Formation of an LLC Flashcards
Requirements
ULLCA (Uniform Limited Liability Company Act)
Requirements
1. Articles of Organization (Not incorporation)
2. One person in it.
Some states require an operating agreement.
Difference between articles of incorporation v. articles of organization
LLC do not issue shares.
LLC is member-managed (owners of the LLC have collective control) or manager-managed (manager has control).
Default is member-managed.
Who are promoters?
Promoters work to help FORM the corporation or LLC
Are liable unless there is a novation or an agreement saying they are not.
They can enter into a PRE-ORGANIZATION contracts, which will not effective until entity is created and adopts these contracts.
Member-Managed
- All members run everything themselves
- Each member is an agent with ACTUAL authority and bind the LLC and conduct ordinary business WITHOUT approval of other members.
- If it’s weird, non-ordinary business, you will need a majority or sometimes it has to be everyone depending on what the agreement says.
Manager-Managed
- 1 or more manager runs it.
- Managers are chosen by the O of the LLC or elected by members.
- Each MANAGER is an AGENT with actual AUTHORITY to bind the LLC and can bind WITHOUT other managers/members.
- But non-ordinary weird business needs APPROVAL.
- Members can REMOVE managers for ANY REASON and a manager does not have to be a person, it can be another company.
Amending Operational Agreement
Requires at least a majority of members to agree.
Withdrawal
When the LLC members want to withdraw, they lose any management rights and duties, but do not get a buyout payment.
Their financial interest continues unless the operating agreement provides for a payout or the LLC dissolves
LLC do not dissolve UNLESS all members consent or leave or the court or agreement ends the LLC.
No member in the LLC for 90 DAYS – automatically dissolves.
How do you wind up a LLC
Outside debts first
Leftover to everyone involved.
