Some business owners starting out are very focused on getting their LLC formed.
Sure, it’s good to set up a legal entity – it’s a great way to protect personal assets from legal liability – but only if it’s done right.
Of course, business owners should form an entity, but when they do, they need to make sure that they understand how to operate it properly, including things like observing formalities and not commingling the company’s funds with their personal funds.
If someone formed an LLC when they launched their business and thought, well now that my assets are protected, I’ll get around to the other legal stuff later, the LLC is probably not doing very much for them.
An annual legal checkup is a great way to fix that.
One of the most important things to review every year is the Operating Agreement. As a business grows and changes, its owners should (at least annually) take some time to review the operating agreement to see if it still accurately reflects the business.
The agreement might need to be updated for things like:
· Membership Changes
· Management Structure Changes
· Changes in the Members’ Personal Circumstances
...among many other things.
Setting up an LLC is not a “one time and done” thing, it needs to be operated in the right way and the documents must evolve to reflect the current circumstances.