the separation of business and personal assets. This helps to prevent “piercing the corporate veil”. When this happens, the owners’ personal assets can be used to satisfy business debts and liabilities. Maintaining a business bank account helps you ensure liability protection of your LLC.

FILE ANNUAL REPORTS WITH THE STATE

Most states require LLCs to file annual reporting. These reports keep the state apprised of your company’s status, and they are sometimes referred to as a “Statement of Information.”
 
Each state has different rules as to how often these report needs to be filed, what filing fees must be paid, and if other documents need to be filed with the report to address key changes to your LLC.

HOLD REGULAR MEMBER MEETINGS AND KEEP MINUTE

Though many states may not require LLCs to hold  Annual meetings, it is still important to do so for many reasons. Holding regular meetings with accurate minutes provides strong evidence that your LLC is serious about observing administrative formalities. Combined with your operating agreement, regular reports to the state, and diligent separation of personal and business finances, such meetings offer extra protection if creditors ever seek to pierce your corporate veil.
 
Outside of protecting your personal liability, holding regular meetings and keeping detailed minutes just makes good business sense, especially for multi-member LLCs. Holding regular meetings facilitates consensus among members when making major decisions, keeps members informed of business actions, and provides a forum to plan for your organization’s future.
 
Meeting minutes also provide a clear record of member discussions, votes, and decisions, which can help reduce member disputes and conflict.


Following these steps will help ensure that your corporate veil is maintained properly. Taking a little time each year to ensure that these practices are in place will allow you the piece of mind knowing that these simple steps can help create evidence that your LLC is truly a separate individual if a liability does arise.

With NCH, the state’s top business formation service, you can register your LLC in Nevada quickly and easily. Our specialists will help you choose the right entity for your company and understand why an LLC in Nevada is your best option. We’ll assist you with all necessary Nevada LLC forms, including the vital Articles of Organization, and help you comply with state regulations. In addition, we offer expert assistance with tax compliance, credit building, and payroll management. Schedule a private consultation to explore effective solutions to minimize tax liabilities and protect your wealth. Start unleashing your LLC’s full potential today with NCH. Schedule a consultation with David Chafkar today!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.