by Brandon Baker
We are privileged with the opportunity to serve many privately-held businesses. Often, the company’s organizational documents (such as an operating agreement for an LLC or bylaws for a corporation) provide good governance practices for the company. However, the actions of the owners and officers unintentionally stray from the terms of those documents. In certain circumstances, such failures could result in a loss of the liability protection afforded by the company. As the old saying goes, “actions speak louder than words.”
We suggest the following guidelines for operating a privately-held business in a conscientious manner:
- The company’s officers should review the company’s organizational documents on a regular basis (at least annually), to ensure the company’s current operating practices, books, and records are consistent with the organizational documents.
- The company should have a separate bank account, titled in the name of the company and used solely for company business.
- Company funds should not be used for personal expenses, unless properly documented for repayment as one would do with a third party.
- The company should maintain sufficient operating capital to conduct the company’s ordinary business activities.
- All agreements should be made in the company’s name, with the signature block noting the title of the individual signing on the company’s behalf.
- Any assets used for company purposes should be owned, leased, or otherwise properly titled in the company’s name.
- The company should maintain sufficient insurance coverage for liability, casualty, workers' compensation, and other matters as appropriate for its business.
- The company’s officers should act in accordance with their fiduciary duty to the company’s owners.
- The company must stay current on taxes and required fees to government agencies. Anyone conducting business in Oklahoma, whether it is a limited liability company, corporation, partnership, individual or otherwise, is now required to file an annual Business Activity Tax Return with the Oklahoma Tax Commission. Generally, the tax is $25.00. The Business Activity Tax, once paid, may be applied as a credit against certain taxes and fees, such as the annual fee paid to the Oklahoma Secretary of State by limited liability companies.
Each company is different and these recommendations may not apply to every company in every circumstance. However, these suggestions will hopefully provide some helpful guidelines for the privately-held business operation.