LLC Corporate Formalities: Are They Needed and What Do I Do?

“Corporate formalities” and “LLC” don’t seem like they should be in the same sentence. Isn’t that one of the perks of creating an LLC? So you don’t have to do those?

 If you’re a single-member LLC in particular, it doesn’t matter too much (except you definitely should keep business and personal finances separate even if single-member-- we discuss this next).

Keep Business and Personal Finances Separate

Every business should keep its finances and accounting separate from its personal accounts. Mixing your personal transactions with your business ones makes it easier for plaintiffs to sue you personally, in the event you actually get sued. It’s part of a concept called “Piercing the Corporate Veil.”

To “pierce the corporate veil” basically means that if your company runs into legal trouble with another party and can’t pay a debt or judgment, the party suing you can “pierce your corporate veil” and pursue your personal assets.

So, here are some easy ways to actually keep your finances separate:

• Open a separate bank account for your business;
• Use that debit card or a company credit card or company checks when paying for anything; and
• If you need to take money out or put it in, that’s fine. Just withdraw or deposit from other bank accounts rather than paying off personal credit cards or charges with a business card and vice versa.

LLC Resolutions

You can also use LLC Resolutions to memorialize important business decisions.  If you make a decision with your partner that, per your operating agreement, would require a "vote," then open a Word or Google Doc, or use our template, and put this information in it: On the resolution you should include:

• Company name
• Date resolution is passed
• Very specific, fact-based details of the issue
• Signatures of the member or members who agreed to pass the resolution