Do you have a company or are you planning to open an LLC in the United States, but don’t know how to manage it properly? Then this article is for you.
An LLC is a business structure that combines the characteristics of a partnership and a corporation.
One of the most well-known advantages of LLCs is that their members are not personally responsible for the company’s debts and obligations.
But they are also recognized for being very easy to manage because, unlike a corporation, you don’t have to go through as much administrative paperwork to get your business up and running.
So, how can an LLC be properly managed?
Without further ado, we will mention four aspects you need to consider to properly manage a Limited Liability Company, ensuring that all actions are carried out correctly.
1. Contracts in the Company’s Name
The main goal of an LLC is to separate our business transactions from personal matters.
When establishing a business relationship or performing work and signing a contract, it must be signed in the name of our company. In case of any legal issues, the LLC is the responsible entity.
Finally, it’s important to have the necessary insurance policies for our business activities.
2. The LLC Must Have Its Own Bank Account
It’s also important for the LLC to have a commercial bank account. All business operations of the LLC should be handled through this account.
Customer payments for our services or products are deposited into this account, and all operating expenses and business-related investments are also paid from it.
If the business owner needs money for personal use, it’s appropriate to transfer funds from the business account to their personal account. This way, they can use those funds for personal expenses or make withdrawals by writing a check.
It’s mandatory that the bank account is registered in the name of the LLC, and all transactions made are strictly for business purposes. This includes applying for credit cards or loans; all these accounts must also be in the name of the LLC to maintain the proper separation between business and personal finances.
If you wish to use one of your personal credit cards for the LLC, it is possible, but all transactions must be documented, so it should also be used only for business purchases.
3. Accounting and Records
The records of your business transactions should be kept separate and organized, ready for a possible IRS audit. The LLC’s purpose is to separate your personal finances from your business finances.
While some small businesses may not need an accountant, maintaining organized records, including receipts, is essential.
Mixing personal and business financial expenses jeopardizes legal protection, exposing personal assets.
Therefore, we recommend keeping them for 3 years (or 4 years for businesses with payroll) and up to 7 years for equipment with long-term warranties.
4. Commercial Vehicle Records
The final tip for managing your LLC is to register your commercial vehicles in the company’s name.
When we talk about commercial vehicles such as trailers, trucks, or cranes, it’s ideal for them to be registered in the name of the LLC. In case of accidents, it will be the LLC and the insurance policies that will take care of it.
So, concerning company vehicles, it’s better to have them under the name of our LLC, and keep under our name only our personal vehicles for everyday use.
Is it better to manage an LLC by members or managers?
Either option is possible. Choosing one over the other depends on various factors, as one of the members can choose to be the manager or they can designate an external manager.
However, the decision depends on your company’s needs. If you want comprehensive guidance in choosing the type of management, we have an article on LLC managed by members vs. managers.
Conclusion on how to manage a Limited Liability Company
LLCs are designed to protect our personal assets by separating them from business activities. To maintain this separation, it’s vital that contracts, bank accounts, vehicles, and financial records are in the name of the LLC.
Keeping accurate records and ensuring that all transactions are properly documented under the name of the LLC is fundamental for maintaining this legal protection.
Need help managing your LLC?
At Rex Legal, we have professionals who will guide you in the best way to manage your LLC properly.
You just need to contact us, and we will take care of the rest.