What Is an LLC Executor? (Key Responsibilities Unveiled)
An LLC executor can offer essential help and direction while your company is still in its early stages.
However, most business owners are concerned about whether an LLC executor is needed to operate a limited liability company.
As a Mergers and Acquisitions specialist, I had the opportunity to work alongside LLC executors from my clients’ businesses.
We’ll share our insights as to the key responsibilities of an LLC executor and help you determine if you need one for your business.
Quick Summary:
- In strict legal terms, an LLC executor is the individual who prepares, signs, and files the Articles of Organization with the Secretary of State to register a limited liability company.
- The duties and responsibilities of the executor extends throughout the existence of the company.
- Some states require appointing an executor when forming an LLC.
- I recommend that new business owners employ a legal professional, such as a lawyer or an accountant, to act as an executor for their company.
What is a Limited Liability Company Executor?
An LLC executor is the individual or entity that files the Articles of Organization with the Secretary of State to formally register a limited liability company.
The members of the LLC have the option to designate an executor as a formal company position to perform administrative and legal duties.
An executor assists the company in all stages of its existence, including the formation process, preparation and filing of compliance documents and helps complete the dissolution of the LLC.
Becoming an executor does not require specific qualifications, but knowledge of business and tax laws is essential. Strong organizational skills and multitasking abilities are beneficial.
An executor can be any individual, including an attorney, accountant, or initial member of the LLC.
Responsibilities of a Business Executor
The primary responsibility of a limited liability company executor lies but is not limited to, the formation of the LLC.
One of the key benefits of forming an LLC is the personal liability protection it offers, safeguarding business owners' personal assets from legal issues or financial debts related to the company.
The position entails duties and responsibilities throughout the existence of the business entity.
Non-professional executors spend approximately 570 hours settling an estate, translating into about 71 full workdays or 14 full work weeks [1].
"Your own business growth and success depends on many things, and along that growing path, you are going to have to concede certain responsibilities and activities - whether for your accounting, your production, or day-to-day management."
– Michael Gerber, American Author & Founder of Gerber Companies
Formation of the Company
The executor’s primary role involves the processes necessary to form an LLC.
Forming and managing an LLC business includes understanding the roles and responsibilities associated with establishing a limited liability company, as well as the legal and financial advantages it offers to business owners.
1. Preparing and Filing the Articles of Organization
The primary responsibility of the executor in the formation of an LLC is preparing, signing, and filing the articles of organization or certificate of formation with the state.
The document is the legal basis for the creation of an LLC as a registered business entity in the state that provides a public record of the LLC's existence.
Additionally, the Corporate Transparency Act requires companies to file a Beneficial Ownership Information (BOI) report with FinCEN, ensuring detailed disclosure of ownership and applicants.
2. Designating the registered agent
The executor may appoint a member of the LLC or employ a business service provider to act as the company's registered agent.
The position serves as the point of contact for service of process, as well as receiving and handling legal documents on behalf of the LLC.
3. Obtaining an EIN from the Internal Revenue Service
The executor may be tasked to obtain a federal tax lD number or EIN for the company. An EIN is necessary to register the business entity with the IRS, open a bank account, hire employees, and enter into contracts.
4. Business Taxes
Once the LLC has obtained an EIN, the executor may proceed to register for taxes that are applicable to the LLC based on its line of business and operating structure.
5. Preparing and Filing an Initial Report
In states where it is required, the executor has to prepare and file an initial report for the LLC.
The document must include the name and address of your company, registered agent information, the nature of your business, and the names of all the members.
Additionally, companies must file a Beneficial Ownership Information report as mandated by the Corporate Transparency Act, which involves sharing crucial information with FinCEN regarding the reporting company, its beneficial owners, and the company applicants.
Compliance Requirements
At Venture Smarter, we understand that the executor ensures the LLC remains compliant through administrative and legal documentation duties.
Additionally, an LLC serves as a separate legal entity, which is crucial for protecting business owners' personal assets from the company's legal issues or financial debts.
1. Preparing and Filing an Annual Report
An annual report is a document that specifies basic information about a company, a comprehensive transcript of the business’ activities during the preceding year, and financial standing of the LLC.
An LLC executor will prepare and file the annual report with the Secretary of State or its equivalent agency to maintain a status of good standing.
2. Maintaining LLC Operating Agreement and Documents
As an LLC executor, you will be responsible for organizing and keeping important documents on file, such as the Articles of Organization, operating agreement, LLC members’ credentials, Certificate of Good Standing, and other certified documents or copies.
An LLC operating agreement is particularly important as it defines the administrative and financial structure of the company, outlines governance, and aids in managing compliance tasks.
My clients appreciate the importance of having LLC executors since the documents are kept in order and easy to access.
3. Filing the Articles of Amendment
Whenever there are significant business changes within the company, executors are responsible for filing the articles of amendment.
These changes include the following:
- Business name or address
- Registered agent
- LLC statement of purpose
- Members and managers
- Amending sections in the articles of organization
Dissolution Process
To formally dissolve your LLC, the executor must file the termination document and begin with winding up the business.
In the case of a single member LLC, specific considerations must be taken into account, especially regarding the responsibility of winding down the LLC after the owner's death, which may automatically fall to the executor of the owner's estate.
1. Filing Articles of Dissolution
To legally dissolve an LLC, the executor should prepare and file the articles of dissolution. It includes the company name, formation date, and the reason for business termination.
Whenever clients intend to dissolve an LLC, I always inform them of the importance of filing this document.
If an LLC is not formally dissolved, the business entity continues to be liable to pay state fees and taxes [2].
Considering the average time to settle an estate is nearly 16 months, with most completed within 18 months, LLC executors need to prepare for extended involvement in estate matters [3].
2. Closing Out Accounts
The executor is responsible for closing out business bank accounts, and taxes, as well as canceling licenses and permits.
3. Informing
The executor must inform clients, debtors, and contractors about the termination of the business through a Notice of Intent to Dissolve.
The letter includes the official date of dissolution and the individual who is handling the liquidation and payment of any outstanding debt.
4. Overseeing the Distribution of Assets
Once the LLC members collectively decide to voluntarily dissolve the company, the executor oversees the equitable distribution of assets among the owners.
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FAQs
Is the Name of the LLC Executor Made Public?
The name of the LLC executor is made public since they are required to sign the formation documents during the initial founding stages.
Can I Change My LLC executor After I Start an LLC?
You can change your LLC executor after you have started an LLC, but it requires compliance with jurisdiction laws and operating agreement provisions.
References:
- https://anthonyspark.com/e184-why-is-bein-an-executor-difficult-the-statistics/
- https://www.corpnet.com/run-business/articles-of-dissolution/
- https://www.estateexec.com/Docs/General_Statistics
