The LLC is a popular way to structure a business because it provides personal liability protection to the members-- like a corporation does to its shareholders--but without as many administrative formalities. But if you’re an LLC member, don’t let this lull you into complacency.
As a business owner, you’re responsible for the proper governance of the LLC. If a conflict arises—either among LLC members or between the LLC and a third party—the governing documents and methods through which the owners govern the LLC may help prevent a conflict from escalating into litigation. Even if a dispute reaches court and you are unable to control the outcome, you can ensure that the LLC presents clear evidence of its intent and purpose by practicing good governance.
Good LLC governance hinges on four key practices:
-All distributions and any advancements to members should be documented as such.
-Members who are also employees of the LLC should receive a paycheck from the LLC payroll account like any other employee would.
Practicing good governance of the LLC helps make the intent and purpose of the LLC clear to its members and to outside parties. And, if a conflict goes to court, good governance provides the judge or jury with a clear picture of what the members intended for the LLC.
We work closely with business owners to create and implement forward-thinking business-planning strategies. We anticipate what can go wrong and counsel our clients on how to best maintain their businesses so that they are well prepared to weather any storm.