How to Avoid Bank Hassles as an LLC or Corporation

I’ll be brief.  I just want to quickly share a story that happened to a client of mine last week that could help you avoid lots of unnecessary hassles.

A corporate client called last week to report that he had had an unpleasant encounter at a bank with one of those rude bank employees who seem to think that their mission is to make customers’ lives difficult with paperwork.
What was the issue?

Our client had executed an LLC operating agreement a few years ago, and had it witnessed and notarized.  As we do with so many clients these days, we drafted the documents, sent them by email, and the client signed them at his office.  But the version he had signed was actually the penultimate draft.  At that point, the client was still considering having two members of the LLC, and therefore, the documents had two signature lines.  So the witness signed on the second member signature line.  Now, it seemed, the bank wanted to consider the witness a member of the LLC even though the witness was not mentioned anywhere else in the operating agreement.
In addition, the client had originally requested that we leave the percentage allocations blank in the Schedule A so that he could fill them in at the last minute.  Well, he ultimately decided that he was the 100% owner, but left the allocations blank when he executed the Agreement.  So now the bank didn’t want to believe that he was the 100% owner and that the witness was just a witness.

The client ultimately resolved his banking issue, but he ended the call by telling me that this experience would make a helpful cautionary tale for other corporate clients and he encouraged me to share it with clients and friends of the firm.

Lessons Learned:
1) Make sure you are signing the final version of an agreement.

2) Make sure you fill in all the blank spaces in the agreement, including the date, the titles and names of the signatories, and ownership information and addresses.

3) Make sure you carefully review all exhibits and schedules to make sure they are complete.

Remember, after executing any agreement, be sure to send it to us for final review.  That way, we can help you make sure it was executed and filed correctly so you won’t have any hassles later on.

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