Chapter Seventeen Flashcards
characterisitics of an LLC
who are the owners?
limited liability company
relatively new creatures of state laws
limited liability
taxed as partnership (pass through)
allows foreign investors
owners - members
profits/losses with an LLC
members are owners - can agree to share profits/losses any way members want
ex: you and partner own LLC; partner contributed 40,000 for capital; you only gave 10,000 but you perform 90% of work
LLC Management
two kinds
designated in Articles of Organization
1) member managed - owner
2) manager-managed - third party
where to find LLC Management
designation in Articles of Organization
LLC how to file/create
go to TN Secretary of State website
is the name available?
Prepare Articles of Organization Information to form LLC
pay fees $50 member $300-3000
Operating Agreement Internal workings of LLC
Articles of Organization
info to form LLC
must file with TN Secretary of State: cost
name of business
principal address
name and address of registered agent
number of members
manager/member managed
Operating agreement
internal workings of LLC (or corp)
1) management
2) dividing profit/losses
3) transfer member interest
4) dissociation of a member
5) voting rights
Case 17.2
Schaefer and Orth opened Grilled Cheese LLC
operating agreement states LLC to pay Orth salary
Company struggles so Orth not paid, he quits, LLC dissolved and closed
operating agreement states LLC (not Schaefer) to pay salary
language of operating agreement critical
assumed name
for both corporation and S corporation
assumed name: must use LLC after the company’s name unless the company’s files for an assumed name
pierce limited liability veil
a limited liability may lose the protective status and be held personally liable if
1) commingles personal and business fund
2) flagrant disregard of the LLC (or Corp) formality such as fraud on the owners part
