We have many clients who are members in limited liability companies (LLC’s) who regularly ask if they need to hold formal member meetings. While I believe holding meetings is a good idea for several reasons, in the state of Colorado, limited liability companies have no statutory requirement to hold any kind of regular or special meetings. This is unlike corporations which by Colorado law are required to hold at least an annual meeting of shareholders, whether there is one shareholder or a thousand, the law requires at least an annual meeting. Because the State has no meeting requirements, many LLC owners skip the meetings, at least in a formal sense with notices and minutes.
The general rule of “no meetings” can change if the operating agreement for the company requires meetings. Other than the practical usefulness of requiring a meeting to review the company’s performance and plans, there is at least one very significant legal reason it is a good idea to hold a formal meeting with a record of the meeting at least once a year. Simply stated, the reason is “asset protection.” A primary reason many people set up LLC’s or other business entities is to protect their personal assets from business debts or liabilities. This is true because state law recognizes this separate entity as distinct and different from the owners – therefore its liabilities and assets belong to the entity itself and not its owners. This is only true if all the owners act like and treat the entity as separate and distinct from themselves. Ways to do this are not using business assets for personal purposes, not allowing the business to pay personal expenses AND having regular meetings in which company business is discussed and formally addressed.
If owners, on a regular basis, do not act like the business entity is separate and distinct from themselves, creditors of the company can “pierce the corporate veil” and seek to collect personal assets to pay company debts and liabilities. While having meetings alone won’t prevent this from happening, our regular suggestion to LLC owners is to have at least an annual meeting to discuss business issues, review performance and document your meeting with thorough minutes.