Category: Best practices

“BEST PRACTICES IN LLC FORMATIONS” (Post #4) – My LLC Formation Checklist

By , February 4, 2012 4:48 pm

The most basic “best practices” in forming LLCs are:

  • To create or acquire a checklist that tells you all of the legal and tax tasks that should be performed for clients who need comprehensive LLC formation services; and
  • To use this checklist whenever you form an LLC.

When you form an LLC for a client, you should, ideally, perform all of the tasks on your checklist that are within your professional expertise; and you should help your client find other professionals who can handle LLC formation tasks that are beyond your expertise.

I’ve been forming LLCs since 1993. I still find that after I think I’ve done all I should do for a particular LLC formation client and I look at my checklist, I find yet additional tasks to perform. Unless you look at your checklist, you always forget something.

Obviously, if your client wants comprehensive LLC formation services:

  • You and any professionals you associate yourself with should perform all of the tasks on your checklist;
  • You should perform each of these tasks thoroughly; and
  • You should perform each in accordance with the applicable best practice. (This means, of course, that first you have to determine this best practice.)

Obviously, if your clients want only a portion of the services on your checklist—i.e., they want only intermediate or basic services—that’s all you should provide; and you may have to provide some of these services less than thoroughly. But if this is the case, you should be clear about it in telling your client the scope of your representation—and I would argue that Rule 1.2 of the ABA Rules of Professional Conduct as in effect in most states so requires. Otherwise you might face a malpractice suit for what you didn’t do. And you should always begin by offering your client all of the services on your checklist.

Over a period of many years, I’ve spent scores of hours compiling my own LLC formation checklist, and I’ve asked a lot of other LLC lawyers to review my checklist. The resulting checklist is attached here. This checklist is the backbone of the third edition of Drafting Limited Liability Company Operating Agreements, my Wolters Kluwer LLC formbook and practice manual, on which I’m currently at work. The table of contents of the third edition as I currently envision it is here.

I’ll be quite grateful for any comments that, on the basis of your own LLC formation experience, you may have on either of the attached documents.

“BEST PRACTICES IN LLC FORMATIONS” (Post #3) – “Best” Practices vs. “Sound” Practices

By , January 21, 2012 10:58 am

As I mentioned in my first post in this blog on the subject of best practices in forming LLCs (published on January 16, 2012), it seems to me that authors of LLC formbooks and practice manuals worth their salt ought not merely to propose to their readers the practices these authors favor for use in forming LLCs or even to recommend these practices for this use.  Rather, they should provide their readers with what they believe to reflect LLC formation best practices; and they should explain to their readers why they believe them to be best practices.

The reason, obviously, is that this is what, if they reflect on the matter, readers clearly want.  Obviously, if you ask these readers whether, in forming LLCs for their clients, they want do so as well as they reasonably can–i.e., at a high level of competence–their answer (even if they have not previously focused expressly on the question) will be a resounding yes.   But this means that what they want from such a book is not merely recommended or even clearly sound practices.  Rather; they want best practices.

But validly classifying specific LLC formation practices specifically as best practices is no easy task.  This is because, in almost all cases, the best LLC lawyers and law firms—i.e., the ones most likely to be using the best LLC formation practices—cloak these practices (and all of their other legal practices) in secrecy.  In my experience, they almost never disclose them in any detail in law journal articles, in practice manuals, in CLE outlines or in any other source.

So what can be done by a person such as myself–a person intent on writing the best possible LLC formbooks and practice manuals—to overcome this cloak of law firm secrecy?

Above all:

  • We can scour the legal literature in the hope that the best law firms or the most skillful LLC formation lawyers have disclosed their secrets in these sources (even though we know in advance they probably haven’t done so);
  • We can test our own considered ideas about best practices by seeking evaluation of them by other LLC lawyers we believe are forming LLCs for their clients with a high degree of competence; and
  • We can test our ideas in blogs like this one and elsewhere on the Internet and in other public media–e.g., bar seminars–in the hope of receiving useful feedback from the community of LLC formation lawyers.

Indeed, if we want to write good books about LLC formation practice, we must do all these things.

“Best Practices in LLC Formations” (Post #1)—Introduction

By , January 16, 2012 1:00 pm

I’m currently preparing a third edition of Drafting Limited Liability Company Operating Agreements, my Wolters Kluwer LLC formbook and practice manual. The purpose of the Third Edition is to comprehensively and systematically implement in the book the concept of LLC formation best practices.

As you no doubt know, “best practices” is a concept in wide use in medicine, manufacturing and other non-legal fields, but not in the law. It is a concept that I want to be express, pervasive and unifying in my book.

In a series of posts in this blog, I will be presenting, as succinctly as I can, my key thoughts on the subject of LLC formation best practices as I develop them in drafting and revising the Third Edition. I’ll be very grateful for any comments you may have on these posts.