Annual Meetings for LLC Members

Many start-up businesses select the limited liability company (LLC) as their legal structure. The LLC entity offers its owners flexibility and fairly simple required formalities. For example, the members and managers of a LLC are typically not required under the law to hold annual meetings. However, it is common for the Operating Agreement governing the LLC to require annual meetings because there are a variety of benefits that result, including:

• Helps prevent piercing the corporate veil. When a creditor sues the entity and seeks to also hold the LLC members personally liable, it is typically done by piercing the corporate veil. A creditor can pierce the corporate veil if it can be proven that the LLC was not operated as a prudent and separate business. In order words, by holding regular meetings and having the members vote on key business decisions, you can prove that the LLC was a viable entity separate from its owners. It is essential that you properly document that the meetings were held by keeping minutes of same.

• Requiring members to vote on LLC actions . If your business is owned by several members, it is important for the managers and members to vote to approve or reject proposed actions being taken by the company. For instance, any time the LLC borrows a significant amount of money, the entity should put all members on notice of a meeting to discuss whether the loan is the appropriate course of action for the business to take. This helps prevent internal disputes among the managers and members as well.