Keep Your LLC Active

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By George Anderssen

Forming an LLC may have been a breeze, but keeping your LLC in compliance with state and federal regulation is another matter entirely. 


Keeping your LLC active is no issue if you know what is required from you. According to TRUiC, your LLC compliance is dependent on several factors which you will need to pay strict attention to if you want to ensure the continued compliance and operation of your LLC, some of which will be discussed below.

Proper Funding

Once you have set up an LLC, it needs proper funding in order to remain active. You should have sufficient financial capital to sustain your LLC and the expenses it incurs, until your LLC reaps a healthy profit thus making external financing, as a source of capital, completely unnecessary. It is better for your LLC, that you secure proper financing from the start rather than accumulating large amounts of debt to cover your LLC’s expenses. Accumulating debt as a means to pay off your LLC’s expenses is not a rabbit whole you would want to enter and may be very detrimental to the active status of your LLC in the long run.  


One of the most important factors of keeping your LLC active is through keeping in compliance with state and federal law. And in order to do this, you need to practice transparency when it comes to conducting business. This transparency includes avoiding all unethical, irresponsible and unfair deals, as well as not misrepresenting or concealing the status of your LLC to state and federal authorities, and to your creditors and vendors. This transparency should be applied at every level of your LLC, even when you report your LLC’s profits or losses on your personal tax returns statements. Keeping your LLC active is all about maintaining your ‘active status’ with state authorities, which may, in certain states, require you to file yearly LLC reports or pay an annual fee, for example Franchise Tax, in order to keep your LLC in good standing with the state.  


Creating a distinction 

It is imperative that you create a distinction between you and your LLC right from the beginning. The financial bookkeeping and account of your LLC should remain entirely separate from your personal income statements and those of your LLC’s other members (in the event that you own a multi-member LLC). You can ensure that this distinction remains clear by obtaining an Employer Identification Number (EIN) for your LLC, opening an official business bank account in the name of your LLC, and keeping your personal records and those of your LLC completely separate. Creating this distinction between you and your LLC is necessary to guarantee your LLC’s limited liability protection. Once your personal bank accounts and statements get mixed with the books and accounting of your LLC, the line separating you from your LLC becomes blurred, which may compromise the limited liability protection your LLC affords you.


Having an Operating Agreement

While an Operating Agreement is not mandatory for LLCs, creating one may be beneficial and assist you in keeping your LLC active. An Operating Agreement is an internal legal document, agreed upon and signed by all members, that outlines the ownership and management procedure of your LLC. An Operating Agreement is important to have, not only because it prevents future risk and conflict among members, but it also defines the responsibilities to each member and the manner in which profits or dividends will be distributed among members. An Operating Agreement defines the terms of work for each member, how they receive profits or dividends, and also how the LLC will be managed. Without an Operating Agreement, your LLC will be subject to state rules and regulations which may not be as beneficial for you and your LLC. An Operating Agreement assists in keeping your LLC, and its members on track and in compliance with state and federal laws. 


Keeping your LLC active may not be as difficult as you had once thought. These factors, if taken seriously and actively accomplished, will go a long way in ensuring that your LLC remains active. If you want to know more about how to keep your LLC active, you can visit TRUiC’s website, there you will find all kinds of assistance and how-to guides to help you get your LLC underway.

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