Your Limited Liability Company

Your Limited Liability Company

Your Limited Liability Company

Keep your LLC in good standing with the law. Use this book's forms and instructions to create a paper trail that show the courts and the IRS that you've followed the rules. This bestseller shows you how to:

Includes all the legal forms you need!

Available as part of Nolo's Start & Run an LLC Bundle

July 2022 , 10th Edition

A limited liability company can give your small business tax benefits and shield you from personal liability for business debts. But without careful record keeping, regular meetings, and formal minutes, you could lose these advantages.

Your Limited Liability Company provides all the instructions and forms you need to maintain the legal validity of your LLC. Forms include:

You‘ll also find more than 50 of the most commonly used legal resolutions to insert into your minutes or written consents. Use them to:

“We‘ve never seen a Nolo book we didn’t like.”—Small Business Opportunities

“The nation‘s largest publisher of self-help legal books and software.”—Wall Street Journal

9781413329636 Number of Pages Included Forms

Preparing for LLC Meetings

LLC Minutes and Written Consents

Standard LLC Business Resolutions

LLC Tax Resolutions

Resolutions to Amend the LLC Articles and Operating Agreement

Membership Resolutions

LLC Hiring and Compensation Resolutions

Loans to the LLC

Loans by the LLC

Self-Interested Business Dealings between the LLC and Its Members or Managers

Anthony Mancuso

Anthony Mancuso is a California corporations and limited liability company expert. A graduate of Hastings College of the Law in San Francisco, Tony is an active member of the California State Bar, writes books in the fields of corporate and LLC law, and has studied advanced business taxation at Golden Gate University in San Francisco. He has also been a consultant for Silicon Valley EDA (Electronic Design Automation) and other technology companies. He is currently employed at Google. Tony is the author of many Nolo books on forming and operating corporations (both profit and nonprofit) and limited liability companies. Among his current books are The Corporate Records Handbook, How to Form a Nonprofit Corporation, Form Your Own Limited Liability Company , and LLC or Corporation? His books have shown businesses and organizations how to form a corporation or LLC for decades. Tony is also a licensed helicopter pilot and guitarist.

Your LLC Companion

1. LLC Documents

2. Using Meetings, Minutes, and Written Consents

3. Steps to Take Before Holding a Meeting

4. How to Hold an LLC Meeting

5. How to Prepare Written Minutes of LLC Meetings

6. How to Hold a Paper LLC Meeting

7. How to Take Action by Written Consent Without an LLC Meeting

8. Standard LLC Business Resolutions

9. LLC Tax Resolutions

10. Resolutions to Amend the LLC Articles and Operating Agreement

11. LLC Membership Resolutions

12. LLC Hiring and Compensation Resolutions

13. Loans to the LLC

14. Loans by the LLC

15. Self-Interested Business Dealings Between the LLC and Its Members or Managers

16. Lawyers, Tax Specialists, and Legal Research

Appendixes

Appendix A: Accessing This Book’s Downloadable Forms on the Nolo Website

Appendix B: How to Locate State LLC Offices and Laws Online

Index

Introduction:
Your LLC Companion

Congratulations—you’ve formed a limited liability company (LLC)! Running your business as an LLC gives you limited liability for business debts (like a corporation) but allows you to avoid some of the legal formalities and tax rules that apply to corporations. It’s one of the most flexible—and efficient—ways small business owners can structure their business.

To get your LLC up and running, you’ve already had to complete some essential start-up tasks: preparing and filing articles of organization (called a “certificate of organization” in some states) and preparing and signing an LLC operating agreement. Once these documents are completed and the initial membership interests are sold to the founders and initial investors, you may be tempted to forgo any further formalities and get back to doing what you do best—running the day-to-day business.

