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Must LLC Members Attend Annual Meetings?

If you have started a business and formed it as a limited liability company (LLC), you are likely enjoying the flexibility it is offering the members. The LLC structure has minimal formal requirements compared to other legal structures. In fact, California law does not require the members and managers of a LLC to hold annual meetings. However, there are two important reasons why your LLC’s Operating Agreement should require them anyway:

  1. Maintain your personal limited liability protection . One of the most common ways creditors or other third-parties attempt to hold members of a LLC personally liable for debts of the entity are to file a lawsuit and “pierce the corporate veil.” The primary argument behind piercing the corporate veil is to prove that the members of the LLC did not operate the entity as a prudent business or that it was a “legal fiction.” In other words, the members used the LLC for their own personal benefit. By holding annual meetings and voting on important business decisions, the members have proof that the LLC is a legitimate business (it is important for the LLC to maintain minutes of every meeting).
  1. Have members vote on actions of the LLC . If the LLC is owned by several parties, having meetings provides the entity the opportunity to inform the members and manages of important decisions. The members of the LLC can vote to approve or reject the proposed actions of the LLC. In most instances, a member that has been provided notice of an annual meeting and chooses not to attend or otherwise participate, cannot later dispute any actions that were voted on and passed at the meeting. Thus, annual meetings help the members get on the same page and prevent arguments after key decisions have been made.

If your business is established as a limited liability company, it is important to review your Operating Agreement to determine whether or not it requires annual meetings to be held. If it does not and you are interested in amending your Operating Agreement to include the requirement, we can help. We can also assist you with understanding how to properly document your meetings. The minimal effort and cost it takes to comply with the annual meeting requirement is worth the significant amount of protection it can provide the entity and its members.

If you need assistance with your limited liability company or other business-related matters, contact the legal team at The Swenson Law Firm to schedule an initial consultation.

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