5 Best Practices When Managing an LLC

Google changed its business structure from a corporation to a limited liability company (LLC) in 2015. If you like to keep updated on the most current news, chances are you already know that. 

This restructuring meant the company transformed the rules governing its stock ownership, management, and taxation processes. It gave Google free rein to concentrate on its search and advertising arm and report its own updates to the parent company.

Forming LLCs has become quite popular with businesses. A 2017 year-end economic report from the National Small Business Association found that 35% of small businesses were LLCs while only 19% were corporations. 

So what is an LLC, and why have they become famous lately? A limited liability company is a business structure that operates under the elements of a partnership and a corporation. 

LLCs are popular because they protect personal liabilities. Taxation is also based on the pass-through tax treatment, and management and ownership are flexible.

You can look into a Wyoming vs Mexico LLC to see which is ideal for your business needs. Other states where you can incorporate LLCs include Delaware and Nevada.

If you wish to form an LLC, below are the most effective guidelines to follow in managing one.

On a side note, if you are looking to settle taxes or legal matters for your small business, I would highly recommend this MyCompanyWorks LLC Service to assist you. 

1. Know who you are dealing with

Make sure you know the person you are doing business with. Maintain policies and guidelines to adhere to in case of disagreements between members. 

Problems may not crop up in the beginning. But they sometimes occur years later when you and your partners already have different business priorities. 

You need to have a partnership arrangement, which can be a part of your operating agreement. Make sure to discuss all possible scenarios with your partners and plan your collaboration to the end. 

An excellent example of a situation that may present itself in the future is when you want to venture into a new business or industry. However, your partner is content with the way things are being run and would like the company to operate the same way as before. 

Another instance would be when a partner needs cash and wants to sell his shares, but you do not have the means to buy them out. When these situations occur, you and your members or partners must have a plan to follow.

2. Do the paperwork

It is necessary to do the state filings, tax returns, and permits that come with the business. Not keeping up with the paperwork could mean that the state where your LLC is registered will cancel your company. This means you won’t have any protection from liability if you get sued.

3. Create an operating agreement

An operating agreement is not required by law, but if your company does not have one, state laws will apply to your company. The state can dictate how you run your business, which can mean losing the power to control your business and make it flexible. 

An operating agreement serves as a contract that indicates financial decisions and includes rules, policies, and provisions. Make sure to include any changes voted in by members.

4. Avoid fraudulent conveyance of assets

A fraudulent conveyance of assets is transferring assets to a family member, business, or trust to avoid debt or prevent creditors from seizing your assets. This practice is considered a civil offense and can cost the perpetrator a lot of money. 

If you formed an LLC with a motive to defraud creditors, the latter would still be able to get hold of your assets. You may also be up for imprisonment or have to pay penalties. 

Deliberately committing a fraudulent transfer can be a criminal offense. On the other hand, you may also unknowingly convey assets without the intention of being dishonest. When this happens, you won’t get criminally charged, although you may still be required to turn over the assets.

The best way to avoid a fraudulent conveyance of assets is, to be honest with creditors regarding personal properties. You also need to be transparent in your ability to pay debts.

5. Reduce tax burdens but stay away from tax evasion

The best ways to reduce small business taxes are to employ family members, start retirement plans, or put away money for healthcare needs. You should, under no circumstances, elude paying taxes through illegal means. 

You should also stay away from tax avoidance which occurs when you dodge the creation of tax liabilities. Remember that tax evasion is a felony, and jail time is not one of the ways you would like to spend your retirement years.

Forming a robust business structure such as an LLC allows flexibility and versatility in managing it. However, it is equally important to continue to be on top of it, act in its best interests, and comply with federal regulations. In so doing, you will keep it going in the right direction.