LLC Management

LLC Management

LLC management is a very important part of running an LLC.  Ninety percent of the people who get set up a limited liability company (LLC) only get halfway to the goal.  There isn’t any management.  The people get the state papers filed, pay the fees, and about 80% of them get an operating agreement.

All that’s great, but without LLC management, they are failing to use a powerful tool.  It’s like they get a new car, and the most they ever learn how to do is use the power window buttons.  They have no clue that this vehicle can actually take them places.

Your LLC is a business vehicle.  It should get you asset protection, tax benefits, and business protection.  One very important part of LLC management is to get your articles of organization filed (some people call the operating agreement an “LLC company agreement”), and technically you have an LLC.

The operating agreement will name the LLC manager, and the operating agreement will lay out all of the LLC management requirements.  Note the word “manage.”  Your LLC needs TLC.  It needs to be managed.

The attorneys and the LegalDoom sites mostly gloss over the LLC management issues.  Nobody sits you down and goes through the tax options.  Nobody gives you a management handbook.  Getting you the state papers is as far as the attorney’s or website’s responsibility goes.

LLC Management Formalities

LLCs have formalities, not as many as a corporation, but there are formalities that the LLC manager needs to observe and follow.  For example:

• Proper payment of fees each year
• Proper filing each year
• IRS compliance
• Money management (Commingling money is the number one way you can lose asset protection in an LLC.)
• Records keeping (You may not be required to have your management meetings, but they will go a long ways toward establishing you asset protection base when you get sued
• And the list goes on and on

Your operating agreement will actually define dozens of responsibilities that the LLC manager needs to execute.  The object in drafting the operating agreement is to define lots of things.  The courts will “honor” your operating agreement when you get into court.

If you’ve defined the situation that the lawsuit is addressing, and your LLC manager has “lived by your operating agreement rules,” the courts will use your operating agreement to solve the matter.  That’s powerful stuff.

When you only get halfway there, you don’t get maximum asset protection, maximum tax benefits, and maximum ease of LLC management.  Just getting the attorney’s stock forms or the internet site’s lowest-common-denominator forms really does only get you halfway there.

You’ve got to know what needs to be done and take an active hand in your LLC management.  It will mean more security and even more money – maybe a lot more money. Take a look at my Operating Agreement. It will help you get your company in order.