All registered companies and corporations are required by law to hold an annual meeting. Usually billed as a shareholder meeting, the annual meeting for a corporation usually addresses the company’s annual report, board of director elections, changes to internal policies and procedures, and even dividends. Limited liability companies (LLCs), however, are not subject to the same statutory requirement for regular meetings. This naturally begs the question: “Should my LLC hold an annual meeting?”
To that, we answer YES.
In fact, the answer may be that your LLC must hold an annual meeting if the LLC’s governing documents, such as the Operating Agreement, require it.
What Is the Purpose of an LLC Annual Meeting?
As mentioned, an LLC operating agreement may require an annual meeting. If it does, failure to abide by this formality can jeopardize the LLC liability shield. For many of our clients, the liability shield is the driving force behind the creation of the LLC in the first place. These LLCs are not manufacturing companies or retail entities. They are often family-owned LLCs—many of which hold real estate—which is why preservation of the liability protection is such a key issue. In addition to liability protection, though, there are other practical business reasons for why LLC members need to occasionally convene, including the following:
- Give owners a forum to discuss strategy, ownership, and issues facing the company
- Establish a record of key company events, decisions, and member voting records, which can be useful internally and externally (e.g., documentation for the Internal Revenue Service or a state licensing board)
- Measure progress (or lack thereof) on previously decided plans and proposals
- Address leadership changes (perhaps due to the incapacitation, divorce, or death of a member) and discuss the addition or removal of members
- Consider operating agreement amendments (perhaps to allow for the transfer of membership interests to trusts for probate avoidance purposes)
- Promote good communication and decision-making processes
Having meeting rules and keeping accurate records of meetings can serve as evidence—in the eyes of members and outside interested parties—that the company is truly legally separate from its members. Annual meetings are also useful for valuation purposes as the meetings and the accompanying records can bolster a sense that the company is being run well.
How to Hold an Annual Meeting
When an LLC’s operating agreement or articles of organization require annual meetings, members should comply with any formalities specified, such as the provision of notice or the preparation of
minutes. The governing documents for the LLC might also include a provision allowing unanimous written consent in lieu of meeting, which can serve the same purpose as holding a formal in-person
meeting. If no specific rules are included in the governing documents for the LLC, the members can
decide the format and notice requirements that works best. But, perhaps the members should consider adding to the agenda a plan to adopt more formal rules for meetings going forward.
If annual meetings become burdensome, LLC members can look to modify the governing documents to eliminate them or change the frequency (though it would likely require a meeting to eliminate the need for future meetings).
Get Step-by-Step Legal Guidance for Your Corporate Meetings
As mentioned, one of the advantages of the LLC structure is that the business is viewed as a separate legal entity from its owners. But, this separation could be jeopardized if the company does not hold annual meetings and obey other legal formalities.
We can help ensure that your LLC complies with all requirements related to its annual meetings or other formalities required by state law or the operating agreement of your LLC. For legal advice about your corporation’s or LLC’s annual meeting, schedule a Business Strategy Session with Amy.
