Steps to not pierce LLC corporate veil.

General Real Estate Investing
1

I understand the part about not commingling your own funds with those of the LLC. And that you have to have a meeting and take minutes.

Is there a list somewhere of all the steps one needs to take after the LLC is created to keep it’s liability protection? Are all those steps you do supposed to be in your operating agreement and you just follow that? It could get expensive running back to an attorney every time I have a question, I’d like to avoid doing that as much as possible. Thanks.

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Are all those steps you do supposed to be in your operating agreement and you just follow that?

yes, if you have good one.

Is there a list somewhere of all the steps one needs to take after the LLC is created to keep it's liability protection?

Nope. Because no one could envision all the different ways somebody could screw it up.

In a nutshell: act like it’s someone else’s business.

[list]

  • have a seperate checking account
  • submit expense reports and get reimbursement when you personally pay for company expenses.
  • don’t pay personal expenses out of company funds
  • want cash out of the company? Take a paycheck, expense reimbursement, distribution or other official form of payment. Don’t “just write yourself a check.”
  • need to put cash in? write a personal check. Call it a capital contribution or a loan. If it’s a loan, sign (as officer of the company) a promissory note to you (personally). Charge interest.
  • need to put property in the LLC? Document document document. Call it a capital contribution.-

[li]don’t sign documents personally; sign as “president,” “managing member” or whatever your title is according to the operating agreement.

  • probably two dozen more I could list.

just treat it like it’s somebody else’s business. You’ll be fine.

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thanks mcwagner

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That’s why you hire an attorney to set up the LLC. It isn’t filing paperwork with the state. That’s like saying parenting is nothing more than getting an SSN and birth certificate for your child.

It is making sure you know what to do to keep the LLC intact and here’s the part all the DIY proponents forget. If you get sued, you will have to hire an attorney to defend the LLC. That means a hefty retainer and hourly fees if the case is a valid. You will spend a bunch of money getting the attorney up to speed on your LLC. If he is the one who set it up, he drafted the agreement and knows it as he learned it on his dime. More importantly, he knows how to defend it and will provide you with annual updates on new case law.

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Thanks–is it possible to get these updates to the operating agreement only when and if the LLC gets sued? This sounds rather expensive to keep returning to a lawyer for updates.

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You get an update whenever this is new case law. Good attorneys review the case and determine the appropriate changes. Why do you think the el cheapo LLC is so cheap? It is never updated. They send you some stuff and forget about you. There is no ongoing relationship and you find out what you have works only when you keep your assets after the creditor attack. You know it didn’t work when the creditor is taking assets to satisfy the judgment.

Seriously, if you are balking at these costs, you really don’t an LLC. You are wasting your time and money if you aren’t going to do properly.