You may have heard that limited liability companies, or LLCs, have fewer recordkeeping requirements than corporations. But if you have formed an LLC, you might now be wondering exactly what those requirements are.
Your state's LLC laws may list certain documents and information that LLCs must keep at their headquarters. But the documents you must keep vary by state, and some states don't have any LLC recordkeeping requirements at all.
Regardless of what your state's laws say, there are certain documents that all LLCs should hang on to, as a matter of good business practice. Here are nine types of records every LLC should keep:
1. Formation documents. This includes a copy of the articles of organization filed with the state and the certificate of formation. Also keep any documents confirming that you have registered to do business in additional states, along with any amendments to your formation documents.
2. Operating agreement. Your operating agreement will usually describe how profits will be divided and what the capital contributions of the owners (also known as members) are. It also explains the voting rights of members and the procedure for accepting new members and handling departures. If any of this information is in a document other than the operating agreement, keep those documents as well.
3. List of members and managers. Always keep a current list of the names, addresses, phone numbers, and email addresses of your members, and of your managers, if your LLC has them.
4. Meeting minutes and resolutions. LLCs don't have to hold shareholder meetings the way corporations do, but if you do have member meetings, keep minutes. Also keep copies of any resolutions that are approved.
5. Licenses and permits. Keep copies of all state or local licenses and permits.
6. Insurance information. Keep policy and insurance company information for any LLC insurance policies, including liability, property, business interruption, and professional liability.
7. Contracts. Keep copies of all contracts that your LLC is a party to. This includes leases, major supplier or customer contracts, and routine nondisclosure agreements.
8. Tax records. The Internal Revenue Service advises most taxpayers to keep their records for three years—the length of time the IRS has to begin an audit. But there are some instances where you should keep tax records as long as seven years. Tax records include your federal, state, and local tax returns, plus receipts, invoices, paid bills, canceled checks, and credit card statements.
9. Employment tax records. Keep these for a minimum of four years, according to the IRS. Employment tax records include employment tax returns, W-4 forms, information about your employees and their dates of employment, time cards, and records of your payments to your employees.
Finally, look at your state's LLC laws to see if you are required to keep any other records. Develop a system for storing records in binders, file folders, or digitally. Then, when you need to, you will always be able to find the documents that explain both your business relationships and your finances.
Get consultations with tax professionals and advice from independent attorneys in your state with our Business Advisory Plan.