LLCs Part 2: The core LLC document you forgot?

This is the second in a series of six videos that will help you protect your personal assets.

Is my LLC exposed?

Have you formed an LLC or small business corporation and then left it exposed to attack by an attorney or the IRS?

Many new clients come to me looking for assistance with planning or contracts and such. One of the first things I ask them is for copies of their organizational documents, so I know how to proceed. They give me their articles of organization they filed online in 15 minutes and believe that that is everything they need. Wrong!

What are the Articles of Organization anyway?

Think about what is in the articles. The company name and address, who the registered agent is, and who is filing the document. In most states there isn’t much more than that. Think that little document is going to protect you??

It leaves out a whole lot of information, like: Who are the owners of the business? How are they sharing profits or losses? What happens if one of them dies or goes away? Who is in charge of the day-to-day operations? What responsibilities do they have? What is the process for adding new owners or partners? Those and many other questions are never answered in writing. Thus, when the attacking attorney comes along to sue you, they can pretty much do whatever they want to you since there are no rules and in essence, no entity giving you liability protection.

How do I fix that?

If you are an LLC it is done with an operating agreement, and if you are a small business corporation it is done with organizational meeting minutes, stock certificates and bylaws. Those documents set the rules and relationships. They tell us who the owners are and how the company is managed.

The articles of organization are just a way to let the world and the state know that you intend to have an entity owning your business. But you are exposed without the other organizational documents. Without them, the state imposes some rules in the law but doesn’t answer the most basic questions, like who are the owners and how is the business managed.

So, what do I do?

My clients ask me for help completing the organizational documents they didn’t know about and we take care of that. But there are other ways. You can Google it, do some research, and try to tackle it yourself. Maybe use on online service. If you need help, you might have an advisor or attorney you work with that can get it done for you. For Colorado residents, we can get it done for you for a reasonable single fixed fee. You can contact us here.

It’s your financial future, it’s your call. Take a few minutes to learn the basics in the next few videos. There are a few more things that you’ll need. See you there!

Check out my other videos for more ideas and if you like this video, please subscribe.