By Phillip B. Rarick, Miami Lakes and Weston Estate Planning Attorney
Note: This 10 Point Checklist is for those persons who have interests in one or more Florida entities, such as a corporation, limited liability company (LLC), or limited Partnership (LP).
1. Annual Fees. In January the State of Florida will send notices via email reminding you that annual fees for each corporate entity are due no later than May 1. Do not wait to get an email notice from the state, as your fees are due regardless of whether you get a notice. Remember: The deadline to pay these fees is May 1 without penalty.
Note: The state will no longer waive the $400 penalty for filing late. You can check the status of your entity by going to: Click here: sunbiz.org
2. Conversion to LLC or LP. The entities that now offer the best asset protection are not corporations; rather the higher quality of asset protection is usually offered by a properly structured LLC (limited liability company) or LLLP (limited liability limited partnership. If we have not met within the past year to review your corporate entities and discuss the pros and cons of converting to an LLC or LLLP, I advise that you schedule an appointment to do so.
3. Shareholder Agreement. Your business is your personal money making machine and it usually needs to be protected by a shareholder agreement if you have partners. This agreement is essentially a plan to make sure that if your partner becomes incapacitated, dies, or simply wants out of the business, you do not end up with a partner that you do not like working with – such as your partner’s spouse, children, or total stranger. It provides an exit strategy for you and your partner. If you do not have such an agreement, or it has not been recently reviewed, it is time to do so.
4. Funding of Shareholder Agreement. In order to properly protect you and your family, the Shareholder Agreement needs to be properly funded with life insurance or some other source. In reviewing many Shareholder Agreements, we have found many to be deficient in this area: either they are underfunded or not funded at all.
5. Certificates. The best way to prove your ownership in a corporate entity is to have stock or membership certificates that accurately reflect your ownership interest. This means you should have a corporate book for each entity and a current record showing every person or entity that has an ownership interest. This record should be crystal clear. If you have multiple corporate entities, we recommend preparing a Summary of Entities that shows your ownership interest in each entity.
6. By-Laws. This is usually a real sleeper that most persons overlook in their corporate records. By-Laws are important to protect you. For example the By-Laws should have a provision authorizing indemnification of the officers and directors by the corporation if such persons are sued.
7. Annual Meeting Minutes. All corporations need to maintain annual meeting minutes. Such minutes are not required for a LLC or LP, but are often recommended if you have multiple partners or if there have been significant transactions during the year.
8. Special Meeting Minutes. Special Meeting Minutes are advisable whenever there is any change in ownership, a major purchase or acquisition, change in officers or directors, or other similar transaction.
9. Employment Agreement. If you are employed by your corporate entity, there should be an up-to-date Employment Agreement that accurately reflects your compensation and benefits. Why is this important? First, your company is a business and needs to run like a business to avoid a creditor arguing that your company is not a valid corporation. Second, in the event your business has financial difficulties, you want to be the first creditor in line against the company.
10. Lease. If your corporate entity is used to protect rental properties, then it is usually advisable that the leases are between the entity and the tenant, and payments are made directly to the corporate entity. Make sure your lease is up to date.
Big Note: This Checklist is not a substitute for a review by an attorney, but rather is intended to help you flag issues that you may need to address now. We are available to answer any questions or concerns that you may have. To schedule an appointment with Rarick & Beskin, P.A. call (305) 556-5209 or email Phil Rarick at firstname.lastname@example.org.
The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Miami asset protection attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.