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LLC Operating Agreements Overview |
Article Submitted by: Mesriani Law Group
Wednesday, 23 December 2009
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One of the most ideal business structures is the limited liability company (LLC) that protects the personal assets of people. While some states do not require entrepreneurs to have LLC operating agreements, Los Angeles corporate lawyers believe that a written contract is the best way to avoid disputes and confusion which may lead to lawsuits. EXCEPTIONS TO LIMITED LIABILITY While the LLC owners' personal assets are protected, there are some instances when they cannot seek protection from this business structure. • The LLC owners' assets are not protected if they will personally agree to become a guarantor to a business debt or bank loan in which their company fails to pay. • They fail to deposit taxes which are withheld from their workers' wages. • The court believes that they intentionally did something which is considered fraudulent or reckless that caused harm to their company or to someone else. • They treat their company's finances as extension of their personal assets rather than a separate entity. This last entry is the most common mistake of LLC owners. According to business consultants, the provisions in LLC are considered void if the owners treat their businesses as extension of their personal assets. In case the court finds out that the owners violate the provisions in LLC, their personal assets such as house, jewelry, car, and anything that has a value will be liquidated to pay for the business debts they owe from suppliers and vendors. To make sure that the courts will recognize that LLC owners have limited personal liability, they should follow certain provisions that will protect their personal assets. According to lawyers, here are the ways to make the provisions of LLC enforceable: • Provide enough funding for the LLC. It is important to invest enough cash to the business to make sure that its operation will continue especially in times of weak economy. By providing enough funds, owners will also meet their liabilities and expenses without paying fees for late penalties and high interest rates. • Operate in legal way and practice transparency in business. Owners should practice transparency by not concealing and misrepresenting facts such as the state of their business finances to suppliers, creditors, and vendors. • Draft a comprehensive operating agreement. Many lawyers agree that a written operating agreement will not only provide solutions to potential problems and disputes but also makes the provisions of LLC legally enforceable. • Pay taxes and report the company's profits and losses. LLC owners, either one-member or multi-owner, should pay income taxes just like any ordinary employee. (The advantage of this business structure is that owners are not required to pay business taxes.) However, they are required to pay the income tax of the profits which are kept in their business bank account. Article Source: http://www.ArticleBlast.com |
About The Author:
Our skilled Los Angeles corporate lawyers provide legal assistance in drafting LLC operating agreements. For consultation, visit our website and dial our toll free number.
Our skilled Los Angeles corporate lawyers provide legal assistance in drafting LLC operating agreements. For consultation, visit our website and dial our toll free number.
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