Mark had his LLC all set up and ready to go. Then came the fateful day, his last day at work. It hit him when he woke up the next morning, realizing that he didn’t have to go to work. What was he to do now? How was he to turn his LLC documentation into a living, breathing business? Mark had a dream of establishing a sales business much like the one he had just left as an employee. But Mark was suddenly realizing that having a dream is one thing, while turning the dream into a reality is another thing.
Identifying
A first step in operating your LLC is to identify your business activities with the LLC, more so than with you individually. Of course, your LLC will in some respects carry or reflect your own individual identity, including your character, personality, commitments, and interests. But it is important that your business’s customers, clients, or patients understand that they are dealing with your LLC, not just with you. And so, your LLC’s website, business cards, email address, letterhead, print materials, contracts, and signage should all carry the LLC’s name. That prominence is why your choice of the LLC’s name is significant. You need it to convey your LLC’s identity, whether also your identity in part or the identity of the goods or service you provide, and manner, method, or location in which you provide them. Be thoughtful, thorough, and consistent in how you associate your LLC’s identity with its business activities.
Branding
You may, if you wish, think of identifying your LLC in its operations as branding. Your LLC’s business can benefit from a clear, positive, and memorable public presentation of its identity in its website, business cards, email address, letterhead, signage, and other communications. That’s the theory of branding, that consumers not only remember but also value the brand identity of a product and service. If you can create an impression of consumer value around your LLC’s brand, then you’ve added value to your LLC’s business. Branding can include not only the LLC’s name but also the font, script, color, position, and arrangement of the name and the design of associated logos. Once you have the brand identity, put it everywhere, not just on the marketing materials but also on the LLC’s goods, facilities, and vehicles. Branding can be valuable not only to you and your LLC but also to your LLC’s customers or clients.
Marketing
Marketing is also a key activity for businesses. Marketing is more than branding. Branding distinctly identifies the LLC. Marketing discerns and addresses the LLC’s customer, client, or patient population. Marketing then determines that population’s location, needs, interests, and resources. Marketing then discerns how to produce, package, price, and deliver the goods or services that the population needs, at locations and by methods the population can access, and at prices the population can afford and is willing to pay. Don’t try to sell to everyone. Don’t try to sell the goods or services you want to supply at the prices and in the locations you want to provide them. Instead, decide to whom you want to sell, what they need or want to buy, and where and at what price they’ll buy it. That’s the genius of marketing.
Advertising
Advertising differs from branding and marketing in that advertising communicates to the population you want to serve, the goods or services your marketing has determined you should sell, with the branding you have decided to use. Advertising is the promotion, not the design or discernment. You can do all the branding and marketing you want, but if you’re not reaching the population with advertising, then your LLC may be unsuccessful. Advertising can be by word of mouth, referrals from satisfied customers or other providers of goods or services, networking, educational seminars, or other traditional or non-traditional means like websites, social media campaigns, social media ads, television or radio ads, billboards. Your LLC can also advertise to your LLC’s current or former customers or clients. Consider how advertising might stimulate your LLC’s operation.
Contracting
Once you have business to conduct through your LLC, you need to ensure that you are contracting for that business in the name of the LLC. The limited liability of the LLC applies only when you conduct your business through and on behalf of the LLC. So, if you have a premises lease to sign, the lease should name the LLC as the lessee, not you. You should sign the lease as the LLC’s manager, not on your own individual behalf. Same thing for service contracts, supplier agreements, and agreements with customers, clients, or patients. Do everything in the LLC’s name, signing your own name only while simultaneously indicating above or below your signature that you are signing as the LLC’s manager, not individually.
Titling
As your LLC acquires property, you should generally title that property in the LLC’s name rather than your own individual name. That property may include a facility, motor vehicle, significant piece of equipment, or other asset. Titling the property in the LLC’s name helps to preserve member limited liability. Vehicle owners, for instance, generally have liability for serious injuries and other losses that careless operation of their motor vehicle causes. Title and register the vehicle in the LLC’s name, and members should avoid that owner liability. If the property represents an LLC asset, the LLC should likely own it on any title, registration, or other document reflecting ownership.
