Author Topic: How to properly create and administer an LLC?  (Read 1437 times)

flowerofsun

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How to properly create and administer an LLC?
« on: May 15, 2017, 01:54:02 AM »
So in order to make sure your LLC is correctly formed and supported, what do you do?
1) Correct formation: pretty much just opening it, right? Having bylaws, registered agent, operation agreement, minutes of the organizational meeting
2) Proper functioning of an LLC: pretty much minutes of annual meetings?

Am I missing anything?

Thedudeabides

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Re: How to properly create and administer an LLC?
« Reply #1 on: May 15, 2017, 06:30:15 AM »
Yes on 1 and 2. #2 could be restated as following corporate formalities.

Then there is proper separation from yourself. This means the LLC has its own bank account, no commingling of funds, its own address (ideally). Basically it should not be an "alter ego" of yourself.

Those are the basics as I understand them. Here is an empirical study examining cases involving piercing of the corporate veil. The study contains a list of how the veil was pierced and frequency. http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=3501&context=clr


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SeattleCPA

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Re: How to properly create and administer an LLC?
« Reply #2 on: May 15, 2017, 07:21:31 AM »
So in order to make sure your LLC is correctly formed and supported, what do you do?
1) Correct formation: pretty much just opening it, right? Having bylaws, registered agent, operation agreement, minutes of the organizational meeting
2) Proper functioning of an LLC: pretty much minutes of annual meetings?

Am I missing anything?

I think the bylaws and annual meeting are really only for a corp. I.e., the operating agreement is in place of bylaws. And if your operating agreement doesn't require a members annual meeting, you won't need that. BTW, you must have a registered agent, but that can be (should be?) you.

Also, in talking with attorneys about piercing the veil, the advice I've always received is that it is really hard to pierce the veil if business makes good faith effort. I remember one attorney saying, basically, "you need to understand that corps and llcs are products the state sells to businesses and investors... they make lots of money for basically no effort... and their judges don't want to make the "product failure" rate high because then the product is no good.

flowerofsun

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Re: How to properly create and administer an LLC?
« Reply #3 on: December 17, 2018, 12:41:35 AM »
So in order to make sure your LLC is correctly formed and supported, what do you do?
1) Correct formation: pretty much just opening it, right? Having bylaws, registered agent, operation agreement, minutes of the organizational meeting
2) Proper functioning of an LLC: pretty much minutes of annual meetings?

Am I missing anything?

I think the bylaws and annual meeting are really only for a corp. I.e., the operating agreement is in place of bylaws. And if your operating agreement doesn't require a members annual meeting, you won't need that. BTW, you must have a registered agent, but that can be (should be?) you.

Also, in talking with attorneys about piercing the veil, the advice I've always received is that it is really hard to pierce the veil if business makes good faith effort. I remember one attorney saying, basically, "you need to understand that corps and llcs are products the state sells to businesses and investors... they make lots of money for basically no effort... and their judges don't want to make the "product failure" rate high because then the product is no good.

That is a very good point!

flowerofsun

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Re: How to properly create and administer an LLC?
« Reply #4 on: December 17, 2018, 12:43:57 AM »
Yes on 1 and 2. #2 could be restated as following corporate formalities.

Then there is proper separation from yourself. This means the LLC has its own bank account, no commingling of funds, its own address (ideally). Basically it should not be an "alter ego" of yourself.

Those are the basics as I understand them. Here is an empirical study examining cases involving piercing of the corporate veil. The study contains a list of how the veil was pierced and frequency. http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=3501&context=clr


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Wow! That is very impressive! Big document! Thank you!

Jon Bon

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Re: How to properly create and administer an LLC?
« Reply #5 on: December 17, 2018, 05:15:06 AM »
PTF

Can you go into costs and time required to set this up?

I dont want to name names but someone has been putting this off for like 2 years now.....