Ready to get your books in order or clean up your business before a sale? Book a free 15-minute call with one of our client advisors and start preparing with confidence.
Is Your Business Shipshape? Clean-Up Your LLCs and S-Corps Before It’s Too Late!
Starting a business is like launching a ship. You gather your crew, stock the supplies, and head out on a sea full of hope, but every sailor knows a vessel needs regular care—missing parts and cracks can lead to disaster when the waves get rough. The same goes for your LLC or S-Corp. Without regular upkeep, you could hit a storm and find your business and personal assets at risk.
At KKOS Lawyers, we specialize in helping business owners and investors tidy up their business entities. We call it an Entity Clean-Up; and for many businesses, it’s the difference between smooth sailing and shipwreck.
When Does Your Business Need a Clean-Up?
You wouldn’t head out in a leaky boat, so why run your business without ensuring everything’s shipshape? Sadly, many business owners start their companies with just a filing receipt, thinking they’re protected. Yet, years later, they discover that their “protection” is just a leaky dinghy that can’t handle the storm.
Here are some red flags that it might be time for a Clean-Up:
- Missing or Incomplete Documents – If all you have is a state formation certificate, your entity is missing crucial documents and needs a Clean-Up. You need Articles of Organization/Incorporation, an Operating Agreement (for LLCs) or Bylaws (for corporations), Initial Resolutions and Minutes, an EIN, and Stock/Membership Certificates to keep things solid. Additionally, many people find out too late that the documents they received from a discount online service are incomplete with blank spaces throughout the documents or – even worse – the wrong set of documents altogether! I recently had a client who set up with a discount online service and was given ‘corporation bylaws’ for an LLC! Another was given an operating agreement for their Series LLC without any of the required provisions for a Series LLC! If you used a discount online service to set up your business, check your documents and ensure they are complete and correct. Call KKOS Lawyers if you have any questions or doubts. We want to help you!
- Wrong State Registration – Forming your entity in places like Nevada or Delaware can sound appealing. However, if your business operates in another state like Arizona or Texas, you would be sailing under the wrong flag, and the Court would not protect you when you need it most! While a good Charging Order Protection Entity in Wyoming or a similar state can be invaluable, it is NOT a universal solution for all your business’s needs.
- Expired or Suspended Status – Forgetting to renew your entity can leave you “abandoned at sea.” A dissolved LLC or corporation could mean you’re personally liable for anything that goes wrong.
- Wrong Entity Type – You might find yourself stuck in a C-corporation with a dragging double-taxation anchor or floating around in a sole proprietorship dinghy that offers no tax savings or liability protection. You want to ensure you have the right entity for the needs of your business.
- Handshake Partnerships—If you’re in business with partners and don’t have an operating agreement, it’s like sailing without a captain. Disagreements will leave you adrift and could destroy the business altogether!
If any of these red flags sound familiar, it’s time to get a Clean-Up before rough waters hit!
Get personalized help from our team at KKOS Lawyers!
What Does a Real Entity Need?
Many owners think filing a single piece of paper is enough, but that’s like assuming a pool floaty’s the same as a well-built vessel. For your LLC or S-Corp to offer real tax savings and asset protection, you need:
- Articles of Organization/Incorporation—The initial filing with the state, but this is just the starting point.
- Operating Agreement or Bylaws—A document outlining procedures and policies for the company. These are essential for dictating how decisions are made and how disputes will be resolved.
- Initial Minutes and Resolutions—These records document the company’s launch, who is in charge, and key decisions and policies.
- Ownership Certificates—Membership or stock certificates documenting who actually owns the company.
- Corporate/Company Book—A neatly organized binder where important company documents are kept and organized for easy reference.
- EIN—The company’s federal tax identification number is required to open bank accounts and file tax returns. If you do not have an EIN or if it was obtained incorrectly, you could miss out on thousands—if not tens of thousands of dollars—in tax savings when attempting to pursue certain tax elections, such as an S-election, only to miss out due to a missing or incorrect EIN.
Without these components, your entity is just drifting without direction.
Maintaining Your Business Vessel
Even the best-built vessel can sink if it isn’t properly maintained. Once your business entity is established, it’s crucial to keep it in good shape through regular upkeep:
- Hold Annual Meetings and Keep Minutes—Even if your state doesn’t require you to file these, documenting major decisions strengthens the corporate veil to protect you from liability.
- Keep Finances Separate—Always use a dedicated bank account for your business. Mixing personal and business funds is one of the quickest ways to jeopardize your company.
- Use the Company Name Consistently—Always prepare contracts and agreements in the company’s name, not your own. Every business transaction should be conducted under the company’s banner.
- Pay Annual State Fees—Each state has unique renewal requirements for businesses. Failure to meet these requirements can result in suspension or dissolution of your entity.
- Title Property Properly—Ensure that assets such as rental properties and business equipment are titled in the correct entity, not in your personal name.
These steps aren’t just about paperwork; they are essential measures to keep your liability shield and tax strategies from cracking under pressure.
Simplifying Compliance: MSBS Services
For many business owners, managing compliance tasks (i.e., doing the “deck-work”) can feel overwhelming. That’s why our sister company, Main Street Business Services (MSBS), offers a Company Essentials service for just $199 per year. It’s like hiring a trusted first mate to keep your ship in order.
This service includes:
- State Renewal Filings—MSBS prepares and files state documents on your behalf, ensuring you never miss critical deadlines.
- Annual Minutes—MSBS handles the preparation and record-keeping of annual minutes, providing an essential layer of liability protection.
- Monitoring State and Federal Requirements—The proactive monitoring of state and federal regulations keeps you informed and ensures that you maintain good standing.
- Entity Amendments—This service includes up to three standard entity amendments each year, as needed.
Once your vessel has been built (or repaired!) with the assistance of an attorney at KKOS Lawyers, we will refer you to Main Street Business Services (MSBS), where, for less than the cost of a night at the harbor, MSBS will manage your entity, ensuring everything remains in optimal condition. This way, you can focus on navigating the best course for your business instead of spending time fixing issues and managing crises.
Ready for Smooth Sailing?
Establishing an LLC or S-Corp goes beyond simply filling out forms; it’s about creating a robust structure for your business that protects you from lawsuits, taxes, and financial difficulties. However, this protection is effective only if your business entity is set up and maintained correctly. If your structure resembles a patched-up dinghy rather than a reliable vessel, it’s time for a comprehensive Entity Clean-Up.
At KKOS Lawyers, we’re offering a special promotion on Entity Clean-Ups and Entity Setups to help business owners restore their protections and navigate their ventures with confidence. Don’t wait until a lawsuit or the IRS demands repairs during a crisis. Book with us today, and let’s ensure your business is truly shipshape.
Start with a free consult—we’ll help you build the right structure to ensure success!