Five Common Mistakes Business Owners Make When Organizing an LLC in Missouri

1. Not Having an Operating Agreement

An Operating Agreement (“OA”) is a crucial document that establishes the ownership of the LLC, the rights and duties of the company’s members and managers, and the operating rules for the company. While the OA is not filed with the Missouri Secretary of State (“SOS”), it is required by law. Without an OA, your LLC runs the risk of losing its limited liability protection and the members of the LLC could be held personally liable.

2. Not Updating the Operating Agreement

The OA establishes the ownership of the LLC, how the LLC conducts its business, and how it is taxed.  There are several ways for an LLC to be taxed, including as a disregarded entity or an S-corporation.  Including this in the OA and acting in accordance with the OA are very important.  If tax status, ownership, or any other portion of the OA changes, it should be promptly amended to reflect the change(s).

3. Not Registering a Fictitious Name Used By the LLC

If an LLC transacts business in a name other than the legal entity’s name, that name must be filed as a fictitious name (also known as a “d/b/a” or “doing business as”) with the SOS. A fictitious name is any name business is transacted under other than the true name of the legal entity. For example, if the legal name of the LLC is “Flett Enterprises, LLC” and it owns a restaurant named “Andy’s BBQ,” the owner should register “Andy’s BBQ” as a fictitious name. If not, the owner(s) risk personal liability for operating “Andy’s BBQ” in their individual capacity.

4. Registering a Fictitious Name in the Owner’s Individual Name

To apply for a fictitious name, the Missouri SOS requires an “owner” of the fictitious name. Oftentimes, the individual who owns the LLC registers as the owner of the fictitious name in their name rather than the name LLC’s name.  For example, if Andy registers as the owner of the fictitious name “Andy’s BBQ,” he can be held personally liable for business conducted under that name. Instead, the owner of the fictitious name should be “Flett Enterprises, LLC.”  That way, if someone chokes at Andy’s BBQ and files a lawsuit, it would be against “Flett Enterprises, LLC,” rather than Andy individually.

5. An Owner Serving as the Registered Agent for the LLC

LLCs registered to do business in Missouri must have a registered agent located in Missouri who accepts documents for the company, including summonses for any lawsuits filed against the company. Owners of LLCs often name themselves as the registered agent and include the business address or their home address as the registered address. If the business address is listed, summonses could be served in front of employees and/or customers.  If the owner’s home address is listed, a Sheriff/process server will come to their front door with any summons.  The owner’s home address is also publicly available on the Missouri SOS website. When your attorney serves as the registered agent (Danna McKitrick offers this service), you avoid these issues. Any summons is served directly to your attorney who will notify you and can timely file a response.

Posted by Attorney Katherine M. Flett. Flett is a member of the litigation team whose primary focus is on assisting clients in business litigation, employment law, real estate, insurance defense, and bankruptcy matters.

Published in the January 2024 St. Louis Small Business Monthly.

© iqoncept www.fotosearch.com