The IRS and Department of Revenue have really increased the auditing of all small business activity.  In addition, the IRS is auditing Schedule C's and Sub-S corporations that have anything at all appearing to be understating income.  As if that is not enough, a huge number of small business taxpayers are having to go into short sales, foreclosures or even bankruptcy.  AND, this all tends to create more law suits and divorces.

As a result of the above, it has become clear that if the liability and property protection of assets held in Limited Liability Companies can be pierced, there are those that will try to do that.  It cannot be emphasized enough that Managing Member and Owners of LLC's need to do the following:

1. Review your Operating Agreement with a professional that is up to date on all these issues.  Most Agreements will need to be amended to provide adequate protection in a legal situation.

2. It is now recommended that LLC's do have Annual Meetings and keep minutes.  All changes in Members need to be properly documented.

3. Decisions need to be made on whether it is advantageous to be Member Managed or Manager Managed. There is a huge tax and liability difference between these.

4. Duties and responsibilities of Managers and Members need to be clear and be followed.

5.  All Assets need to be titled in the LLC name.

6. All Income and Expenses need to go through the LLC bank account.  NO personal expenses should be paid by the LLC.  All Member transaction need to be approved and documented correctly.

7. The LLC needs to stay current with it's respective State Filing.

8. The elective tax filing of the LLC must be approved within the Operating Agreement.

Courts are turning over assets from LLC's to claiments if the above is not done correctly.  This includes real estate.  Almost all investment real estate properties are currently in LLC's.  AND almost all real estate LLC's are not being handled correctly.