Limited Liability Companies Flashcards
Limited Liability Company
a hybrid business organization that is taxed like a partnership, offers its owners the limited liability of shareholders of a corporation, and can be run like either a corporation or a partnership.
Owners of LLCs are also referred to as . . .
members
Is there a limit on the number of owners an LLC can have?
no
Who is fully personally liable for an LLC’s debts?
no one
How is an LLC formed?
by filing a certificate of organization with the secretary of state.
An LLC must have at least one . . .
member
In an LLC, who has the right to management rights of the LLC?
all members have an equal right to management of the LLC unless otherwise stated in the operating agreement.
There must be what kind of vote for an LLC to make decisions?
a majority of the members must vote in the affirmative.
What two types of LLCs are there?
member-managed and manager-managed
Member-Managed LLC
an LLC where the members owe to each other and the LLC duties of care and loyalty. They must perform these duties using good faith and fair-dealing.
Manager-Managed LLC
an LLC where only the managers are bound by the duties of loyalty and care and only the members can authorize or ratify an act by a manager that would otherwise violate the duty of loyalty.
The operating agreement may eliminate the duty of loyalty and alter the duty of care if doing so is not . . .
manifestly unreasonable.
Are members and managers personally liable for the obligations of LLCs?
no
What does piercing the corporate veil mean?
the court can pierce the corporate veil and take the personal property of the members and managers in certain circumstances despite their not being liable for the obligations of the LLC.
Is failure to observe corporate-type formalities enough to subject members and managers to piercing the corporate veil?
no
Under RULLCA, distributions in an LLC must be made how?
equally among the members and managers
In most states, how are distributions made?
according to contributions to the LLC.
Can a member demand their distribution in a form other than cash?
no
Can members and managers of LLC be indemnified for costs incurred by them for the company?
yes
In a member-managed LLC, who is entitled to information about the company at any time?
members
In a manager-managed LLC, who is entitled to information about the company at any time?
managers, whereas members are allowed to inspect the books.
Can a member who has been injured by their LLC bring a direct action against it?
yes
Can a member transfer their interest in an LLC?
yes
Does transferring one’s interest in an LLC give the transferee the right to management of the LLC?
no
When can a person dissociate from an LLC?
at any time
Someone who wrongfully dissociates from an LLC is liable to the LLC for what?
damages
What events will cause an LLC to dissolve?
where 1) an event happens that in the operating agreement says terminates the LLC; 2) the consent of all the members; or 3) the passage of 90 consecutive days with no members.
An LLC which has been terminated is still in existence until what?
until it is wound up.
