Your LLC is not protecting you unless to follow the formalities!

Simply registering an LLC isn't all that you have to do to ensure that it's protecting you. As I'm sure you know, the point of an LLC is to provide you with personal liability protections, but those protections don't just come automatically. In order to get these protections, you have to follow various formalities to ensure that the veil of protection is not pierced. So here are the 4 primary ways the LLC protection can be pierced and how to avoid them. The first way is not following the rules in your operating agreement, and if you don't have an operating agreement, then you must follow the rules within your state. The second is not recording meeting minutes to keep track of the major business decisions that you make. Even if you're the only owner of the LLC, you still have to record meeting minutes, and basically that means that you have to have a meeting with yourself, write down the decisions that were made, and file them away with your other business documents. The third way to lose protections is by not filing the annual reports and paying the annual fees to keep the LLC active. The fourth way to pierce the veil is by not having a separate business bank account. When you operate an LLC, you want to have a separate account that is only used for business expenses. The money that your business makes should go into that account, any expenses should come out of that account. If you don't do this, then you could trigger the alter ego doctrine, which would pierce the veil of protection. And the fifth way the court could pierce the veil of protection is by determining that your LLC is not adequately capitalized. Basically, this means that you must keep enough money in your LLC's bank account to pay for all of the business expenses. And lastly, you must sign business-related contracts using the LLC's name rather than your name personally.