Is Your LLC Ready For 2020
By Lane V. Erickson, Idaho Business Attorney
Not only is a new year almost here but an entirely new decade also looms ahead of us. Both of these milestones are a good opportunity to review everything associated with your Idaho LLC business to make sure that it is ready both for the new year and to continue moving forward successfully.
One of the best things you can do at the beginning of the new year and new decade is consult with a qualified Idaho business attorney who can look at your LLC objectively, can I ask you several questions about your plans for the future, and can then provide you with guidance about the things that could be done to help your business move forward successfully.
For more than 70 years the premier Idaho business attorneys at the Racine law office have assisted business clients in the creation and operation of and LLC as part of their business structure. We take the time to meet with each client individually, to learn what their business needs are, and then help them customize structuring or updating their LLC to meet their business needs. The attorneys on our premier Idaho business team include partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Each of the lawyers on our team is skilled, knowledgeable, and experience in assisting clients with their business needs including organizing, creating, and updating the operation of an LLC.
We are confident that if we have a few moments of your time we can help you update your LLC in a way that will prepare you for growth and meet the needs of your business in the coming year and decade. To do this, we will ask you several simple questions that can help us provide you with the guidance you need to help your business be successful. Below, are just a few of the questions that we would go over with you to make sure everything in your business is ready. Keep in mind, these questions are not exhaustive. Rather, they are just a starting place to help you continue to be organized and to move your business forward successfully. Here are the first simple questions that you should consider.Are the Records for Your LLC Updated?
The first, and one of the most important questions that you should ask yourself is whether the records for your LLC current, and do they need to be updated. Maybe we should start even more basic than that, by asking what are the basic records that you should have for your LLC?
At a bare minimum, you should have your own EIN number from the IRS. An EIN is an acronym for “employer identification number”. An EIN is generated from the IRS by making an application. an EIN acts as the social security number or the identification number for your business entity. If you are operating an LLC, you should have an EIN for purposes of setting up bank accounts, filing tax both federal and state documents, and you may also need it to obtain business licenses for the operation of your business within your own county or city.
This leads to the next most important thing that you should have which is separate bank accounts for your LLC. It’s important that you do not have a joint account for yourself personally and for your business entity. Rather, your business entity should have a separate business account, or multiple accounts (such as a checking account and a savings account) that only handles the finances for your business. Your personal account should not be the same as your business account.
Additionally, you should also have the basic operating documents for your LLC including an operating agreement, as well as the initial filing documents when your LLC was created in the first place. As we stated before in other articles, the operating agreement acts as a contract between you and the other owners of the business. The operating agreement specifically spells out who the owners of the business are, the percentage of ownership that they have in the business, how do owners can come into the business, and any restrictions associated with transferring ownership interest from an owner to some third party.Are Any Changes in Ownership On the Horizon?
This leads us to the next most important thing that you should be considering for your business with the new year and new decade ahead. This is whether there is going to be any changes in ownership of the LLC.
If you anticipate a change in ownership, either because one of the current owners will be leaving, or because a new owner will be coming into the business, you should consider how this will impact not only the business but the documentation you have for your business as well.
For example, if an owner of the business is leaving, you will want your corporate records to reflect that this person will no longer be an owner once they leave the business. This would require an update or amendment to the operating agreement, as well as making changes to corporate bank accounts and future tax filings.
The same would be true if you have a new owner coming into the business. Your LLC documentation would need to reflect who the new owner is, the percentage of ownership that this owner will own, and whether the new owner has any rights of management within the business operations. You will also have to track a capital account for the new owner, and you will need to keep track of all tax related issues that will be reported to the new owner through federal and state tax filings for the LLC.Does Your Business Need a Change in Management?
The last thing that we want to mention that should be considered with the new year arriving, is whether there will be any management changes in your LLC. An LLC could be managed by all of the owners together, by a single owner, or by a person who is specifically tasked with management of the business. The person or group of persons who are in charge of management of the LLC will be spelled out in the operating agreement.
