Are You Doing Annual Maintenance on Your Limited Liability Company (LLC)?
Limited liability companies offer a lot of advantages over other types of legal options for your business. They provide asset protection, give legitimacy to your company, and allow you to have a simplified way to have several owners. While they are far less complicated compared to a corporate structure, there are still a few things that you need to do at least on an annual basis to maintain the company.
Keeping up with these obligations is more than just good practice. Many of these are legal requirements that could undermine the legal status of your business if you fail to complete them. If you are not already doing annual maintenance on your LLC, then you should be!
Formal Requirements: Annual Fees, Taxes, and Filings
Every state has slightly different requirements for annual reports, but they all contain similar information. In fact, in some states, filing requirements actually only occur every other year, and at least one state only requires a filing once every ten years. Be sure that you understand your state’s requirements and comply with filing needs.
Annual reports are required so that the state has the most updated information about your LLC. Specifically, the goal of the report is to ensure that contact information is updated and current.
Most filing requirements also require that you pay fees or taxes at the same time as well. Some filing fees are minimal, while others may be hundreds of dollars.
In general, you must provide state authorities with your annual report by mailing in a hard copy, or many states offer electronic filing options as well. Most states have forms that you can simply fill out, rather than making your own list of the necessary information. Keep in mind that failing to meet filing requirements or pay fees can cause the immediate dissolution of your company.
You may also have separate tax filing obligations that are not associated with annual filing requirements, too. Whether this applies to you is based on how your business is structured from a tax perspective.
Additional Recommended Annual Maintenance
While most states do not have any other legally required forms or upkeep for your LLC, it is a good practice to take some very simple steps to maintain your company from year to year.
In addition to filing a report with your state, you may also need to hold annual meetings with the owners of the LLC. While not every state has this requirement, it is a good idea to have at least yearly meetings to check in with the other owners of the company. Some potential topics to discuss at these meeting include:
- General updates and information about the company
- Sales or profit information
- Human resources issues
- Long-term planning
- Potential larger expenses
- Investment or expansion opportunities
- Fundraising or debt discussions
- Overall goals or objectives of the company
What the annual meeting looks like for your company is completely up to you. It can be a good opportunity to discuss problem areas or opportunities for growth.
Many organizational documents (including articles of organization and operating agreements) will require a certain meeting process. If you fail to follow what is noted in your organizational documents, that can undermine your status as an LLC. Be sure to read and understand the requirements that you made for yourself with the LLC was established.
When you have your annual meeting (or any meeting), you should also keep minutes of that meeting. Minutes are a formal term for notes about what happened in the meeting. The minutes will also often include information about:
- Where and when the meeting took place
- Who was present at the meeting
- Which topics were discussed
- The voting results of any vote that took place during the meeting, including who voted which way in some cases
- General notes about discussions that took place
While minutes are not required, having a record of what was said at the meeting can be very helpful if there is any question in the future about what took place at the meeting (or even whether the meeting took place at all). Notes like these also help prove that the LLC is a separate legal entity from the owners.
Review and Update Formation Documents
There are many situations where your LLC documents simply do not match what your company is actually doing. In most cases, you will need to review requirements so that you ensure that you are meeting them. However, there may be circumstances where it will make more sense to revise your formation documents so that it matches what you are doing in practice.
Reviewing your formation documents at least on an annual basis will help you make sure that you are in compliance, which decreases the chances that you run into any legal issues.