A number of subscribers have asked about what's
involved in managing and administering a legal entity such as a family
partnership, a trust or a corporation. Some of their concern is about
what needs to be done to ensure that the legal benefits of the entity
are not lost because of a failure to do whatever is required to preserve
the separate existence of the entity. At a more basic level, some
subscribers are asking about more mundane procedures, such as separate
bank accounts, bookkeeping and reports to the IRS.
First, I'll offer some general suggestions that I believe
will help you to operate and administer a limited partnership, limited
liability company, a trust or a corporation - regardless of it's unique
features. Then I'll offer some comments on any special requirements that
might apply to any of these specific entities.
After the entity is formed, the first thing that needs to be
done is to request a taxpayer identification number for the entity. The
request should be made to the IRS using form SS-4, which is technically
a request for an employer identification number. (That can now be done
on the IRS web site for dopmestic entities.) Most public accountants and
tax preparers will have copies of this form. Even if you have no
employees and don't expect to have any, this is the taxpayer
identification number that will be used on any information returns that
are sent to you and any tax returns you will send to the IRS. Any banks
or brokerage firms with whom you set up an account will ask for that
number. If any reports need to be filed before the number is assigned by
the IRS, you can just put "Pending" in the appropriate box on the
form.
The next thing you need to do is to open a bank account in
the name of the separate legal entity. It would usually be a good idea
to have a checking account with minimal charges for deposit and checking
transactions, with a separate money market account for any medium term
cash savings. The bank will usually ask you to sign a form giving
information about each of the officers, partners, members or trustees
who have any authority to act for the applicable entity. They may also
ask for a copy of the corporate charter and by laws, the trust
agreement or the partnership (or LLC) agreement. It would be helpful for
you to have a supply of those documents available. If you are
attempting to open a foreign bank account, the foreign bank is likely to
ask for a lot more information in order to comply with the various
money laundering laws.
As a precaution against losing valuable original documents,
you might want to open a bank deposit box in the name of the entity to
keep any original documents and valuable papers.
Where the entity is to own various kinds of investments, it
will be necessary to open an account with a brokerage firm.
