LLC Minutes & Maintenance Issues

Bill Gulley · 2012-12-28T08:08:09-08:00

A recent thread pointed out the need for an Operating Agreement which led to maintenance rquirements of an LLC. Not only do members need to have an Operating Agreement but the corporation needs to be maintained. Minutes of Meetings will provide evidence of how buisness is conducted through your LLC. The best way for you to lose the liability protection provided by your LLC is to mismanage the company, allowing it to remain dormant and inactive. But, keeping minutes of meetings of a one member LLC seems silly, but the LLC really isn't you so much as a seperate corporate beast that should be fed. Any time your company acts in a significant transaction, like buying a property, such actions need to be authorized. While meetings may not be specifically required by law for an LLC, an LLC is a corporate entity and meetings are required for corporations. Robert's Rules have been adopted my some states as to how meetings are to be conducted, adopting the outline will show a formal attempt to conduct your business. That said, how can we make it easier to maintain an LLC and conduct meetings as well as recording meeting activities in the minutes? Really, I used some standard verbage to show meetings were conducted in various corporate stuructures, just going through the motions, but when significant buisness was conducted anotations were made. In about five minutes a month, minutes could be maintained without much buisness activity. It may take longer when significant busienss is conducted, so what do you consider significant? I'd suggest "significant" is outlined in a good Operating Agreement, major purchases, entering contracts, withdrawl of money above amounts set for normal business expenses, admission or withdrawl of members, obtaining insurance policies, making claims against others or addressing claims against the company, letting contracts, hiring an attorney or accountant, and engaging in any business not specifically described in the Articles of Incorporation. In such matters, common sence must prevail, what is usual and customary may not need to be addressed, say with letting contracts or hiring professionals, sending a maintenance guy over for a minor repair is usual and customary in rentals, hiring a roofing contractor to replace a roof is significant. BTW, a roofing job might be a good example why the company should approve the work, if there is an accident, if your company did not approve the work the damages could end up being on you, while I don't have a specific case, that example was given to me by our attorney, just passing it along and I do see such being an issue. What else do you think should be considered and how can it be simplified?

Account Closed

Residential Real Estate Broker · Oklahoma City, OK · Member since 2011 · 114 posts · 38 votes

13y

Disclaimer - this is not legal advice. You should consult an attorney in your state. Laws governing LLCs may vary from state to state.

Bill, I don't know Missouri law, but some of the information you are putting out in this post is not accurate for most states. An LLC is not a corporation. Rules requiring corporations to have annual meetings do not apply to LLCs.

You don't need to have "meetings" if you have a single-member LLC. That is non-sensical. If your single-member LLC is managed by a manager, then there should be a list of actions (specified in your operating agreement) that require member approval. This would be major actions like borrowing money or entering contracts involving more than $XXXX. In those cases, you should execute a written consent of the member approving the action. You do not need member approval to enter into contracts that are within the routine course of business for your LLC.

If your LLC is member-managed, then the member will be signing all of your contracts in his capacity as member-manager, so a written consent is not necessary.

Your LLC should have an operating agreement, and you should operate your LLC according to the terms of the operating agreement. You do not need to have fictional "meetings" or draft up minutes on a monthly or even annual basis.

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Bill Gulley

OP

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

13y

I agree with much of what you say, perhaps I gave my LLCs more life than needed, but it has worked to my advatage in Missouri.

In OK, do you file Articles of Limited Liability Company or do you file Articles of Incorporation? Is the LLC statute under Corporations?

An LLC is a hybird of the corporation.

Here, an LLC is a form of a corporate entity, not a C-Corp, an S-Corp or a Not For Profit or Non-Profit Corporation (but I do understand that some states allow for non-profit LLCs).

A single Member LLC is difficult, IMO, to maintain the distance between your personal actions and corporate actions, I'm speaking of the flavor, proving a clear difference between the two. Simply signing for the company as a member as is required may not cut it. And, that may be unique to Mo.

Part of why I posted the thread, state issues are different, since the inception of these corporate hybirds, each state has had proceedings with various issues and what may have been adopted and precidence may vary state to state.

I like to error on the side of caution, if I want my company to be treated with the liability aspects of a corporation, wanting it to walk like one, I like to have it quack like one so it will be seen as one.

I'd like to hear some legal minds address these aspects as well as some tax authorities as I know the treatment of the LLC goes beyond a simple declaration in some matters.

It is odd, that in Mo. anyway, they mention referring to single member LLCs that they may address such in the plural, in other words to say the "Members of XYZ, LLC" is correct even though there is only one member.

Not arguing here, I understand the different points of view and agree with variances. However, I really don't like the idea of having no Operating Agreement and substituting an afidavit stating there is none and that it is a one member LLC.

