Your Obligation to Maintain LLC Agreement
A limited liability company is a legal entity owned by its members that can operate a business and transact with other companies or third parties. In order to ensure that it is clear what is the structure of the limited liability company and what are its rules of governance, a Limited Liability Company Agreement is created and maintained for the life of the company.
FORMING A LIMITED LIABILITY COMPANY
When you establish a limited liability company all the members of the company will need to sign and agree to the Limited Liability Company Agreement, thus formally adopting the agreement. This is a very important document for the life of the company, and it should be well maintained as it may be critical at times when the company enters into important agreements or other transactions with third parties. Correct maintenance and management of this document is a legal obligation of the company’s officers.
Whenever new members join the company, an officer of the limited liability company and every one of the new members must sign the original LLC Agreement. Alternatively, a separate document stating their agreement to be bound by the company’s LLC Agreement can be signed and executed.
USING LLC AGREEMENT FOR LEGAL TRANSACTIONS
This important document, in general, remains private to the company and its officers and members; however it may be required to be produced to third parties in various situations. A bank may want to review a copy of the company’s LLC Agreement before it will open the company’s bank account. Various legal transactions with other parties, including supplier agreements with other businesses, may also require you to produce the LLC Agreement. In such situations it needs to be confirmed that the company may validly enter into such a transaction in accordance with its governance rules.
Similarly, if the company becomes subject to litigation or instigates a legal action against someone else it may need to provide copies of its LLC Agreement to the other parties. Depending on the information required in a given situation, an entire document or its extract may need to be provided.
ALTERING AND MAINTAINING LLC AGREEMENT
The LLC Agreement may require changes or additions over time, as your business grows and its needs change. This document should clearly define how any modifications need to be made and recorded. A chronological record of the changes needs to be maintained at all times.
The current, that is valid, version of the LLC Agreement should be safely maintained and be easily available to all members. It is advisable to destroy any incomplete or unsigned copies of the document.
The limited liability company agreement should be kept in a safe place at all times and it is the obligation of the officers of the company to ensure it is never lost.
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