The LLC must hold itself out to the public at all times as a Limited Liability Company. All letterheads, billheads, advertising, business cards, and telephone listings should use the LLC’s registered name, such as the followed by the words, “a Wyoming Limited Liability Company,” “Ltd.,” or “LLC” to indicate its status.
A Limited Liability Company acts through its Members, Manager if any, or through agents properly appointed. When action is taken to sign a letter, contract, or check for the LLC, or when the name of any person is printed on a business card, you should make certain that the capacity of the individual signing or named, is clearly indicated. In virtually every, case that person must be either be a Manager, all the Members or as otherwise agreed, or an authorized business agent. Agreements and other documents for the LLC should be signed in such a way as to identify the LLC, the signor, and their authority to sign for the entity. Do not sign in your individual capacity or you might acquire personal liability! Learn more about forming Wyoming Limited Liability Companies. We also have resource articles on their excellent privacy and other benefits which make them unique.
Establish a checking account for the LLC. That account, and any other accounts of the LLC, should be established in the LLC’s name. The appropriate responsible LLC officials in their official capacities and on behalf of the LLC should execute signature cards for the accounts.
Always observe the distinction between Member, Manager, or individual signatures, even in cases where the individual involved is required to be a signatory (for example, where an individual will be a guarantor of the LLC’s obligations and will sign in his or her individual capacity).
It is extremely important that LLC property is clearly understood to be that of the LLC and not that of any individual member, manager, or officer. The LLC is not simply a separate pocket of its members. It is a distinct legal entity. The failure of the members, managers, and officers of a Limited Liability Company to recognize that their LLC’s cash or other assets are not theirs could cause significant and unpleasant encounters with the IRS, and could invalidate asset protection features of the LLC.
Any assets transferred to the LLC become the property of the LLC and must be treated as LLC property. Insurance policies for fidelity bonds, liability insurance coverage, and property coverage should be obtained in the name of the LLC. If there will be liability coverage for individuals as well as for the LLC, the individuals should be added as additional insureds.
For instance, if the LLC distributes money or assets, this must be done:
As wages or salary (for management fees); or
A distribution of profits taxable to the member; or
As a loan (loans from an LLC to its members are extremely suspect to the IRS, and unless completely documented have a questionable chance of surviving an IRS audit). Likewise, cash or property made available to the LLC by its members will either be considered a contribution to capital or a loan, and all loans should be properly documented. Properly documented, this also means that the note should be signed and should bear a market interest rate.
There is normally no tax owed when property is contributed to the LLC in return for an LLC interest. The transfer of assets to an LLC in exchange for an LLC interest is called a capital contribution. If someone sells property to the LLC, however, the seller must pay any taxes (such as capital gains tax) resulting from such sale . It is important that you review several of the prior articles of this manual for the exceptions to this tax-free transfer rule!
All important transactions of the LLC, such as major business agreements, loans, employment agreements, leases, and buy-sell agreements, must be considered and approved by formal action of the Members unless authorized to a Manager. If there is a pattern of individual action without the necessary formalities, the members involved risk a legal determination that they were acting and are liable as individuals, despite their use of the LLC name. The end result could be a loss of tax benefits and asset protection.
Since the LLC is a business, members should know the business plan and general activities of the business. In a Limited Liability Company the Members, or Managers if any, transacts all business, so there may not be a requirement for approval of day-to-day decisions and affairs. An annual business meeting is a good idea in order to keep everyone informed of the business plan, investment plan, and to gain member input. LLC meetings are usually not necessary to take any action that is required by or consistent with the Limited Liability Company agreement.
The Wyoming LLC and its managers, officers, and members are responsible for payment of salaries, wages, and payroll taxes. They must insure that salaries and wages as well as payroll taxes are properly paid. They may incur personal liability if the LLC fails to make proper withholdings and tax payments.
Employers, who pay taxable wages to employees or who have employees who report tips, must withhold income tax and Social Security (FICA) taxes. Each employee should fill out a Form W-4, withholding allowance certificate, or form W-4E, exemption from withholding. Every employer must file all necessary Form 941 quarterly employment tax reports by the last day of the month following the end of each calendar and an annual unemployment tax return, Form 940, on or before January 31st of each year.
The Limited Liability Company must normally comply with any state withholding requirements in all states in which it does business.
Your LLC is a valuable component of an overall estate plan. State and federal gift and estate tax exemptions are changing, and to keep your plan current an annual estate plan review is advisable.
Periodic review of your LLC is essential to address changes in the law and changes in the situation in which the LLC was originally envisioned. We recommend that you contact us annually or biannually for a “business and estate planning review.”
We strongly advise clients not to amend technical legal documents without competent attorney assistance! Such an action risks frustration of all or part of your plan.
Your LLC contemplates gifts of LLC units to other family members or to trusts that have been established for their benefit. If you did not sign an annual retainer agreement, make sure you contact your attorney and/or CPA to assist you in accomplishing and properly documenting annual gifts.
Periodically an appraisal of the assets in your LLC and valuation of the LLC itself is necessary. For gifts to be properly documented, appraisals of assets and valuations of LLC interests must be done at the time gifts are made. Updating must also be done in the event of the death of a member.
An annual maintenance agreement with your attorney and/or CPA is a great way to help document and maintain your LLC each year. Please call with questions and be sure to always provide changes in your address or phone number.
Learn about other LLC best practices here.
The most important thing you can do after setting up your LLC is to operate it correctly. You should review this manual at least annually and whenever you have questions. If it does not contain the answer to your questions, please contact us and/or your CPA for guidance. We will either have the answers or we will help you find the answers from one of your other advisors.
Learn more about Wyoming LLCs here.
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