How To Maintain Your Limited Liability Company Agreement

The limited liability company agreement is not one that is adopted and then placed in a safe or drawer never to be looked at again. It is the most important document for an LLC business and should be properly and actively maintained as the business grows and evolves. Learn the key requirements for proper maintenance.

PROPER ADOPTION OF LIMITED LIABILITY COMPANY AGREEMENT

First, you should confirm that your agreement was properly adopted by the LLC and agreed to by every member of the business. This requires that all members signed the document and an officer of the limited liability company also signed the document on behalf of the business.

When a new member is admitted to the LLC, the new member should sign the actual limited liability company agreement or a separate document where he or she agrees to be bound by the agreement. The important thing is to make sure there is a writing with the signature of a new member.

KEEP IN SECURE LOCATION

Many businesses adopt an LLC agreement and then lose it. This does not good when the document is needed to accomplish a business transaction or to provide guidance on business operations. Keep the limited liability company agreement in a secure location. Many LLC statutes require that it be reasonably accessible to all members.

Make copies of it and provide copies to all members. If you have unsigned copies or drafts lying around, throw those away so that any later confusion can be avoided.

AMENDING THE LIMITED LIABILITY COMPANY AGREEMENT

As your business grows and evolves, there may be a need to update or amend your LLC agreement. Modifications are permitted in all states. Your document should have provisions that instruct on the proper approvals and methods for amending the agreement. Follow these and document the approval and processes in writing.

All amendments or modifications to the limited liability company agreement should be dated so that a historical record can be maintained.

KEEPING AGREEMENT PRIVATE

Generally, this document is a private, not for public view agreement. However, as your business transacts with other parties, there will come a time when a third party will want to see your limited liability company agreement.

For example, many banks are now requiring review and to maintain copies of the operating agreement of an LLC prior to opening bank accounts. Also, if your business needs to enter in to a supplier transaction with another business, the other business may need to see the LLC agreement to confirm that the transaction they are entering into is validly authorized in accordance with the governance rules of the limited liability company.

Litigation may require that the document be produced for copying and study related to a lawsuit. In all situations, determine whether the other party needs to see the entire document or just a component. It is possible to segregate out provisions from the entire agreement for provision to outside third parties.