Limited liability companies Flashcards
Formation
Forming an LLC requires filing articles of organization with the state.
An LLC has the tax advantages of a partnership and the limited liability of a corporation.
Member management
Unless otherwise specified, the default management arrangement is member management.
Members of a member-managed LLC have the authority to bind the LLC.
By contrast, members of a manager-managed LLC do not have the authority to bind the LLC.
Dissociation
A member can withdraw at any time and for any reason so long as she provides notice.
Under the Uniform Limited Liability Company Act, notice need not be written.
Dissolution: voluntary
Dissolution can occur if:
(1) All members agree;
(2) There are not enough members remaining for a period of 90 days; or
(3) Any other reason stated in the operating agreement.
Dissolution: involuntary
A member can ask for a court order dissolving the LLC.
To obtain such an order, the member must show that a controlling member has acted oppressively and harmed the member seeking dissolution.
Member management: ordinary course of business
An act outside the ordinary course of the activities of the company may be undertaken only with the consent of all members.
Dissociation: effects
Dissociation does not:
(1) discharge the member’s interest or liability;
(2) nor does is necessarily trigger dissolution and winding up.
The dissociated member relinquishes his right to participate in the LLC and is entitled to distributions only if the continuing members receive payment.
Profits and losses
Typically, the operating agreement of the LLC determines the manner in which profits and losses will be allocated among the members of the LLC.
In the absence of such an agreement, profits and losses are allocated and distributions are made according to each member’s contributions to the LLC.
