Limited Liability Companies Flashcards
A limited liability company (or LLC) are owned by _____ and managed either by its _____ or by _____.
Members
Members or Managers
The managers could be specified members. Or the managers could be outside people who are not members.
LLCs share some of the characteristics of _______ and some of the characteristics of ________.
Partnerships and Corporations
Like partnerships, LLCs are business organizations that are:
not subject to double taxation – the company’s profits are only taxed when distributed to its members
Like corporations, LLCs are business organizations that generally provide:
limited liability protection to its owners
Piercing the corporate veil also applies to LLCs; like the liability protections provided by the corporate form, the LLC’s protective “veil” can be “pierced” in certain rare circumstances.
Filing Requirement
To form a limited liability company (LLC),
Articles of organization must be filed with the department of state
The articles of organization must include:
(1) name of the LLC;
(2) mailing address ad street address;
(3) the name and street address of the LLC’s initial registered agent for service of process within the state.
A properly named LLC must contain:
Limited liability company, limited company, LLC, or LC
When member-managed, managerial authority is apportioned according to
each members interest in the profits of the LLC
Management decisions are determined by: vote of majority in interest
When manager-managed, the manager or managers must be appointed or elected by
approval of vote of the majority in interest
When there are multiple managers:
each has equal rights in the management and control of the business and management decisions are determined by majority of the managers
In general, each managing member or manager of an LLC owes:
duty of loyalty and care to the LLC and members
Violations of the duty of care are limited to:
(1) grossly negligent or reckless conduct
(2) intentional misconduct
(3) knowing violations of the law
Violations of the duty of loyalty are limited to:
(1) competing with the LLC in the conduct of its business
(2) dealing with the LCC in a manner adverse to its interest
(3) failing to account for any profit, property, or benefits of the LLC
Liability of Members of an LLC
The members or managers of an LLC are not liable for any debt, obligation, or liability of the LLC solely by reason of their being a member or manager of the LLC.
This can be modified by provision in an LLC articles of organization or operating agreement
