As we discussed earlier, even a single-owner company needs a well-written LLC agreement. Make sure your LLC agreement has certain key things in it. Make sure, by using an experienced attorney, that it is protecting you.
We’ve seen cases where people have fought over the ownership of the LLC. We’ve seen times where liability has not been kept, and we’ve seen people build agreements that don’t give them the flexibility needed to run the business. There are correct provisions that must be in your LLC agreement. An attorney can help.
#1 Make sure the ownership is clear. Even a single-owner company must have records, a document that shows you as a single owner, in your file for evidentiary reasons. We have seen disputes where companies have not had an LLC agreement. Later, one person claims to be the owner of the company, and the other person doesn’t have materials to prove ownership. In a case like that, make sure that you have that document in place. While it won’t be dispositive in the event of litigation–it typically won’t end the litigation–it will certainly be a good factor to show who is the real owner of the company.
#2 Make sure you have correct liability-eliminating language. We’ve seen LLC agreements with unfortunate language that has increased owner liability, rather than decreased it. While it is beyond the scope of this blog, there is certain language that you can put in the LLC agreement to minimize the risk of having liability from third parties. Make sure your LLC agreement limits your administrative burdens. Some copied and pasted LLC agreements require a lot of record keeping, meetings, and other issues. One of the reasons LLCs are popular is that they require less work, they are simpler to administer, and they are straight forward. Make sure that your LLC agreements are simple, and easy to run, and do not put you in a situation where someone can later say, “You didn’t follow your own formalities,” and expose you to liability risks.
These are simple things, but they can easily be built into your LLC agreement and add necessary protection.
What has been your experience with LLC agreements? Did you write an LLC agreement when you set up your company? What are you thinking about when you’re setting up your LLC agreement? Let us know in the comments below.
Each case is unique. Past results do not guarantee future outcomes. This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. FreeImages.com/photographer C. Glass.
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