Alternative business org Flashcards
what are the requirements for closely held corp
1) unanimous election of shareholders evidenced by shareholders in Articles of Incorp or bylaws and
2) REASONABLE shared transfer limit
consequences of a closely held corp
1) no piercing corporate veil EVEN if fail to observe corporate formalities
2) likely s corp status (taxed as partnership)
- no more than 100 owners of stock and only 1 class of stock
what are professional corporations
licensed professionals (lawyers, accountants etc)
whar are the requirements of professional corporations (P.C.)
1) file articles with named professional corporation or PC
2) shareholders mst be licensed professionals
3) corp may only practice ONE PROFESSION
can there be more than 1 profession in a professional corp
NO
what are the consequences of a professional corporation?
1) professionals are liable personally for their OWN malpractice
2) but the professionals are NOT liable personally for each other’s malpractice or the obligations of the corporation itself
what is a Limited Liability Company
hybrid b/w corp and partnership in which owners are called members have same rights as limited liability as stock holders of corp plus benefits of partnership tax.
are there any formation requirements for LLC
YES must file articles of organization and may adopt operating agreement
how are LLC controlled
their choice.
1) members may decide to manage business or
2) members may delegate control to team of managers
what is limited liquidity of LLC
a full membership interest MAY NOT be transferred w/o unanimous consent of members or as otherwise in articles
what is the limited life of a LLC
will disclose upon unanimous consent of members or classified in articles of Org or operating agreement
are are recognized fundamental corporate changes
1) merger (A becomes B)
2) consolidation (A and B become C)
3) dissolution
4) fundamental (not ministerial) amendments to articles
5) sale (not purchase) of substantially all of corporations assets
5 steps needed for fundamental corporate changes
1) resolution by board at a valid meeting
2) notice of special meeting
3) approval by shares of stock of all shares entitled to vote and
(a) approval by majority of all shares entitled to vote and majority of each voting group that is adversely effected of change
4) possibility of dissenting shareholder right of appraisal
5) file notice with the state
in IL what percent needs to vote of shareholders for fundamental corporate changes
2/3 approval of all entitled to vote and 2/3 of each voting groups hurt by change
what is the X/C for corporate fundamental changes when shareholders dont need notice
no shareholder approval required for “short-form” merger where a parent corporation that owns 90% or more of the stock in its subsidiary merges with the subsidiary
what is the possibility of dissenting shareholder right of appraisal
1) a shareholder who DOES NOT vote in favor of a fundamental change has the right to force the corporation to buy her shares at the fair value
2) actions by shareholder to perfect the right
(a) before shareholder vote, file written notice of objection and intent to demand payment;
(b) do not vote in favor of proposed change
(c) make prompt written demand to be bought out
what happens if shareholder and corporation cannot agree on fair value of shares to buy out
court has power to appoint expert appraisal to value shares and appraisal is binding on parties
in LLC can an operating agreement eliminate duty of loyalty
YES, as long as doing so is not “manifestly unreasonable”
general what is LLC and operating agreement
LLC combines features of partnership with limited personal liability enjoyed by corporate shareholders.
- Allows LLC owners (members) to adopt operating agreements that control moswt aspects of LLC business and management as long as they are not contrary to law
what does dissolution of LLC mean
an LLC that has been dissolved continues its existence, but is not allowed to carry on any business x/c as appropriate to wind up its affairs.
- In winding up, the LLC must discharge its debts, obligations, or other liabilities.
- A claim can be asserted against a dissolved LLC to the extent of the LLC’s undistributed assets.
- the LLC must notify its known claimaints in writing of the dissolution, describing the proper procedures and deadlines asserting a claim
what happens if an LLC assets have already been sold and distrubted to its members w.o proper wound up and paying creditors
each member may be personally liable to the claimant to the extent of her proportionate share of the claim or to the extent of the assets distributed to the member, whichever is less.
- Members total liability for creditor claims may not exceed the total value of assets distributed to the member in dissolution
alter ego of LLC to pierce the veil
intermingling of personal and business funds is often cited as a justification for piercing the veil in both corporate and LLC contexts
What are the 2 ways to dissolve an LLC?
1) file articles of dissolution with state
2) an LLC may be dissolved upon the consent of all members without the need to file articles of dissolution
What does it mean when an LLC has been dissolved
it continues its existence, but is not allowed to carry out on any business EXPECT as appropriate to wind up its affairs.
