Smart LLC withdrawal refers to actions taken by the owners of a business to limit the funds that can be applied toward the company's liabilities. This is accomplished by regularly withdrawing funds from the company's accounts in accordance with applicable state and federal laws.
Payments to the owners are the safest form of withdrawal because they are least likely to violate applicable statutes. Payments can be made in the form of salaries for services rendered or regular repayments to the owners for loans and investments in the company.
The UFTA is the primary code under which withdrawals are regulated, and most states have adopted a version of its provisions. Under the code, it is unlawful for an owner to withdraw funds to prevent or delay payment to creditors and to withdraw enough funds to render the company effectively insolvent. Withdrawing lump sums from the LLC into personal accounts can result in the loss of liability protection for the owners' personal assets.
The smartest way for an LLC owner to avoid fraud claims is to establish a clearly documented schedule for withdrawals after consulting with a qualified accountant. An accountant will help an owner understand the laws governing withdrawals in his state, while the structured withdrawal plan will help insulate the owner from potential fraud claims.