You can’t simply keep running your business exactly as you did before you formed an LLC, however. There are a few new formalities and paperwork requirements you should observe to keep proper records of important LLC decisions, transactions, and meetings. This will protect your LLC status and keep members, managers, and others apprised of the LLC’s activities. This book will help you take care of these formalities, quickly and easily. It provides all of the forms and advice you’ll need to:

Why You Should Record Key LLC Decisions

If you don’t take the time to properly memorialize important decisions and meetings, you could run into trouble. You can lose crucial tax benefits if you fail to properly document and support important tax decisions and elections. Even worse, ignoring the legal technicalities of running your LLC may jeopardize its legal existence as a separate business entity, which means that you could be held personally liable for LLC debts. And, of course, as time passes and memories fade, the reasons important LLC decisions were made, and the extent of each member’s or manager’s participation in these decisions, may be forgotten. This can lead to controversy and dissension, even in the ranks of a closely held LLC, unless you use written minutes, consent forms, and resolutions to keep track of all important LLC decisions and votes.

Here are some reasons why you should record important LLC decisions:

You don’t need to document routine business decisions—only those that require formal manager or membership approval. In other words, you don’t have to clutter up your LLC records binder (see Chapter 1) with records of decisions to purchase supplies or products, maintain or improve services or products, or other day-to-day issues.

However, key legal, tax, and financial decisions absolutely should be acted on and recorded by your managers and/or members. For example, you’ll want to keep records of:

These and other important decisions should be made by your managers and/or members and backed with legal paperwork. That way, you’ll have solid documentation if key decisions are questioned or reviewed later by managers, members, creditors, the courts, or the IRS.

The federal CARES Act, which expired at the end of 2020, addressed challenges faced by small businesses as a result of the COVID-19 pandemic social and economic shutdown. For example, under the Act’s Paycheck Protection Program (PPP), eligible small business owners could apply for loan funds to help them maintain payroll, hire back laid-off employees, and cover applicable overhead. In some cases, loan funds did not need to be repaid. Also, the IRS provided employer tax credits and relaxed filing deadlines during the COVID-19 crisis. States also provided small business relief, for example by delaying tax filing deadlines and waiving entity filing fees.

The federal American Rescue Plan Act of 2021 provided COVID-19 relief measures for individuals, which included direct stimulus payments, extended unemployment compensation, eviction and foreclosure moratoriums, and the refund of an increased Child Tax Credit.

You can search online for information on the latest federal and state COVID-19 related benefits using the following links:

Who Should Use This Book

Although all LLCs should formally record important decisions, some may need more help than this book provides. This book is for smaller LLCs—those that are privately owned and have a manageable number of members (up to about 35) and employees (up to about 50)—whose members and managers can work together without a great deal of controversy. A typical example is a family-owned LLC or an LLC that is owned by several people.

If your LLC is larger you will have to contend with a wider variety of viewpoints— and may not be able to count on the cooperation of all members in making or documenting decisions. Similarly, if a significant number of your LLC’s members don’t participate in the day-to-day management of the business, you’ll need to use procedures that keep these members informed of LLC actions. The procedures described in this book won’t be sufficient for LLCs that have to contend with a lot of disagreement among members or have to spend significant time and energy apprising far-flung, uninvolved members of the LLC’s activities.

How to Use This Book

This book explains, step by step, how to document important LLC decisions, votes, and transactions. You’ll learn how to hold meetings and create the minutes, written consent forms, and resolutions necessary to record LLC business.

In every business, someone must be responsible for managing the day-to-day affairs of the company, and the LLC is no exception. There are two types of LLC management structures. In a member-managed LLC, all members are responsible for managing the business; most small LLCs take this form. In a manager-managed LLC, the business is managed by just some (not all) of its members, or is managed by one or more managers who are not LLC members.

This book refers to “managers’ meetings” and “members’ meetings.” However, if your LLC is member-managed, then you don’t have to hold separate managers’ meetings to approve LLC decisions—a members’ meeting will do. If your LLC is manager- managed, then you should hold separate managers’ and members’ meetings to approve important LLC decisions. After all, you want to make sure that all owners (all members) agree with the important decisions made by the management team.

