Best Practices for Maintaining the Corporate Veil of an LLC

[Rick C.]

I own several rental properties in an LLC. The LLC has its own bank account/credit card which are only used for those properties, any bills/contracts are always signed with "Manager XX LLC" next to my name, etc. Are there any best practices, in addition to those few, that you employ to ensure that the corporate veil of your LLC is not pierced?

[Chris Martin]

The obvious. Keep your finances separate. Separate tax returns, etc. Don't use company assets for personal use and vice versa. Follow your Operating Agreement. Exceptions happen, that's why you have resolutions. If you contribute capital (or material, etc.) account for those capital contributions. Keep your corporate filings (with your state's Secretary of State) and meeting minutes up to date. Document your decisions/meetings (if multi-manager) and memorialize in a formal motion/resolution book. Sign, seal, date resolutions and motions. Give notice for annual events (meetings). Electronic records are fine, but have a backup plan.

Keep your company well capitalized. My view is that even for single member LLCs, the company should own and grow (over time) the assets. Company owned, manager controlled. This is true with multi-manager LLCs as well.

Nobody really cares about your corporate formality discipline until there is some kind of issue. Then you will see that your discipline can pay large dividends.