So you've gone through the process of formally launching a Limited Liability Company (LLC).
That wasn't so bad, was it? Now it's time to get down to the hard work of making your business profitable. But before you bury your paperwork in a filing cabinet, there's something you should know . . .
The task of forming your LLC was just the beginning of a long process of LLC maintenance. Like other business entities, LLCs need to be monitored, tweaked and cared for on a continuous basis. Some maintenance tasks are required by state regulatory agencies. Others are internal requirements that may seem less demanding, but are no less important for the viability of your business.
Since LLCs are state regulated, we can't overemphasize how important it is to verify your LLC maintenance requirements with a state representative. However, LLC formalities, requirements and expenses usually involve the following:
- Annual reporting. Many states require LLCs to file an Annual Report (also known as an Annual Statement). The form this document takes varies by state and includes an annual fee ranging from $10-$300.
- Franchise tax. Many states also require LLCs and corporations to pay an annual franchise tax. For LLCs, this tax is typically based on business revenues.
- Operating Agreement updates. Although it's not required, it's a good idea to maintain and update your LLCs operating agreement on an annual basis. You should also consider issuing and recording changes in membership shares or interests.
- Annual member meetings. Again, this is not required in most states, yet it's a good idea to have an annual meeting of LLC members in order to reinforce the LLC's identity as a full-fledged business entity.
- Accurate financial documents. It's absolutely vital to maintain accurate financial documents that clearly underscore the LLC's independent financial status. Any co-mingling of finances at all will jeopardize the LLC's ability to protect your personal assets.
- Adequate capitalization. The LLC must be able to demonstrate adequate capitalization to maintain it operations. If it can't, it could be a sign of fluidity between personal and business assets – and once again, the LLC's liability protection will be threatened.