Today, limited liability companies or LLCs are considered as the popular form of business in the United States. The primary reason for this is the fact that an LLC blends the features of both a partnership and a corporation. However, one of the major challenges related to it is deciding on its internal management structure. Irrespective of the fact that whether the owner or owners of an LLC decide to manage it themselves or consider hiring a manager to do the job, managing the company demands attention to detail and an in-depth understanding of the law. An owner needs to follow a systematic procedure to after forming an LLC to manage it in the right way.
Steps to Manage an LLC
As there are both opportunities and challenges in the prospect of setting up an LLC, the key is to address the issues and make the most of the opportunities that come along. Adopting a systematic approach can make a big difference in this regard. The steps to manage an LLC efficiently are discussed below.
- Seek Professional Help: As discussed earlier, there are two ways to manage an LLC – It may be either managed by one of the members or a manager can be hired for the purpose. Here comes the tricky part. Despite the fact that the tax structure of an LLC is simple and flexible and it also helps avoid double-taxation. The tax issues related to management structure can be a bit complicated, especially if you are new to it. While managing members are not liable for self-employment tax, the non-managing members are liable for it. Therefore, to simplify matters, it is strongly recommended that you should seek professional help.
- Hire a Business or Civil Litigation Attorney: If you are running an LLC, it is always useful to have a relationship with an attorney who is qualified to handle legal issues related to business or civil litigation. Post the formation of an LLC, it is considered as a separate legal entity from its owners. As such, jurisdictions usually do not allow non-lawyer employees to appear in court to handle a legal issue such as a lawsuit on the part of the company. Many jurisdictions consider it as an unauthorized practice. Given the fact that you are more likely to confront legal questions in the course of the business from time to time, seeking legal advice can help you make informed decisions in the interests of your company.
- Build a Better Understanding of the Laws: An insight into the laws related to LLC in your jurisdiction can help you avoid certain costly mistakes. Although you will be hiring an attorney to take care of the legal issues, knowledge about the do’s and don’ts in terms of LLC will keep you informed about the actions that can be detrimental to you or your company.
- Remember Your Business Purpose: While filing the articles of organization, the members or owners of an LLC are required to state the purpose of their business. Operating the company outside the stated purpose may lead to loss of limited liability at the subsequent stages. An important thing to bear in mind is the fact that if your action leads to the loss of liability to other members, they could sue you to recover or claim their damages.
The objective of form an LLC is to earn a profit and achieve growth simultaneously. In order to ensure it, one should adopt best practices and fully comply with the rules and regulations associated with LLC in a given jurisdiction. A combination of both is the sure-fire way to address the issues and meet various challenges to help manage your limited liability company in the best possible manner.