Sunday, January 6, 2013
Maintaining Limited Liability - New Mexico Business Attorneys
You may be in danger of personal liability should you or the business fail to comply with the regulations that pertain to your company's operations. The following are some key criteria in maintaining limited liability standing. This list is not exhaustive, so if you're looking to form a New Mexico LLC and are concerned about the potential pitfalls, then be sure to contact a New Mexico business lawyer.
Individual Guarantees for Business Obligations
One of the major advantages of organizing an limited liability company is the protection it offers for individual assets. The managers, members, and officers can be held personally liable for the LLC's obligations and debts in some circumstances, however. Unless you sign a personal guaranty agreement, a lot of lenders will not offer credit when you begin a company. Signing such an statement will make you personally liable for the debt or obligation secured.
By taking certain actions you could also take on individual responsibility for the organization's debts or obligations. An adverse party might be able to “pierce the corporate veil” and make you personally liable for the LLC's obligations if you blend your personal interests or assets with business assets or if you neglect LLC rules and regulations.
In addition to this, it is crucial to diligently review all leases, credit agreements, contracts and equivalent written documents before signing them to be sure that they don't incorporate unseen personal liability representations or indemnification agreements.
Negligence (not to mention willful or intentional torts) might also result in the loss of liability protection for that individual. If an officer, member, manager, employee or other representative of the Limited Liability Company engages in negligent conduct that hurts someone else they might be determined to be personally liable. Limited Liability Companies should think about carrying liability insurance coverage to safeguard against these types of risks.
An Employer Identification Number can be supplied by the Internal Revenue Service when you organize a Limited Liability Company. Withholding and FICA taxes have to be reported, collected, and paid to the state and federal government as required by law. The individuals responsible for keeping and paying for these various taxes may be held liable separately from the Limited Liability Company.
Distributions by the Company
Distributions from an LLC to its members are typically disallowed if they would render a company insolvent or when the company's assets are lower than its liabilities. In certain cases, improper distributions may be recovered. Therefore, it is a smart idea to see whether or not a distribution will be lawful before making one.
Always Use the Entire Company Name for Business Transactions
When conducting business, it is imperative that you use the LLC name precisely as it's specified in the articles of organization. Accordingly, all letterhead, stationery, receipts, and invoices should be made using the full and genuine LLC name. A complete title ought to be added beside the signature when signing on behalf of the LLC to make sure that it will be clear the individual is operating as a representative of the Limited Liability Company rather than in his or her individual capacity. If you sign a contract and fail to list your relationship to the LLC near your name in the contract, one could argue that you should be held individually liable as a party to the agreement.
In a similar fashion, if you fail to state your connection with the Limited Liability Company when engaging in banking transactions or signing credit agreements you can be held individually liable for those obligations. The same protocols must be followed when leasing equipment, office space, furniture, vehicles, etc.
Recording and Approving Significant Transactions
Authorization from a manager may be necessary for any important transaction (the operate agreement of the LLC should cover these types of issues). The officers should follow the guidelines of the operating agreement. Alternatively, resolutions could be approved and recorded granting approval. Entering into a financial transaction without the blessing of the LLC might result in individual liability.
This is intended merely as a short overview, and it's certainly not meant to deliver an exclusive checklist of every way a company's limited liability standing could be jeopardized. Never depend on a brief overview on its own when determining the right way to run your company. If you have any concerns you may want to speak with a business attorney for legal advice.