by Richard Keyt, Phoenix LLC attorney

Question: Does Arizona law require that the members or managers of an Arizona limited liability company hold annual meetings or that they document the meetings with minutes.

Answer: No.

Question: Should Arizona limited liability companies hold annual meetings of members and managers and document the meetings with minutes?

Answer: Absolutely. It’s a prudent business practice. Annual meetings can prevent problems.

As an Arizona limited liability company lawyer who has formed 9,300+ Arizona LLCs and who has been practicing business law in Arizona since 1980, I recommend that every Arizona LLC hold annual meetings of members and managers and that the meetings be documented with minutes. In lieu of holding a meeting of members and managers, they may adopt resolutions in the form of an Action by Unanimous Consent signed by all members and managers, respectively.

Many owners of Arizona LLCs ask me why should the members and managers of their small business hold meetings and document the meetings with minutes? Too often people mistakenly believe that after they form their LLC, they are home free and are happily ever after protected from the debts and liabilities of their LLC. They assume that all the members are on the same page and agree on all important actions taken by the company. Ignorance may be bliss, but it can also be very costly.

Why LLC Annual Minutes or Resolutions are Important

There are three important reasons to hold annual meetings and/or adopt annual resolutions.

1.  Reduce the Chance of a Court Piercing the Veil and Finding Members Liable for the LLC’s Debts. Holding regular meetings and documenting the meetings helps to convince a court and a jury that you are treating your LLC like a business rather than a hobby or sole proprietorship. One of the factors that courts consider in determining whether to pierce the veil and hold the members of an LLC liable for the LLC’s debts and obligations is if the members hold meetings. Prudent businesses hold meetings and document the meetings with minutes or resolutions because doing so makes good sense EVEN WHEN THE LAW DOES NOT REQUIRE MEETINGS.

2.  Conduct an Annual Review Audit. The members and managers should review an LLC operations checklist that reminds them of: (i) open items (such as no signed Operating Agreement or that the LLC acquired a new member, but failed to properly document the addition), or (ii) tasks that should be completed in the near future. It is an annual opportunity to review important company matters such as: insurance coverages, year-end tax planning, whether loans to or from the LLC and related parties have been documented and the agreed value of the company for buy-out purposes in the LLC’s Operating Agreement.

3.  Inform Members About LLC Actions & Give Members a Vote to Approve or Reject LLC Action. In multi-member limited liability companies regularly held meetings is a good way to keep members informed about the LLC’s activities and to document approval of important acts, which greatly reduces the chance that the members will have a dispute and go to court over acts or omissions of the members, managers and the company. A company that informs the members of important proposed actions and that allows the members to vote to approve or reject the actions is much less likely to end in court because members disagree over what is done or not done. The members could vote to approve a resolution that approves the actions taken by members and/or managers during the year. This gives members an option to discuss action and vote to approve or reject the action.

Recommended Annual Meeting Tasks

Conduct an Arizona Corporation Commission status audit. Every Arizona LLC should conduct an annual ACC status audit to determine if any information in the company’s Articles of Organization on file with the Arizona Corporation Commission is inaccurate.  Arizona law requires that AZ LLC Articles of Organization be kept up to date.

Arizona Revised Statutes Section 29-3202 states, “The Articles of Organization shall be amended . . . within thirty days after the occurrence of any of the following:

1. a member-managed limited liability company has a change in members.

2. a manager-managed limited liability company has a change in managers or a change in members owning twenty percent or greater interest in the capital or profits of the company.

3. the limited liability company changes its statutory agent.

4. the limited liability company changes its principal address.

5. the address of one or more of the limited liability company’s managers or members changes.

6. the address of the statutory agent changes.

At least once a year the members and managers of every Arizona LLC should review the LLC’s records on file with the Arizona Corporation Commission to determine:

A. Company is in Good Standing. Check to confirm that the LLC is in good standing.  If the LLC is not in good standing, the members and managers must correct the problem so the ACC will reinstate the LLC in good standing status.

B. Known Place of Business. Check to confirm that the domestic address of the company on file with the ACC is correct.  If it is not, file a change of address form with the ACC to correct the address. It is extremely important that the address of the company on file with the ACC always be correct. In certain circumstances the ACC may be authorized to serve legal documents (for example – a summons and complaint when the LLC is sued) on the company by mailing the documents to the address on file with the ACC. If the address on file with the ACC is not correct, the company may never receive the legal documents and suffer adverse consequences, including, but not limited to, having a default judgment entered in superior court against the company. For this reason I recommend that the company review its records on file with the ACC every three months, but not less often than once every year, to confirm that all information is correct.

C. Statutory Agent. Check to confirm that the the company’s statutory agent on file with the ACC is correct.  If the address is bad, file a change of address form with the ACC to correct the address.  If the statutory agent is not correct or should be changed, then the LLC needs to change the statutory agent by filing the following two forms with the ACC: (1) a change of statutory agent form, and (2) an acceptance of statutory agent form.

D. Members. Check to make sure that the member information is correct.  The company must file a change of address form with the ACC if the address of any member is incorrect. The company must file an Amendment to the Articles of Organization and an Amendment Attachment – Members if: (i) the ACC records name as a member a person or entity who is no longer a member, or if (ii) a person or an entity who should be named as a member is not named on the ACC’s records. Note: If the company is member managed, all members must be named in the ACC’s records, but if the company is manager managed, only members who own 20% or more of the LLC must be named in the ACC’s records.

E. Managers – Manager Managed LLCs Only. Check to make sure that the manager information is correct.  The company must file an Amendment to the Articles of Organization and an Amendment Attachment – Managers if: (i) the ACC records name as a manager a person or entity who is no longer a manager, or if (ii) a person or an entity who should be named as a manager is not named on the ACC’s records.

Purchase Our Do-It-Yourself Annual Minutes & Resolutions

I recommend that you purchase our editable Word annual meeting minutes from our Arizona legal form store.  The minutes come meeting minutes for both member and manager meetings and 16 resolutions for common actions taken during the year such as borrowing money, electing managers, or hiring personnel.