You can handle most of this routine paper- work yourself, using the forms and instructions provided with this book. And, as explained in Chapter 2, LLC owners don’t necessarily have to get together in person every time you have to make an important decision—you may also be able to approve LLC business through written consents or minutes. (The methods you can use depend on your state’s law—Appendix B explains where to find state-by-state LLC rules.) The information in this book will help you decide which approval method to use and how to prepare the necessary records.

The paperwork you’ll need to complete consists of minutes and written consent forms for members and managers, together with resolution forms that are inserted into the minutes or consent forms to show approval of various types of LLC actions. To help you complete these forms, you’ll find detailed instructions and samples in each chapter. All of the forms are included on Nolo’s website on the companion page for this book (see Appendix A for the link).

However, you won’t have to read the whole book cover to cover to get the information you need. Start by reading Chapters 1 and 2, which explain some basics about LLCs and the options you have for making decisions. Armed with this information, you can decide whether to document the particular decision you’re facing by (1) holding an actual meeting of your members and/or managers, (2) preparing minutes for a meeting that doesn’t actually occur (called a “paper meeting”), or obtaining the written consent of your members and/or managers to the action or decision at hand.

When to Consult a Professional

Small, privately held LLCs routinely hold LLC meetings and prepare standard resolutions and other legal paperwork. However, you may occasionally face a more complicated decision that has important legal, tax, or financial ramifications—and in this situation, you should get some professional advice. Please see a tax or legal specialist before using the forms provided with this book if:

A consultation of this sort will be far more cost-effective than making the wrong decision and having to fix it later. For information on choosing and using a legal or tax professional, see Chapter 16

We hope you enjoyed this sample chapter. The complete book is available for sale here at Nolo.com.

This Book Comes With a Website

Nolo’s award-winning website has a page dedicated just to this book, where you can:

DOWNLOAD FORMS - All forms in this book are accessible online. After purchase, you can find a link to the URL in Appendix A.

KEEP UP TO DATE - When there are important changes to the information in this book, we will post updates

And that’s not all. Nolo.com contains thousands of articles on everyday legal and business issues, plus a plain-English law dictionary, all written by Nolo experts and available for free. You’ll also find more useful books, software, online services, and downloadable forms.

Product Details

A limited liability company can give your small business tax benefits and shield you from personal liability for business debts. But without careful record keeping, regular meetings, and formal minutes, you could lose these advantages.

Your Limited Liability Company provides all the instructions and forms you need to maintain the legal validity of your LLC. Forms include:

You‘ll also find more than 50 of the most commonly used legal resolutions to insert into your minutes or written consents. Use them to:

“We‘ve never seen a Nolo book we didn’t like.”—Small Business Opportunities

“The nation‘s largest publisher of self-help legal books and software.”—Wall Street Journal

9781413329636 Number of Pages Included Forms

Preparing for LLC Meetings

LLC Minutes and Written Consents

Standard LLC Business Resolutions

LLC Tax Resolutions

Resolutions to Amend the LLC Articles and Operating Agreement

Membership Resolutions

LLC Hiring and Compensation Resolutions

Loans to the LLC

Loans by the LLC

Self-Interested Business Dealings between the LLC and Its Members or Managers

About the Author

Anthony Mancuso

Anthony Mancuso is a California corporations and limited liability company expert. A graduate of Hastings College of the Law in San Francisco, Tony is an active member of the California State Bar, writes books in the fields of corporate and LLC law, and has studied advanced business taxation at Golden Gate University in San Francisco. He has also been a consultant for Silicon Valley EDA (Electronic Design Automation) and other technology companies. He is currently employed at Google. Tony is the author of many Nolo books on forming and operating corporations (both profit and nonprofit) and limited liability companies. Among his current books are The Corporate Records Handbook, How to Form a Nonprofit Corporation, Form Your Own Limited Liability Company , and LLC or Corporation? His books have shown businesses and organizations how to form a corporation or LLC for decades. Tony is also a licensed helicopter pilot and guitarist.

