Compliance Calendar for LLC: Everything You Need to Know
Upon the formation of a limited liability company, also known as an LLC, you should expect several maintenance requirements.3 min read
2. What Happens if You Don't File a Statement of Information Form?
3. Are All LLCs Required to Have an Operating Agreement?
4. What Are Internal Requirements?
5. What Is Piercing the Corporate Veil?
Creating a compliance calendar for LLC in California is a vital step to take. Upon the formation of a limited liability company, also known as an LLC, you should expect several maintenance requirements. LLC owners who ignore these requirements often find themselves regretting their decision. Many will ignore them simply because they choose to, while others just claim ignorance.
Regardless, continuing to ignore the LLC maintenance requirements will ultimately put your company in an unfavorable standing with the state. Ultimately, it can reduce your protection from personal liability.
Your LLC should take every precaution to remain in good standing with the state, particularly since limited liability protection is the chief reason for doing business as an LLC to begin with. As an extra cushion of protection, it is a good idea to consult and acquire an attorney to handle the ongoing requirements. An experienced business attorney can offer assistance and advise you throughout the year to ensure you are in compliance with California LLC maintenance requirements.
When Do Statement of Information Forms Have to Be Filed?
Within 90 days of filing the articles of organization to start a business, California requires you to file a statement of information. There is a $20 filing fee, and after the initial filing, the statement of information must be filed every two years. The state requires this form to keep it informed of any changes your business makes, such as a new address, manager, or appointed registered agent.
What Happens if You Don't File a Statement of Information Form?
If you fail to file the required state of information along with the $20 fee, you will be charged a $250 late fee. As long as the statement remains outstanding, you will acquire additional penalties and monthly interest up to $696. You also risk the suspension of your California LLC.
Whether you engage in business or not in a particular year, as an LLC, you are required to pay a franchise tax. The annual minimum franchise tax in California is $800 and is collected by the California Franchise Tax Board.
Are All LLCs Required to Have an Operating Agreement?
All LLCs are required to have an operating agreement pursuant to California Corporations Code 17050. This applies to both single-member LLCs and multimember LLCs. Failing to do so leaves your LLC vulnerable. The operating agreement is somewhat like corporations bylaws. An LLC's agreement will specify who owns your LLC and whether it is managed by a member or manager. There are three basic types of businesses:
- S corporation
- C corporation
The type of business you have will dictate how you are taxed.
What Are Internal Requirements?
Requirements that are to be executed within a corporation or an LLC are referred to as internal requirements. Directors, shareholders, members, or managers are responsible for completing and documenting internal requirements. While easily forgotten about, they are important requirements that can be of significant value when selling your LLC or in the event of a lawsuit.
When an LLC is manager-managed, although not a requirement, updating your operating agreement is a good practice. Equally important is to issue membership shares, record all membership interest transfers, and hold annual meetings for both members and managers.
Annual or biennial statements are required by most states for corporations and LLCs. This is sometimes referred to as an annual report. How taxes are calculated will vary from state to state. Formulas for calculation may be based on business revenue or number of authorized shares and par value.
A few states, such as California and Nevada, require initial reports to be filed within the months following incorporation. Again, this will vary from state to state. It is best to speak with your registered agent to ensure you are in compliance with state requirements.
What Is Piercing the Corporate Veil?
In the event that an LLC or corporation does not fulfill the state requirements and ends up in legal proceedings, a judge may rule that the LLC or corporation has operated as a sole proprietorship or general partnership. As a result of this finding, the limited liability protection may disappear and the individual owner's assets are then vulnerable. This is called “piercing the corporate veil”.
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