Understanding the Profits and Loss Distribution Clause in LLC Operating Agreements
Hey there, entrepreneurs! Today, let's talk about something that often leaves many business owners scratching their heads - profits and losses in the...
2 min read
“Corporate formalities” and “LLC” don’t seem like they should be in the same sentence. Isn’t that one of the perks of creating an LLC? So you don’t have to do those?
If you’re a single-member LLC in particular, it doesn’t matter too much (except you definitely should keep business and personal finances separate even if single-member-- we discuss this next).
Legal GPS Subscription
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Keep Business and Personal Finances Separate
Every business should keep its finances and accounting separate from its personal accounts. Mixing your personal transactions with your business ones makes it easier for plaintiffs to sue you personally, in the event you actually get sued. It’s part of a concept called “Piercing the Corporate Veil.”
To “pierce the corporate veil” basically means that if your company runs into legal trouble with another party and can’t pay a debt or judgment, the party suing you can “pierce your corporate veil” and pursue your personal assets.
So, here are some easy ways to actually keep your finances separate:
- Open a separate bank account for your business;
- Use that debit card or a company credit card or company checks when paying for anything; and
- If you need to take money out or put it in, that’s fine. Just withdraw or deposit from other bank accounts rather than paying off personal credit cards or charges with a business card and vice versa.
LLC Resolutions
You can also use LLC Resolutions to memorialize important business decisions. If you make a decision with your partner that, per your operating agreement, would require a "vote," then open a Word or Google Doc, or use our template, and put this information in it: On the resolution you should include:
- Company name
- Date resolution is passed
- Very specific, fact-based details of the issue
- Signatures of the member or members who agreed to pass the resolution
Do I need a business lawyer?
The biggest question now is, "When do I need to hire an attorney?” For most businesses and in most cases, you don't need a lawyer to start your business. Instead, many business owners rely on Legal GPS Pro to help with legal issues.
Legal GPS Pro is your All-In-One Legal Toolkit for Businesses. Developed by top startup attorneys, Pro gives you access to 100+ expertly crafted templates including operating agreements, NDAs, and service agreements, and an interactive platform. All designed to protect your company and set it up for lasting success.
Legal GPS Subscription
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Protect Your Business with a Custom LLC Operating Agreement
Legal GPS templates are drafted by top startup attorneys and fully customizable.
Exit Strategies and Succession Planning: S Corp Operating Agreement Essentials
The journey of building a successful business is both exciting and rewarding. However, as a savvy entrepreneur, it's crucial to think ahead and...
1 min read
Comparing Member vs. Manager-Managed LLCs for Single-Member LLCs
Before we dive into this topic, first, some guidance that not many attorneys will tell you: this question doesn't matter that much for single-member...