Table of Contents

Your LLC Companion

1. LLC Documents

2. Using Meetings, Minutes, and Written Consents

3. Steps to Take Before Holding a Meeting

4. How to Hold an LLC Meeting

5. How to Prepare Written Minutes of LLC Meetings

6. How to Hold a Paper LLC Meeting

7. How to Take Action by Written Consent Without an LLC Meeting

8. Standard LLC Business Resolutions

9. LLC Tax Resolutions

10. Resolutions to Amend the LLC Articles and Operating Agreement

11. LLC Membership Resolutions

12. LLC Hiring and Compensation Resolutions

13. Loans to the LLC

14. Loans by the LLC

15. Self-Interested Business Dealings Between the LLC and Its Members or Managers

16. Lawyers, Tax Specialists, and Legal Research

Appendixes

Appendix A: Accessing This Book’s Downloadable Forms on the Nolo Website

Appendix B: How to Locate State LLC Offices and Laws Online

Index

Sample Chapter

Introduction:
Your LLC Companion

Congratulations—you’ve formed a limited liability company (LLC)! Running your business as an LLC gives you limited liability for business debts (like a corporation) but allows you to avoid some of the legal formalities and tax rules that apply to corporations. It’s one of the most flexible—and efficient—ways small business owners can structure their business.

To get your LLC up and running, you’ve already had to complete some essential start-up tasks: preparing and filing articles of organization (called a “certificate of organization” in some states) and preparing and signing an LLC operating agreement. Once these documents are completed and the initial membership interests are sold to the founders and initial investors, you may be tempted to forgo any further formalities and get back to doing what you do best—running the day-to-day business.

You can’t simply keep running your business exactly as you did before you formed an LLC, however. There are a few new formalities and paperwork requirements you should observe to keep proper records of important LLC decisions, transactions, and meetings. This will protect your LLC status and keep members, managers, and others apprised of the LLC’s activities. This book will help you take care of these formalities, quickly and easily. It provides all of the forms and advice you’ll need to:

Why You Should Record Key LLC Decisions

If you don’t take the time to properly memorialize important decisions and meetings, you could run into trouble. You can lose crucial tax benefits if you fail to properly document and support important tax decisions and elections. Even worse, ignoring the legal technicalities of running your LLC may jeopardize its legal existence as a separate business entity, which means that you could be held personally liable for LLC debts. And, of course, as time passes and memories fade, the reasons important LLC decisions were made, and the extent of each member’s or manager’s participation in these decisions, may be forgotten. This can lead to controversy and dissension, even in the ranks of a closely held LLC, unless you use written minutes, consent forms, and resolutions to keep track of all important LLC decisions and votes.

Here are some reasons why you should record important LLC decisions:

You don’t need to document routine business decisions—only those that require formal manager or membership approval. In other words, you don’t have to clutter up your LLC records binder (see Chapter 1) with records of decisions to purchase supplies or products, maintain or improve services or products, or other day-to-day issues.

However, key legal, tax, and financial decisions absolutely should be acted on and recorded by your managers and/or members. For example, you’ll want to keep records of:

These and other important decisions should be made by your managers and/or members and backed with legal paperwork. That way, you’ll have solid documentation if key decisions are questioned or reviewed later by managers, members, creditors, the courts, or the IRS.

The federal CARES Act, which expired at the end of 2020, addressed challenges faced by small businesses as a result of the COVID-19 pandemic social and economic shutdown. For example, under the Act’s Paycheck Protection Program (PPP), eligible small business owners could apply for loan funds to help them maintain payroll, hire back laid-off employees, and cover applicable overhead. In some cases, loan funds did not need to be repaid. Also, the IRS provided employer tax credits and relaxed filing deadlines during the COVID-19 crisis. States also provided small business relief, for example by delaying tax filing deadlines and waiving entity filing fees.

The federal American Rescue Plan Act of 2021 provided COVID-19 relief measures for individuals, which included direct stimulus payments, extended unemployment compensation, eviction and foreclosure moratoriums, and the refund of an increased Child Tax Credit.