There may also be limitations on decisions that can be made by the manager(s) depending on the dollar amounts involved or the size or nature of the transaction. For instance, if the LLC owns residential real estate rental properties, there may be a limitation on the manager’s ability to sell or buy a new rental property as part of the LLC business.
With a new year and a new decade coming, now is a good time for business owners to consider whether a change in management should be made. Again, the reasons for making a change could be because new owners are either coming into or leaving the business. Additionally, a change in management may need to occur simply because the old management system isn’t working well for the current owners.
If you feel that with the new year or the new decade you need to have your business structure reviewed, we can help. We have assisted numerous small business owners who have had LLCs as part of their business structure make refinements or changes or additions to their business structure. We are confident that we can answer your questions and we can help you too!Enlist An Idaho Business Attorney To Help You
Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.Isn’t Liability Insurance Enough?
One of the major goals of being a real estate investor is to protect those investments. There are a couple of different ways that this can be done. First, a person who owns real estate, particularly real estate that is rented out to others such as residential real estate, or commercial real estate, should protect both themselves and their property through liability insurance.
What we are really talking about here is protecting you against bad things that can happen on your property. For example, suppose that you own a duplex that you rent out to individuals who live there. Now suppose that someone is coming to visit their family member who is renting the duplex. It’s wintertime, and either this person slips on the ice on the sidewalk and gets hurt, but work suppose an icicle falls off the roof and hits and injures them. In either of these situations, it’s more than likely that the owner of the property will be responsible for the injury that happened.
Insurance is the first line of defense against this type of liability. The problem is, Insurance, particularly liability insurance, can be expensive, and it’s difficult to know how much coverage a person should have. If a person slips on the ice and Falls, they could break an arm which would require some medical treatment and will result in several medical bills. However, those bills will be much smaller than a person who slips on the ice, hits their head and is in a coma requiring 24-hour care for an undetermined amount of time.
Depending on the size of the building, the number of units that are within the building, and so forth, we recommend that a person obtain as much liability insurance coverages they are comfortable paying for. As I mentioned above, liability insurance is the first line of defense.How an LLC Protects Both the Entity and You Individually?
After liability insurance using an entity such as an LLC provides additional protection for both the entity and for you individually. Let’s suppose that you own five duplexes. Let’s also suppose that you placed each duplex in its own separate LLC. Now let’s use the example from above where a person slips on the ice and is injured. Finally, let’s make this injury the worst one we can think of which is permanent brain damage or the person is in a coma. In either of these situations, the damage will continue on for some time and the liability simply continues to grow as medical bills add up.
If the person owns the property where the injury occurred individually, and the liability insurance is not enough to cover the damage that has occurred, the injured person or their family would have the right to sue the owner of the property add to recover a judgment for the full amount of damages. This could result in the loss of additional investment properties that are owned individually by that investor.
However, if as we stated in the example above, the real estate investment properties are each owned individually in different LLCs, the liability for the injury that occurred will stay with the LLC that owns the investment. In other words, the worst thing that can happen is the property that’s within that LLC can be taken away, but no other liabilities would expand beyond that individual LLC. The individual would be protected, and the other LLCs would also be protected.Additional Advantages in Using an LLC for Real Estate Investing.
There are some other advantages of using an LLC as the entity to own real estate Investments. These include management and control options for the investment, tax advantages, gifting advantages to other family members who you may decide you want to bring into the LLC or transfer the ownership of the investment to, and estate planning options.
So, if you are looking to be a real estate investor, we encourage you to talk with a qualified Idaho business Saturday. You should ask them questions about whether using an LLC would be a good idea in your specific situation. If you do have questions, we have helped numerous business clients with these kinds of decisions, and we are confident that we can help you too.Enlist an Idaho Business Attorney to Help You
Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at email@example.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.