Starting a Business

What kind of financial reports are minimally required of an LLC, and how often should they be made available to the partners?

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Minimally, LLCs are required to file annual tax returns and the members (owners) of an LLC would receive a copy of Form K-1, which is an information return that needs to be filed.

However, other provisions of your operating agreement may provide for more frequent disclosure. For example, your operating agreement may provide for (at least) quarterly distributions to the members in amounts that enable them to pay the estimated taxes on the income they will receive from the LLC.

When it comes to P&Ls and balance sheets, some company owners want to track their financial metrics as frequently as monthly. Also, members of an LLC are generally entitled to review the books and records of the company during business hours upon reasonable notice.

You want the members to feel that they have enough information to satisfy their curiosity, without being inundated by paperwork. If your operating agreement is silent about this, it's best to work out a regular procedure for financial reporting reviews with your accountant. Even better, ask your partners how often they want to see the information.

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