Best Practices For Your Business


Running a business is tough. There’s entirely too much for business owners to keep track of on a daily basis, so prioritizing is important. With everything going on, the last thing a business wants or needs to encounter is legal trouble. 

One of the most common concerns I get from business owners looking to form a limited liability entity is, “it’s such a hassle to maintain a corporation [or LLC]. I don’t want the burden.” Sure, it’s more work than being a sole proprietorship, which has almost no formalities. But piece of mind comes at a relatively small price. If the business takes care to follow some best practices, then it can live a long and healthy life, sans burdens and legal mishaps.

Here are some things to consider when operating a corporation or an LLC. To maintain the highly coveted limited liability protection that these structures offer, it’s important to observe certain formalities that help show the business is actually a separate entity from its owner(s) and not just a shell.


  1. The business should maintain separate bank accounts from those of its owners. A good rule of thumb is that commingling is a big no-no when you have a limited liability company.
  2. Your board of directors, or appropriate governing body in the case of other entities, should approve the establishment of corporate/LLC bank accounts.
  3. Determine the officers who will be authorized to sign checks and access funds on behalf of the company and grant them that authority.


  1. All business should be conducted in the name of the entity and not the individual owner. Read on to find out how to sign on behalf of the company.
  2. All forms identifying items should reflect the business’s name. For example, letterheads, invoices, and business cards of employees or officers should all bear the company’s name.
  3. Contracts and leases should be executed in the company’s name with appropriate signature blocks. Click here for a 30-second video on how to sign a contract.


  1. Like I mentioned earlier, NEVER commingle. Notably, don’t commingle business assets with personal assets.
  2. Continuing with the theme of commingling, the company’s checks should be in the business’s name. Aunt Agnes shouldn’t be on the checks and neither should you unless, of course, your company’s name is Aunt Agnes.
  3. To help keep all of this straight, just remember that the owners and the business are not one in the same. They are distinct. Forgetting this will surely get you into trouble.


  1. You should know how often your board of directors is required to meet. This information can be found in your company’s bylaws. Or, if your business is an LLC, the required member meetings should be outlined in your operating agreement.
  2. Notice is often required before meetings take place. If notice is required, then make sure you are giving proper notice to all those entitled to attend the meeting.
  3. For most corporations, the board of directors and shareholders must hold meetings at least annually. Check your governing documents.
  4. Shareholders must elect directors every year, so it’s best to do so at annual meetings.


  1. The board of directors manages the corporation while the officers take care of day-to-day operations. Don’t blur the lines.
  2. Remember that directors owe fiduciary duties to the corporation and its shareholders. The same is true for LLCs – members owe fiduciary duties to the LLC and each other.
  3. If a director has a material financial interest in a transaction, proper steps must be taken to make the transaction valid. Watch out for red flags.
  4. The board of directors must elect officers regularly. When is the last time your board held elections?
  5. All major business transactions should be reviewed and authorized by the board. Make sure thorough minutes are kept. The same is true for actions taken by managers of manager-managed LLCs.


  1. Every corporation and LLC has to file a statement of information with the secretary of state (in California, at least). Corporations have to do it annually and LLCs have to do it biannually. Don’t miss these because you’ll have to pay the piper if you do.
  2. Local permits and licenses may apply to your business and in addition to generally applicable permits/licenses there may also be industry specific requirements, so always check local rules to make sure you’re on the up and up.
  3. Without delving into securities laws, I will just leave you with a heads up that state and federal securities laws may, and often do, apply to shares in a corporation and membership interests in an LLC.
  4. If the business is planning on using any name other than what appears on its articles of incorporation or organization, then it will have to obtain a fictitious business name (aka DBA).


  1. If there is more than one owner of the business, then you should seriously consider entering into a buy-sell agreement. If you already have one, make sure you review it and update it, as necessary, on a regular basis. An owner’s death, disability, divorce, wrongful conduct (and the list goes on) can derail and even devastate a business. A buy-sell agreement should address these possibilities and offer contingency plans. A contingency plan doesn’t seem urgent until it is.

That’s all, folks. The above tips are not the only best practices a business should follow, but I think it’s a good place to start. It may seem overwhelming, but it’s a cakewalk compared to the alternative.

If you have any questions about this or other business law matters, then reach out! And remember, this article is not a substitute for legal advice and is for informational purposes only.

Disclaimer: Nothing in this article is, nor is it intended to be, legal advice. Please consult with an attorney for your individual situation.

Photograph Courtesy of FreeDigitalPhotos.Net


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Full Circle Business Law, PC
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Glendale, CA 91205
Phone: (818) 247-2036