Key LLC Governance Principles:

Always Treat Your LLC as a Separate Person

Running a business is overwhelming and takes a lot of time.  You want to spend that time improving your product or service and getting more customers!  But, do not neglect the LLC formalities.  The law needs to see that your LLC is acting as a separate person and is being treated as a separate person. 

If the owners of the LLC are not treating the LLC separate from themselves, why should the  law do so when it comes to liability protection and responsibility?  The good news is that once you understand this, it is easy to put into practice.

In our eBook, The Six Step LLC Formula for Limited Liability Protection, you are given a detailed overview of the specific areas where the legal courts are especially concerned when it comes to treating your LLC as an entity separate from yourself.  The best way to evidence that your LLC is its separate entity is through documentation.  We offer an LLC Forms CD which contains the most often used forms and agreements used by the small business LLC. Learn more about our LLC Expert Forms or Forms CD

LLC Members and Managers Have Fiduciary Duties

In addition to treating the LLC as its separate person, LLC Members of a member managed LLC and LLC Managers of a manager managed LLC have certain duties that they are subject to under the law.  These duties require you to act in a certain way when you are managing the affairs of the LLC.

In summary, you cannot abuse your authority in a way that hurts the LLC, other members of the LLC or third parties such as creditors of your LLC.  Also, if you are given the responsibilities to make business decisions, you cannot take those decisions lightly and you must do your homework.

In our eBook The Six Step LLC Formula for Limited Liability Protection, you learn about the most common LLC situations where Members and managers have been found personally liable for failing to meet fiduciary duties.  You also get instructions on what you need to do to best avoid meeting the same fate as those who have been found personally liable and lost most if not all of their personal assets.


LLC Governance Forms Provide the Proof for Limited Liability Protection

The most important LLC Governance topic is the written "resolution" also known as the Written Member Consent  The LLC is a fictitious entity. 

Once an LLC Operating Agreement is in place, there is still no evidence to prove what the LLC is allowed to do and not do when it is conducting business.  The only way to definitively evidence that an LLC has the proper authority to do something is with another important document known as the LLC Written Member Consent.

An "LLC Written Member Consent" is a document that summarizes the authority of an LLC to perform a business act.  This act can be as simple as opening a bank account, taking out a loan or hiring an employee or it could address complex matters as entering into a joint venture or bringing in equity investors.

If anyone ever challenges the liability protection f your LLC, the first place a court of law looks when determining whether the LLC maintained enough formalities to be recognized as a protective entity for its owners is the LLC governance book.  The LLC governance book has all the official governance documents of an LLC and should include the articles of Organization, Certificate of Organization or Certificate of Formation, the LLC Operating Agreement, and written LLC Member Consents covering all major LLC business activity.

When it comes to LLC Governance, the best procedure you can institute is to create an ongoing regular process (whether it be weekly, monthly or quarterly) where you, as the owner of the LLC, prepare written LLC Member Consents approving all major LLC actions that took place over that period.

If you do it regularly, it will not take too much time and you will be doing the most important thing you can do to preserve the benefits and protections afforded by you LLC.