Thousands of people set up corporations and/or LLCs each year. Most often, these entities are formed for asset protection reasons. For example, an LLC may be formed to protect a rental property from creditors or a corporation may be set up to support and protect an operating business.
While forming an LLC is certainly the first step in effectively protecting the property owned by the entity, it is equally important that the entity be maintained on a yearly basis.
What is involved with maintaining an LLC or Corporation? First, you must file and annual report with the Secretary of State’s Office each year. Failure to do so will eventually cause your entity to be involuntarily dissolved by the Secretary of State’s Office. At that point, the entity will no longer be in existence to protect your property. Second, the members and managers of your LLC (or the shareholders and directors if you have a corporation) should have a meeting each year where you vote on important matters (such as who should serve as the managers or directors, as the case may be). The minutes of those meetings should be signed and filed in your entity’s company or corporate book.
As you can see, although at times completing the annual maintenance for your LLC or corporation may seem like a routine record keeping exercise, failure to maintain records and to submit filings with the Secretary of State’s Office can lead to serious consequences, including being involuntarily dissolved.
If you have a corporation or LLC and have questions or concerns regarding annual maintenance, contact a corporate planning attorney today to ensure that you are taking the appropriate measures to keep your property protected from your creditors.