Form LLCs

“Form” LLCs are popular and widespread. My first LLCs were “form” LLCs and almost every LLC I have reviewed which I did not organize is a “form” LLC.

Throughout this site I highlight the differences between my old "form" LLCs and my new LLC Packages.

My "form" LLCs were light on asset and liability protection.

For my "form" LLCs I would use a pre-drafted "form" LLC Operating Agreement from a "form" book computer diskette and fill in the blanks with clients' names, addresses, and LLC purposes. I did not modify the “form” LLC operating agreement. See Why “Form” LLC Operating Agreements Are Not Usually Modified.

My “form” LLC organization included a discussion with clients about the benefits of LLCs but I imparted little to my clients that they could use to guide or improve their future LLC operation. I then sent them a filed copy of the LLC articles of organization, the filled-in “form” LLC operating agreement, and a fee statement.

My LLC Packages are now different for the following reasons.

1) Flexibility - South Carolina LLC law authorizes LLC operating agreements to include essentially any provision desired by LLC clients or recommended by the LLC organizer (me). Now that I draft my own LLC Operating Agreements I take advantage of this flexibility, by offering clients organizational and business Options and Choices and then drafting their operating agreements according to their choices, and I draft operating agreements that include any provisions I feel are appropriate for the particular LLC (whether those provisions are ones I have drafted or are drafted by someone else).

2) Asset and Liability Protection - (I find asset and liability protection is the single overriding reason clients want LLCs) - By drafting my own LLC Operating Agreements and including other items in the LLC Packages, my LLCs are now focused on including and enhancing as many LLC asset and liability protection features as I believe are practical (specific ways to enhance LLC asset and liability protections are discussed further by subject in the links at Single Member LLCs and Multi-Member LLCs).

3) Education - There was very little attempt at client education in my “form” LLC organizations-I have learned that LLC status bestows almost nothing on a business or investment that cannot be undone by poor client planning, poor client operation, or client ignorance of the law, so now I stress client education.

The Pre-Organization Questionnaire Letter obviously helps determine what clients want for their LLCs, but it also makes clients think about LLCs and LLC structure. The questionnaire letter involves clients in LLC organization earlier and to a much greater degree then was the case when I used “form” LLC Operating Agreements and didn’t ask many questions. Client involvement is client education.

I want clients to understand their LLC is a separate and distinct legal entity apart from themselves and that they need to constantly operate it as such. Involving clients in LLC organization, asking them pre-organization questions, and providing them with my Attorney Letter about their LLC, results in greater client retention of information and greater client understanding of their LLCs. This is an improvement over my “form” LLC organization.

I ask clients to consider basic LLC options such as “Term” LLC versus “at-will” LLC or Manager Managed versus member managed even though I know which way the LLC should be structure simply because I want clients to think on the subjects. The more I get clients considering LLC managerial and organizational Options and Choices, the more they think about their businesses or investments in terms of an LLC.

The Attorney Letter on doing business as an LLC helps explain the particular LLC operating agreement, gives pointers on future LLC operation, discusses use of the “sample” documents included in the Document Case, and has the overall purpose of helping clients enhance rather than undermine their LLC’s asset and liability protections.

I will also help clients stay aware of LLC issues in the future if they sign up for my firm’s E-Mail Updates.

All of this and the other subjects touched upon in this web site are to my mind improvements over the “form” LLC organization I used to offer. Further, all is done for basically the same Fees and Costs as when I organized “form” LLCs.

“A foolish consistency is the hobgoblin of little minds....” Ralph Waldo Emerson from Essay on Self-Reliance.