You can search online for information on the latest federal and state COVID-19 related benefits using the following links:

Who Should Use This Book

Although all LLCs should formally record important decisions, some may need more help than this book provides. This book is for smaller LLCs—those that are privately owned and have a manageable number of members (up to about 35) and employees (up to about 50)—whose members and managers can work together without a great deal of controversy. A typical example is a family-owned LLC or an LLC that is owned by several people.

If your LLC is larger you will have to contend with a wider variety of viewpoints— and may not be able to count on the cooperation of all members in making or documenting decisions. Similarly, if a significant number of your LLC’s members don’t participate in the day-to-day management of the business, you’ll need to use procedures that keep these members informed of LLC actions. The procedures described in this book won’t be sufficient for LLCs that have to contend with a lot of disagreement among members or have to spend significant time and energy apprising far-flung, uninvolved members of the LLC’s activities.

How to Use This Book

This book explains, step by step, how to document important LLC decisions, votes, and transactions. You’ll learn how to hold meetings and create the minutes, written consent forms, and resolutions necessary to record LLC business.

In every business, someone must be responsible for managing the day-to-day affairs of the company, and the LLC is no exception. There are two types of LLC management structures. In a member-managed LLC, all members are responsible for managing the business; most small LLCs take this form. In a manager-managed LLC, the business is managed by just some (not all) of its members, or is managed by one or more managers who are not LLC members.

This book refers to “managers’ meetings” and “members’ meetings.” However, if your LLC is member-managed, then you don’t have to hold separate managers’ meetings to approve LLC decisions—a members’ meeting will do. If your LLC is manager- managed, then you should hold separate managers’ and members’ meetings to approve important LLC decisions. After all, you want to make sure that all owners (all members) agree with the important decisions made by the management team.

You can handle most of this routine paper- work yourself, using the forms and instructions provided with this book. And, as explained in Chapter 2, LLC owners don’t necessarily have to get together in person every time you have to make an important decision—you may also be able to approve LLC business through written consents or minutes. (The methods you can use depend on your state’s law—Appendix B explains where to find state-by-state LLC rules.) The information in this book will help you decide which approval method to use and how to prepare the necessary records.

The paperwork you’ll need to complete consists of minutes and written consent forms for members and managers, together with resolution forms that are inserted into the minutes or consent forms to show approval of various types of LLC actions. To help you complete these forms, you’ll find detailed instructions and samples in each chapter. All of the forms are included on Nolo’s website on the companion page for this book (see Appendix A for the link).

However, you won’t have to read the whole book cover to cover to get the information you need. Start by reading Chapters 1 and 2, which explain some basics about LLCs and the options you have for making decisions. Armed with this information, you can decide whether to document the particular decision you’re facing by (1) holding an actual meeting of your members and/or managers, (2) preparing minutes for a meeting that doesn’t actually occur (called a “paper meeting”), or obtaining the written consent of your members and/or managers to the action or decision at hand.

When to Consult a Professional

Small, privately held LLCs routinely hold LLC meetings and prepare standard resolutions and other legal paperwork. However, you may occasionally face a more complicated decision that has important legal, tax, or financial ramifications—and in this situation, you should get some professional advice. Please see a tax or legal specialist before using the forms provided with this book if:

A consultation of this sort will be far more cost-effective than making the wrong decision and having to fix it later. For information on choosing and using a legal or tax professional, see Chapter 16

We hope you enjoyed this sample chapter. The complete book is available for sale here at Nolo.com.

Forms

This Book Comes With a Website

Nolo’s award-winning website has a page dedicated just to this book, where you can:

DOWNLOAD FORMS - All forms in this book are accessible online. After purchase, you can find a link to the URL in Appendix A.

KEEP UP TO DATE - When there are important changes to the information in this book, we will post updates

And that’s not all. Nolo.com contains thousands of articles on everyday legal and business issues, plus a plain-English law dictionary, all written by Nolo experts and available for free. You’ll also find more useful books, software, online services, and downloadable forms.