Another issues. Real estate closings and title company/closer requirements. Usually you will be told to bring your Certificate of Good Standing (that comes from the Corporation Division of the Secretary of State) and your Operating Agreement. Your Operating agreement is not nor is it required ever to be made public or passed out to anyone, but you can. What the title folks need to know is that your company is authorized to transact the business and that the person signing is authorized to do so in the name of the LLC. Both issues are resolved and sufficient with a copy of the Minutes showing both issues were authorized, as with other corporate entities.

I suppose there are requirements and then there are options.

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Account Closed

Residential Real Estate Broker · Oklahoma City, OK · Member since 2011 · 114 posts · 38 votes

13y

--Not legal advice--

Oklahoma's laws governing business entities, like many other states', are modeled after Delaware law.

In Oklahoma, we file Articles of Organization to form an LLC, and a Certificate of Incorporation to form a corporation. Both the Oklahoma General Corporation Act and the Oklahoma Limited Liability Company Act fall under Title 18 of the Oklahoma Statutes (which is titled "Corporations"). But the Oklahoma General Corporation Act applies only to corporations - not LLCs.

An LLC has many characteristics of a corporation, and some doctrines (such as piercing the "corporate" veil) may apply to both types of entities. But I would not call an LLC a "corporate" entity (again, Missouri law may be different).

I agree that LLC owners need to be careful to operate their LLCs as business entities separate from their personal business. But I disagree that anyone needs to hold "meetings" with himself to do it. I would do the following:

1. Execute and maintain an operating agreement (whether the LLC will be manager-managed or member-managed);
2. Follow the provisions of the operating agreement in managing the LLC.
3. Execute all contracts in the name of the LLC, in your capacity as manager or managing-member. If the LLC has a manager, then the member should execute a written consent authorizing any transaction requiring the member's consent, as set forth in the operating agreement;
4. Set up a separate bank account in the name of the LLC and transact all of the LLC's business (and none of your personal business) through the LLC's bank account.
5. Keep accounting records of the LLC separate from your personal accounting records.
6. Designate an authorized agent, pay any required franchise taxes, file annual certificates, etc. as may be required by your state.

I have never heard of a case where a court disregarded the LLC as an entity when the owner had done these things. If anybody knows of one, please let me know.

I think people run into trouble when they misunderstand the protection that an LLC provides. There are two protections that many people think LLCs provide, which in fact they do not provide:

First, the LLC is not going to provide liability protection from damages that result from your negligent behavior. So if you form an LLC to hold your rental properties, but you personally manage your rentals, the LLC will not shield you from personal liability if your property burns down because it did not have smoke detectors. Even if you hire a property manager, a judge might decide you were personally negligent in hiring an idiot as your property manager and allow a suit against you personally.

Second, the assets in an LLC that you personally own are not necessarily safe from a judgment against you. Courts, at least in some jurisdictions, have the power to require you to surrender ownership of your LLC over to a judgment creditor to satisfy a judgment against you.

So be careful to preserve your LLC's status as a separate entity, but also carry lots of liability insurance.

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Joseph McKnight

Real Estate Broker · Newport Beach, CA · Member since 2012 · 6 posts · 2 votes

13y

Jon P is correct and provided some helpful insight for those new to this area.

As for minutes, I always suggest that an LLC at least reflect some sort of minutes (of the managers or members depending on how it is set up) once a year.

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Bill Gulley

OP

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

13y

And I agree too, that is a point rarely mentioned, if you own the llc, it is your asset and its at risk, in whole or in part to satisfy judgments.

I'll conceed to the one member LLC, I do see that as cumbersome and silly, as I said before, following the general business requirements may be sufficient. As to multiple member organizations, I'd still like to see a meeting of the minds of members evidenced, even if issues arise among members, if such meetings and discussions are actually accomplished, actually, mine were. :)

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Steve Babiak

Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes

13y

Some helpful links:

http://www.robertsrules.com/faq.html

http://www.rulesonline.com/rror-10.htm

http://www.arara.org/3_2_Minutes.pdf

http://parlipro.org/minutes.htm

http://www.youtube.com/watch?v=cJS3XppFBhY

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Rick L.

Investor · Saint Louis, MO · Member since 2013 · 198 posts · 25 votes

13y

MINUTES OF ANNUAL MEETING OF THE BOARD OF DIRECTORS

OF

_____________________________________________________________________

The annual meeting of the board of directors of the above named corporation was held on: ________________________________ at __________________________________________

Present was:

__________________________________ ________________________________________

Name Address

__________________________________ ________________________________________

Name Address

__________________________________ ________________________________________

Name Address

__________________________________ ________________________________________

Name Address

__________________________________ ________________________________________

Name Address

__________________________________ ________________________________________

Name Address

_____________________________ was requested to be the temporary Chairman of the meeting.

_____________________________ was requested to be the temporary Secretary of the meeting.

1. The meeting was called to order. It was determined that a quorum was present either in person or by proxy, and the meeting could conduct business.

