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I see it several times per day, everyday: An LLC disaster waiting to happen! No matter where I travel or with whom I speak, it's clear that small to mid-sized business owners are not getting proper instruction on how to create, run, and maintain a *rock solid* LLC. Did you or your attorney form your LLC? Are you now left with a stack of papers and confusion?

One comment that I repeatedly hear is, *Well, my attorney set it up for me two years ago*so everything is rock solid.* Usually, without much probing, I soon learn that little else has been done since then. I will typically find that even the attorney may have missed a few steps along the way! In fact, we have uncovered 24 mistakes/traps that LLC owners face all the time! Many of these mistakes are even made by attorneys, experienced business owners, and very talented people. So if you want to avoid disasters and create a *rock solid* LLC*let's get started!

While I can*t cover all 24 mistakes and traps in this article, let's talk about the FIRST 5 MISTAKES in some detail:

1) THE *FATAL DEATH* PERSONAL LIABILITY CLAUSE * A handful of states have a strange option in their articles of organization forms which can be d-i-s-a-s-t-r-o-u-s. Some states require the filer to select whether or not LLC members will be personally liable for the business debts of the LLC. Obviously, members should not be personally liable for LLC debts and obligations! This is the reason you are forming an LLC to begin with*remember? Carefully read the articles of organization or similar formation documents in all states. Make sure that you and your attorney do not accept member personal liability for business debts. If you had an attorney or filing service submit your organizing documents for you, then it is always a good idea to *double check* this area. Make modifications if needed. You would be surprised how many times it's a secretary, legal assistant or clerk who actually completes your precious articles of organization. Just because a box exists, this does not mean you should *checkmark* it!

2) NOT MAINTAINING *REQUIRED* RECORDS * Here is an area where much confusion exists. When I talk about required records, I almost always get the same response, *I don*t want to keep records*that's why I chose the LLC over a corporation!*

Hold on one minute*because you may be surprised to learn that almost every state requires the LLC to maintain certain key records. In fact, maintaining *key records* is one of the few *formalities* that states do impose on the LLC. As a result, this can be a prime target area of attack if a suing attorney, the IRS, or a bankruptcy court wishes to *set aside* or *penetrate* the LLC.

We have reviewed this area in much detail for all 50 states and D.C., and I can tell you that each is different. Regardless of what your attorney, accountant, best friend, or local guru tells you, this is a MUST DO area! Some common records include: copies of resolutions, unanimous consent forms, copies of meeting minutes, tax returns (from 3 to 6 years), the names and addresses of all current and former members and/or managers, a copy of the operating agreement and more!

3) FAILING TO UNDERSTAND AND REVIEW YOUR OPERATING AGREEMENT * This is an all too common mistake. The operating agreement is perhaps the most important document of the LLC! The operating agreement is an *internal* set of rules for the company. It is basically a contract among members of the LLC. Even if you are the only LLC member this document is very important! We continually find that many business owners have a generic operating agreement that has never been reviewed or even signed by members!

Even worse, most operating agreements are usually missing some KEY components. In fact, we have isolated 43 to 45 key components that must be included in almost all operating agreements. Most canned and even *customized* agreements only contain about 25 to 30 of these components. At a bare minimum, you should understand what the *best practices* are regarding operating agreements and then compare this *gold standard* to what you have. Special tax treatments for the LLC (such as the popular S-corporation tax treatment under Sub Chapter S) will require additional terms and controls!

(Please see part two)

To learn more about the remaining traps, mistakes, and errors, which entity may be best for your business and how to file, create, run, and maintain your own *iron clad* LLC or corporation, please see Mr. Barazandeh*s, Incorporate for Wealth * and Wealth Building LLC * courses at http://www.theinformedinvestor.com and http://www.attorneysecrets.com

I want to wish you all the best in your business and email me if you ever need help: taxenterprises@yahoo.com