Keeping your LLC in Good Standing
Failure to understand and fulfill ongoing legal and tax requirements is one of the main reasons that Limited Liability Companies (LLC's) lose their good standing with the state. The Secretary of State may refuse to say that an LLC is "in good standing" and may revoke an LLC if the LLC does not comply with certain annual maintenance requirements. This can make it easier for a creditor or adversary to "pierce the veil" and hold the LLC's owners personally liable for the financial obligations of the company. Compliance with federal, state, and local requirements is a key part of asset protection, and customers should discuss regulations specific to their business with their legal and tax advisors.
How to Protect Your Assets
Initial registration and licensing. To protect their personal assets, business owners can form an LLC by filing Articles of Organization, or an equivalent document, with the Secretary of State in the state of formation. Multiple-member LLC's or single-member LLC's that will hire employees obtain a federal tax ID number from the IRS. Other state or local filings, such as business licensing or state or municipal tax registrations, may also be required.
Annual federal, state and local filings. Most states have an annual franchise tax and/or annual report filing fee. LLC's may also be liable for payroll tax, property taxes, sales and use taxes (sometimes called "seller's permits") or business license renewals. The Department of Revenue or equivalent office in the state of formation of the LLC, as well as the states in which the company is doing business, are typically good starting points for research on annual state requirements. Of course, LLC owners also file individual federal and state income tax returns and may be responsible for annual requirements at the county or city level.
Creating and maintaining internal records. An LLC is governed by its operating agreement, an internal document that designates how and by whom the company will be run, the name of each member and the amount or percentage of interest (ownership) held by each member. Though LLC's are not required to hold annual meetings or draft meeting minutes like a corporation, it is good practice for an LLC to follow some formalities. To maintain its records, an LLC may hold organizational or annual meetings of members and document important information like financial activities and contracts. LLC's are required to keep a formal record of all amendments to the operating agreement and any change in the members or membership interests.
Doing Business in Multiple States
When an LLC operates outside its state of formation, it generally needs to register to do business in every state in which it operates. This process is sometimes referred to as "qualification" and involves filing a Certificate of Authority or other similar document, and getting a business license, in each additional state in which the business will operate. We can assist in qualification filings in any or all U.S. States. Doing business in a jurisdiction without authority from that state government can result in penalties and other legal implications.
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