The following directors were present:

Names of directors:

_________________________________

The following directors by proxy

_________________________________

2. The Secretary determined and reported that notice of the meeting had been properly given or waived by directors in accordance with the bylaws.

3. A motion was made and carried, that the Secretary was ordered to attach the documentation (If any) or the appropriate affidavit of mailing of notice or waiver of notice to the meeting minutes. If no notice is attached, all directors agreed that proper notice of the meeting had been given.

4. There was presented to the meeting, a copy of the minutes of the previous meeting of the board directors.

5. Upon motion duly made, seconded and unanimously carried, it was resolved that the following persons were elected to serve as officers of the corporation until the next board of directors meeting:

__________________________________President

__________________________________Vice President

__________________________________Chief Executive Officer

__________________________________Chief Financial Officer

__________________________________Treasurer

__________________________________Secretary

6. Upon motion duly made, seconded and unanimously carried, it was resolved that the hourly wages or salaries of the following officers were fixed at the following rates:

_________________President

_________________Vice President

_________________Chief Executive Officer

_________________Chief Financial Officer

_________________Treasurer

_________________Secretary

7. The president presented the annual presidents report of the corporation.

8. The treasurer of the corporation presented the treasurers report, which stated that the previous taxable year had:

a) a gross receipts total of: _________________

b) a gross profit total of: _________________

c) a net profit total of: _________________

Upon motion duly made, seconded and unanimously carried, it was resolved that the secretary would attach a copy of the treasurers report to the corporate minutes book.

9. Upon motion duly made, seconded and unanimously carried, it was resolved that a dividend of $______________ per share of common stock would be declared on the stock of the corporation. The dividend would be paid to each shareholder of record as of ______________ date, and shall be paid before ______________ date. The officers of the corporation are directed to take action to carry out payment of dividends.

10. The following other business was transacted:

_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

11. The directors ratified and approved all documents presented.

There was no further business, and upon motion made, seconded, and unanimously carried, it was

RESOLVED, that all the items and documents have been examined by all directors, and are approved and adopted, and that all actions taken thus far have been ratified and approved by the directors of the Corporation.

There being no further business, upon motion made and carried, the meeting was adjourned.

Dated: _____________________________

Secretary ___________________________ _________________________

Signature Printed Name

Witness:

______________________________ __________________________

Signature Printed Name

______________________________ __________________________

Signature Printed Name

______________________________ __________________________

Signature Printed Name

______________________________ __________________________

Signature Printed Name

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Rick L.

Investor · Saint Louis, MO · Member since 2013 · 198 posts · 25 votes

13y

I found the above annual minutes doing a brief Google search on the topic. I think it'll serve it's purpose with some minor modifications. But, how do you approach the members listed above when you just have a single member LLC? Can anyone else provide an example of their corporate minutes, TIA!

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Rick L.

Investor · Saint Louis, MO · Member since 2013 · 198 posts · 25 votes

13y

Here's a another one:

INSTRUCTIONS TO USE WITH FORM #3

“Sample Minutes of Annual Meeting”

Special Note:It is usually helpful to print these instructions first so that you can refer back to them. Also, in the Word Format only - you can move from one fill in space to the next by pressing the F11 key on your computer key board. You can also move through the document by placing your cursor on the shaded fill in space and click once.

1. #1 - Type in the name of the LLC.

2. #2 - Type in the name of the LLC again.

3. #3 - Type in the date of the meeting.

If you want all of the members (owners) to be the managers of your LLC, then they should already be listed in Exhibit A to the Operating Agreement and do not need to be renamed here. If the managers are different people than the members, then you should insert their names here.

4. #4 - Type in the name of each member who was present at the meeting.

5. #5 - Type in the name of the person appointed secretary to take minutes of the

meeting. This can be a temporary appointment or permanent for future meetings.

6. #6 - Type in the name of the individuals who will be managers of the LLC. Note: An LLC can also have an entity such as another LLC or corporation named as the manager. If that is the case, type in the name of the entity. If an entity is named as manager, It is usually helpful to also state the name of the authorized representative of the entity who will be acting for the entity as manager.

7. #7 - Type in a description of business or topic discussed.

8. #8 - Type in a description of what was agreed to by the members.

Special Note: If all members are agreeable, they can waive or forgo sending out an official written notice of the meeting. This saves time and effort. However, the waiver needs to be in writing. A sample form for “Waiver of Notice of Organizational Meeting” can be found after the organizational meeting form below.

