Chapter 38 Flashcards
LLC’s are a deal between ______ and owners, liability _________ if follow the law.
State, protection
What is the advantage of LLC’s?
No double tax, governed by state, flexible, easy to set up, foreign investors.
Nature of LLC’s: owners are ________. Ownership is called ownership ________.
Members, interest
Limited liability of members: liable only for ___________ unless loss of LLC _______ (veil pierced).
Investment, coverage
When is liability imposed on members of an LLC (pierce the corporate veil)?
Fraud, alter ego, bad record keeping, not using LLC in name.
When can the corporate veil be pierced (hold members liable)?
Commingling funds and assets, corporate assets as own, inadequate capitalization, suspect transactions, injustice.
What are the similarities between LLC’s and corporations?
No unlimited liability, foreign if doing business outside state formed.
What is preformation of contracts in LLC’s?
Owners are called promoters. Preincorporation contract may be personally liable by promoter.
What are the disadvantages of LLC’s?
More expensive to start, lack of uniformity of state laws, more accounting expense.
How does the management of LLC’s work?
Member managed or manager managed. If manager managed, the managers have fiduciary duties to LLC.
What is an LLC operating agreement?
Analogous to corporations bylaws, not required but you should have one in writing.
How does a dissociation of an LLC member work?
Event, unanimous vote, bankruptcy, incapacity or death. Member looses management and interest bought by members.
How does Dissolution of an LLC work?
- Pay creditors. 2. Return capital contribution. 3. Remaining money distributed pro rata to the members.
What is a joint venture?
Limited time and scope partnership. Taxed like partnership.
What is a cooperative?
Joint and severally liable, organized to provide economic service to members.
