When you started your business, everyone suggested you create an LLC to protect your personal assets from your business. So now that you’ve done that, are you done? Not quite. In order to keep the separation between your personal and business assets, there are a few additional steps that are required.
First, do you have an operating agreement? This is a legal document that states all the rules of the company. Who are the owners, what percentage of ownership do each have, voting rules and the company tax representative are just some of the items that are determined when drafting the document. I highly recommend that you contact an attorney to have this drafted. Many go online to find a template and while that can work, all documents aren’t created equal and you don’t want to find out that your operating agreement has things missing when you’re in court. So, get one and sign it in front of a notary. Scan it so you have a digital copy and keep the original in your important documents folder.
Second, at least once a year, you get to have a meeting with all the owners of the company…..and yes, this includes those that are single member LLCs (one owner). The courts state that if you want the protection of a corporation, you get to act like one. So, your company is required to have a “shareholder meeting” with the owners. Discuss old business, new business and document it. Look for a “Meeting Minutes” template online or Microsoft Word also has solid templates you can use. Once complete, save it, print it out and place a copy in the same file as your operating agreement.
And a last tip with the meeting minutes – use them as a mini business plan. Since you’re required to write them out, use it to plan your year, quarter or month (depending on how often you have your shareholder meetings). Then you can look back on what your goals were for that period and see if you get to shift or if you’re on track.
So, create that LLC but make sure you’re completing all the necessary steps to create the division/protection you intended. If not, you might as well just register the business name and operate as a sole proprietor.
About LIGHTS: Ohio University’s Innovation Center founded the LIGHTS (Leveraging Innovation Gateways and Hubs Toward Sustainability) program in 2016. LIGHTS’ Innovation Network catalyzes the creation of companies to create high-wage jobs, and attract greater private investment in the coal-impacted regions of Ohio, West Virginia, and Kentucky. The Appalachian Regional Commission generously funded the program because of its unique way of matching complex problems and opportunities facing corporations, communities, and individuals to a network of two strategically-placed Innovation Hubs and seven Gateways. New marketable products arise from these problems. The Gateways and Hubs are new business incubators and makerspaces serving a 28-county area.