(Continue to Form)

SAMPLE MINUTES OF THE ANNUAL MEMBERS

MEETING OF [ #1 - NAME OF LLC - ], LLC

The Annual Meeting of the Members of [ #2 - NAME OF LLC - ], LLC, was held on [ #3 - DATE - ], pursuant to a written waiver of notice signed by all members. The following members were present at the meeting: [ #4 - NAME OF MEMBERS AT MEETING - ]

[ #5 - NAME - ] was appointed Secretary for recording minutes of the meeting.

The Secretary presented an overview of significant business events for the past year.

The Manager (Member) in charge of finances provided a summary of the financial status of the LLC for the last full year of business prior to the meeting.

The next order of business was a discussion of management of the LLC. It was determined that the LLC would continue with the same managers as the previous year which include: [ #6 - NAME OF MANAGERS - ]The above named persons were approved as managers of the LLC by unanimous vote of all the members.

The next order of business was [ #7 - DESCRIBE NATURE OF BUSINESS - ] Upon motion duly made, seconded and unanimously passed, it was voted that [ #8 - DESCRIBE NATURE OF BUSINESS AGREED TO RESOLUTION ADOPTED - ] .

There being no further business, upon motion duly made and seconded, the meeting was adjourned.

Date: _______________ ___________________________________

Secretary

WAIVER OF NOTICE OF ORGANIZATIONAL

MEETING OF [ - NAME OF LLC - ], LLC

The undersigned, being all of the initial members of [ - NAME OF LLC - ], LLC, formed under the laws of the State of [ - NAME OF STATE - ], do hereby waive notice of the time, place, and purpose of the Annual Meeting of members and consent and agree that such meeting shall be held on the [ - DATE OF MEETING - ] .

SIGNATURE OF ALL MEMBERS

Date: _______________ _____________________________________

Date: _______________ _________________________________

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

13y

Originally posted by Jon P.:

--Not legal advice--

Actually, much of what you said WAS legal advice, and very good advice at that. Don't be ashamed of giving good advice!

And no, non-attorneys giving legal advice is not illegal, so don't feel the need to offer that disclaimer just to protect yourself...better to just say, "I'm not an attorney, but here's my free advice anyway..." :-)

Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)

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Rick L.

Investor · Saint Louis, MO · Member since 2013 · 198 posts · 25 votes

13y

How does one hold a meeting with only one member, -ie votes, seconds?? That's my biggest question?

SAMPLE MINUTES OF THE ANNUAL MEMBERS

MEETING OF [ #1 - NAME OF LLC - ], LLC

The Annual Meeting of the Members of [ #2 - NAME OF LLC - ], LLC, was held on [ #3 - DATE - ], pursuant to a written waiver of notice signed by all members. The following members were present at the meeting: [ #4 - NAME OF MEMBERS AT MEETING - ]

[ #5 - NAME - ] was appointed Secretary for recording minutes of the meeting.

The Secretary presented an overview of significant business events for the past year.

The Manager (Member) in charge of finances provided a summary of the financial status of the LLC for the last full year of business prior to the meeting.

The next order of business was a discussion of management of the LLC. It was determined that the LLC would continue with the same managers as the previous year which include: [ #6 - NAME OF MANAGERS - ]The above named persons were approved as managers of the LLC by unanimous vote of all the members.

The next order of business was [ #7 - DESCRIBE NATURE OF BUSINESS - ] Upon motion duly made, seconded and unanimously passed, it was voted that [ #8 - DESCRIBE NATURE OF BUSINESS AGREED TO RESOLUTION ADOPTED - ] .

There being no further business, upon motion duly made and seconded, the meeting was adjourned.

Date: _______________ ___________________________________

Secretary

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Richard Jones

Mcloud, OK · Member since 2017 · 1 post · 0 votes

9y

So, can Minutes, add new members and executives?

I offered my past business partner that retired, to come out of retirement and become my CEO in exchange for 25% of my membership interest.

He accepted and paid me $250.00 to be the contribution of the 25% of Membership Interest, since I paid $1000 for the 100% capital contribution when I started it.

So, can I add him as a member on the Minutes? or do I have to file an amended Operating Agreement?

Just curious to actually do it.
I don't think just updating the "Company information sheet" is legal, I think that is just an information sheet, not actually making it approved.

Another problem is this is an Oklahoma LLC and he lives in Oregon. Not sure if that is an issue or not.

Please let me know if you can.

-Richard

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

9y

Your operating agreement should discuss how you add members. Your operating agreement can also be amended to update who the members/managers are, and their ownership percentage.

Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)

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LLC Minutes & Maintenance Issues

LLC Minutes & Maintenance Issues

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