Best Practices for Maintaining Your LLC

Starting Your LLC Was Just the First Step

Forming a Limited Liability Company (LLC) is a smart move for many small business owners. It offers legal protection, flexible taxation options, and a professional structure. But simply forming the LLC isn’t enough. There are additional steps you must take to actively maintain it to preserve those benefits and stay compliant.

1. Stay Up to Date with State Filings

Most states require LLCs to file annual or biennial reports to maintain active status. These reports typically:

- Confirm your business name and address

- Identify the registered agent

- List members or managers

For Wisconsin LLC’s keep an eye on the email on file with the state for a reminder each year as these are no longer mailed out.

If you miss filing you risk penalties, late fees, or even administrative dissolution of your LLC.

2. Keep Business and Personal Finances Separate

One of the key benefits of an LLC is limited liability protection but that protection can be lost if you mix business and personal finances (this is called “piercing the corporate veil”).

To protect your LLC status:

- Open a separate business checking account

- Use business credit cards for business expenses

- Never pay personal bills from business accounts or business cards (or vice versa)

- Reimburse yourself through formal, documented transactions.

3. Maintain Proper Records and Documentation

Regardless of the size of your LLC, you should still maintain clear documentation to support your operations and defend your business in the event of an audit or legal dispute.

Key documents to maintain:

- Articles of Organization

- Operating Agreement (even for single-member LLCs)

- Member resolutions or meeting notes for major decisions

- Copies of contracts, leases, and permits

- Tax returns and financial statements

4. Review and Update Your Operating Agreement

Your LLC’s Operating Agreement is a foundational document that governs:

- Ownership percentages

- Voting rights

- Profit distribution

- Exit strategies.

If you take on a partner, change your management structure, or expand into new states, or change your tax status update the agreement accordingly.

5. Maintain Appropriate Licenses and Permits

Forming an LLC does not automatically grant you the right to operate. You must also:

- Apply for any industry-specific licenses

- Renew local business permits

- Keep a current EIN and sales tax ID (if applicable)

Failing to renew licenses can lead to fines or a forced halt in business operations.