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LA BAR > BE (LLC) > Flashcards

BE (LLC) Flashcards

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1
Q

LLC Functions

A
  1. limited liability that shareholder of corporations have
  2. tax treatment of a partnership
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2
Q

Personal Liability

A

neither owners (members) nor managers are personally liable for any debts

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3
Q

Tax Benefits

A

not subject to federal or LA income tax at entity level

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4
Q

Compare - S corps

A

largely the same except limits to who qualifies as s corp

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5
Q

Compare - Limited Partnership

A

general partner is still personally liable for entities debts

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6
Q

Formation Requirements

A

Articles of organization AND initial report must be filed with secretary of state

existence begins upon issuance of a certificate of organization by secretary of state

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7
Q

Promotor Liability

A

Statute is silent

probably same rules as pre-incorporation

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8
Q

Articles of Incorporation Formalities

A
  1. must be in english
  2. signed by AT LEAST ONE person (need not be member or manager
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9
Q

Mandatory Words in Articles

A
  1. name of the LLC
  2. Purposes for LLC is formed or purpose is to engage in any lawful activity (EXCEPT INSURANCE UNDERWRITING)
  3. whether the LLC is a low-profit LLC
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9
Q

Initial Report

A

1.must be signed by each person (or agent) who signed the articles

  1. must state the name, location, and municipal address of LLC itself (no PO BOX) OR each of its registered agents, and the persons with power to manage LLC
  2. Must contain a notarized affidavit of acknowledgement and acceptance signed by each of the registered agents
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9
Q

Name Requirement

A

must contain words or abbreviation indicating LLC (L.L.C., L.C., limited liability company)

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10
Q

Operating Agreement

A

written or oral of the members of an LLC as to the affairs of the LLC and the conduct of its business (analogous to corp bylaws)

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11
Q

Conversions

A

any type of already formed LA business can convert to LLC by submitting a conversion application to the secretary of state

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12
Q

Mergers

A

can be merged or consolidated with other business by filing a merger or consolidation agreement with the secretary of state and the conveyance records of each parish

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13
Q

Members’ inspection rights

A
  1. inspect and copy LLC record upon reasonably request during business hours
  2. obtain a) trues and complete information regarding state of business and financial condition b) copy of tax returns c) other information regarding affairs
  3. demand formal accounting of the LLCs affairs whenever reasonable
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14
Q

Operational Requirements

A

only need to continuously maintain a registered office and one registered agent in the state

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15
Q

Members

A

no restrictions on who can be a member

16
Q

Member-managed

A

unless delegated to managers ALL members will manage the business

subject to provisions in articles or WRITTEN operating agreement

17
Q

Risk of Managing Members

A

no risk to limited liability of members if they participate in management and control of the LLC

18
Q

Manager-Managed

A

if members want one or more board person to be nonmembers, articles must specifically state it will manager managed need not be members

19
Q

Selecting and Removing

A

each manager position will be filled by plurality vote of the members (straight voting)

manager may be removed w/o cause by a majority vote

20
Q

Duties

A

fiduciary relationship and must act in good faith with the diligence, care, judgment, and skill which an ordinary prudent person in a like position would

duty of care and duty of loyalty

21
Q

Limits on Liability

A

articles or written operating agreement may
1. eliminate or limit monetary liability
2. provide for indemnification (no automatic like corps)

22
Q

Piercing the Veil

A

commingling member and LLC funds

inadequate capitalization, or failure to maintain separate entity identity

statute allows courts to pierce for fraud, breach of professional duty, other negligent or wrongful conduct

23
Q

Agency Authority

A

each manager/member is a mandatary for all matters in ordinary course of its business EXCEPT alienation, lease, or encumbrance of the LLCs immovable property

24
Q

Removal of Authority

A

mandatary authority may be taken away
1. in the articles
2. operating agreement
3. by majority vote provided 3p knows they lack authority

25
Q

Nonmanager Members

A

in a manager-managed LLC nonmanagers do NOT have manadatary authority OR duties of care or loyalty

Purely equity

26
Q

Voting Requirements - Management Decisions

A

each manager/member entitled to single vote, all decisions made by majority vote (UNLESS PROVIDED OTHERWISE)

27
Q

Voting by Members

A

unless provided otherwise, majority vote of the MEMBERS is required (even if management is vested in less than all members) when:
1. dissolution and winding up
2. disposal or encumbrance of all or substantially all LLCs assets
3. merger or consolidation
4. debt other than ordinary course of business
5. alienation, lease, or encumbrance of immovables
6. amendment to articles or operating agreement

28
Q

Proxy Vote

A

must be written and signed by member or agent and filed in the registered office of LLC

automatically expire 11 months after execution

no case longer than 3 years

29
Q

conflict of interest

A

not void provided:
1. interest was disclosed and disinterested majority approved; OR
2. transaction was fair to the LLC at the time it was approved

30
Q

Profits and Losses

A

shared equally unless provided otherwise

31
Q

Contributions

A

may be in any form (cash, property, services, promissory note, binding obligation)

Promise to contribute must be in a signed writing

32
Q

Distributions

A

not allowed if:
1. LLC would be unable to pay debts
2. would be insolvent
3. violate a provision

33
Q

Withdrawal w/LLC term

A

only if:
1. unanimous consent of members
2. just cause for withdrawal arising out of another member’s failure to perform a material obligation

34
Q

Withdrawal NO term

A

may withdraw either
1. immediately upon the occurrence of an event specified in written operating agreement
2. any reason if given 30 days notice

35
Q

Entitlements upon withdrawal

A

entitled to continue to receive the profits (unclear about losses) until LLC pays FMV within a reasonable time

36
Q

Removal of Member

A

no procedure provided by statute

37
Q

Dissolution

A
  1. even specified in articles or operating agreement
  2. consent of a majority
  3. judicial decree
38
Q

Winding Up

A

give notice of authorization of dissolution and file articles of dissolution with SOS

39
Q

Distribution of Assets upon dissolution

A
  1. creditors
  2. members owed approved distributions
  3. members receive return of capital contributions
  4. members divide the rest in proportion the share in distributions

LA BAR (25 decks)

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