The Discipline of Adequately Maintaining Your LLC or S-Corporation
Updated: Nov 15, 2022
Your ideas. Your dreams. Protect them!
Too often we’ve seen small business owners in California blindsided by litigation. Some
lawsuits are existential threats to not only the business itself, but also to the personal lives of the
Consider this scenario: you have workers that, over the years, were erroneously mis-classified as exempt employees. Instead of paying hourly overtime wages, you’ve paid a flat salary each payroll cycle all along. An employee is, then, subsequently terminated for poor performance and decides to lawyer up. Three months later, the business is served with a claim seeking back wages, penalties, and attorneys fees running into the six-figure range. Employment law in California is complex and small businesses often draw the short-end of the stick when they don’t fully comply.
Although your business will certainly be impacted by the lawsuit, some preventive measures taken earlier on can make sure that your personal assets are safe. At the business’ inception, you may have spent time creating a “veil” of protection via a corporation or a limited liability company (“LLC”). However, periodic maintenance of the business entity MUST be routinely performed. Otherwise, valid creditors will not only collect against the assets of the business, but may also be successful collecting from the owner’s personal wealth, such as a personal home or retirement savings. OUCH!!!
...valid creditors will not only collect against the assets of the business, but may also be successful collecting from the owner’s personal wealth...
Can you readily locate your Articles of Organization/Incorporation? Did you properly declare dividends and are your meeting minutes written? Where is your LLC’s operating agreement and is it still being followed? At Law and Justice, we help clients meet (or remedy) their ongoing formalities requirement to adequately reinforce this safety shield.
Whether you’re an entrepreneur who is just starting out, or an already-established business owner who simply needs a check-up on the legal status of your LLC/S-Corp, give us a call. We’re here for you.