Hi, Lisa here back to share some legal tips, little legal education and today I’m gonna talk about one of my favorite things – LLCs. Specifically I’ll talk about the things you need to do.
You have an LLC, now what?
There are immediate steps that you really need to take and then there are ongoing practices that you need to implement, so I’m gonna rush through those.
Once your LLC is formed, you need to get a good CPA, or Enrolled Agent to discuss tax implications and possible tax selections that the LLC can make to give you the best tax picture for the business. You may at that time also want to consider hiring a bookkeeper or a payroll company, especially if you’re making any kind of tax selection such as the S-Corp election . Which requires you that you be put on payroll.
Business Banking Account and EIN
You need to immediately open your business banking account which needs to be connected to your EIN (Employer Identification Number), issued by the IRS, it’s functionally a social security number for the business. You want to make sure you’re using that number and not your social security number. And the biggest thing is that you’re not going to do is mingle personal funds and business funds because that’s the single best way to eliminate the legal liability protection that the LLC is meant to give you. You also need to get insurance. People say “can I have one or the other?” No. Think of them as an airbag and a seat belt. You need both; they protect you in different ways and they’re both there in case the other fails.
Follow your State Laws
You need to check with your city or town where your primary place of business is to find out if you have to register your business. In Massachusetts, by state law, all businesses are required to be registered in the city or town of their primary place of business; however, those municipalities have the ability to carve out exceptions for LLC and corporations. But not every city or town has done that, so you do need to inquire from one municipality to another, and then you need to either create or revise your estate plans to reflect your business succession plans. If you do not have an estate plan that mirrors your business succession plans, it is quite possible that the Probate Court can override those decisions and let the estate pass the way it has to per your will or as prescribed by law.
On-going Practices for an LLC
First of all you need to maintain proper records. Depending on what state you’re in, the law may be different about what records are required and how long they need to be retained by the company so it’s really important that you check your local statute or check with an attorney to help you figure out what your record keeping requirements are. If you’re going to be doing business in the states other than the LLC’s primary state you may need to register there as foreign entity. This is a very subjective decision – if you have one client in another state, do you need to register? Maybe not. But if you have several clients, or you open a secondary office, or a large portion of your revenue comes through that other state – then most definitely you do need to register. I would recommend checking with both local counsel and counsel in the other state to determine if and when you need to register foreign entity.
Annual Filings and Liability
Make sure you file your annual report with the state and pay the accompanying fee. In Massachusetts there is no late fee which is nice, but if you fail to file your annual report and pay your fee for three years or so, the state will administratively dissolve your LLC and your LLC will no longer exist.
If you need to get a certificate of good standing (maybe you’re entering into an agreement with another business and they want to see it or you’re trying to get a loan and they want to see it) –
if you’re not up to date on your annual reports and your filing fees, the state will not issue that certificate.
Make sure whenever you are signing documents on behalf of the business that you’re signing with your title, whether that’s member, manager, owner, president – whatever you call yourself, make sure that’s how you sign your name. In fact you can even sign checks that way if you’re using checks. So, it could be Ann Smith, President and that makes it very clear (perhaps it is overkill) that you’re not signing that in the individual capacity.
Because the whole point of an LLC is that we’re pulling you the person out of the situation of being liable for anything that business does so you want to make sure that you’re following all these practices to keep your personal assets safe and protected from any debts or obligations or lawsuits of your business.
Conclusion
Hopefully this was helpful, if you need help you can use the information you got here to ask all the right questions of local counsel and really make sure that you have a good solid foundation for your business and that you’re following all of the formalities to keep that liability protection in place.