Employing
As your LLC retains employees, you should generally employ those employees through the LLC. When you retain an LLC employee, have the letter or contract of retention clearly indicate that the LLC is the employer and contracting party, not you or another individual member. See the example letter of retention at the end of this book. Develop and implement employment policies on the LLC’s behalf, in an LLC employee handbook. See the example handbook at the end of this book. Have the LLC’s payroll account, not your personal bank accounts, compensate employees and retain and pay employment taxes. You may do all of the LLC’s recruiting, interviewing, hiring, disciplining, and firing of employees as the LLC’s manager. But no matter your level of individual involvement, make sure that employees, the IRS, and others understand that the LLC is the employer, not you.
Banking
As your LLC engages in financial transactions, both receiving and making payments, ensure that those financial transactions go through the LLC’s own bank accounts, not your individual accounts. Take your LLC’s file-stamped articles of organization and EIN to the bank with which you want your LLC to do business, to open the LLC’s account there. Route every LLC deposit into that account and payment of every LLC obligation out of that account. Do not mix your personal finances up with the LLC’s finances. If the LLC needs additional funds to pay an invoice, and you must provide those funds, then deposit the funds into the LLC account out of which to pay the invoice rather than paying it directly from your own account, and make a clear record of your loan to the LLC in the LLC’s books and records, anticipating your repayment. Keep LLC finances and personal finances separate.
Accounting
One reason to keep separate bank accounts for your LLC is that your LLC will need to annually account for income, expenses, taxes, and distributions. Monthly statements for your LLC’s own bank accounts, and any other LLC deposit and check registers, will help your LLC do so. If you mix personal and LLC accounts and records, you may face challenges over those records from other members, the IRS, or other interested parties. The LLC should be able to account accurately and clearly for its financial transactions, whenever called upon and for whatever reason, from its own accounts and records. So, decide how you’re going to keep track of your LLC’s finances (see the chapter below), and then implement your decision.
Locating
To advance your LLC’s operation, you should also be considering the business’s best location. Many LLCs begin out of their organizer’s home, without any other location. Home-based LLC businesses may be possible, wise, and efficient in many fields. But an LLC’s business may require customer, client, or patient visits to the LLC’s location. Zoning restrictions and personal and family interests may prevent or discourage customers, clients, or patients from visiting a home location. Your LLC may also have equipment, personnel, processes, inventory, or vehicles that require a business location. To further your LLC’s operations, consider its prime location. Then plan to acquire, develop, and operate at that location. Carefully examine and thoughtfully negotiate your LLC’s lease of the premises at that location. Lease obligations can be an LLC’s greatest burden, least flexible obligation, and greatest risk, because of their costs and typically longer duration. If you do lease a location, negotiate for your LLC’s greatest flexibility, if possible with early termination and right-of-renewal clauses. Your LLC might want to stay, or it might want to go. Try to give it the greatest options.
Commingling
A key principle behind LLC operations is not to commingle LLC operations with personal activities and interests. Commingling can be problematic when attempting to rely on an LLC’s limited liability. If the one claiming your personal liability cannot readily distinguish between the LLC’s operation and your personal activities, then you may lose the LLC’s limited liability protection. Commingling can also be a problem when distinguishing and accounting for personal versus LLC assets, whether in a dispute with another LLC member or in a divorce, bankruptcy, collections, dissolution, or other proceeding. Confusion between your personal activities and your LLC’s business activities can also dilute the branding, marketing, and advertising value of your LLC. As much as you can, keep your LLC’s operations distinct from your personal activities, and your personal assets distinct from the LLC’s assets, even if you are your LLC’s sole member, employee, and manager.
Key Points
An LLC should operate through its own identity and branding.
An LLC should market and advertise drawing on its distinct identity.
An LLC should contract in its name, not any individual’s name.
An LLC should employ others in its name, not on behalf of individuals.
An LLC should keep its own separate bank accounts and records.
An LLC’s manager should not commingle personal and LLC activities.