LIMITED LIABILITY COMPANIES (LLCs)

Question 1

I. FORMATION

PLLC

Answer 1

I. FORMATION
A. FILING: Must file a certificate of formation with Secretary of State and pay a fee.

B. NAME: Must include the phrase “Limited Liability Company” or “Limited Company” or an abbreviation of it.

C. PROFESSIONALS (“PLLC”): Members and managers must be licensed to render professional services somewhere. NOTE: no “mixing” of professions.

D. PROFITS/LOSSES: Split in proportion to capital contributions, unless otherwise provided in the company agreement.

Question 2

II. MANAGEMENT

Answer 2

II. MANAGEMENT
A. FLEXIBLE MANAGEMENT: Can be structured like a corporation or a partnership, but managers run the LLC unless otherwise provided in the certificate.

B. SERIES LLC: Can partition assets/liabilities among separate (independent) series. Designed for asset protection (shield assets of one series from creditors of another).

Question 3

III. NO LIABILITY FOR MEMBERS

You form your law firm as a PLLC. A member commits malpractice. Who’s liable to the client?
A member, acting with authority, contracts for the PLLC. Who’s liable for this obligation?

compensation for partner?

Answer 3

III. NO LIABILITY FOR MEMBERS (other than the tortfeasor!)
PLLC is liable for member’s tort too

tort: -tortfeasor and PLLC are liable
contract: -only the PLLC as the principle, member dont have vicarious liability

got to file with secretary of state and include the LLC in the name

A partner is not entitled to remuneration except for services rendered in winding up the partnership’s business.

Question 4

if ppl want to form something to get:
LIMITED LIABILITY:
FLEXIBLE MANAGEMENT:
LESS TAX TO PAY:

Answer 4

always LLC or LLP

LIMITED LIABILITY: All owners shielded from vicarious liability, unlike GP or LP. GP JOINT AND SEVERAL LIABILITY
LLP NO LIABILITY
LP JOINT AND SEVERAL LIABILITY for general partners (unless LLLP)
NO LIABILITY for limited partners (unless control) LLC NO LIABILITY

formation requirement: LLP needs to file an application and pay a fee, LLC needs to file a certificate of formation

FLEXIBLE MANAGEMENT: All owners may exercise control, unlike LP. Exactly how control is allocated is usually determined by agreement among the owners.

LESS TAX TO PAY: Income is passed through to the owners, unlike a corporation, which is subject to double taxation (a corporation pays tax on its income, then shareholders pay tax again on corporate income distributed to them as a dividend).

CONVERSION/MERGER: If you choose the wrong form, you can convert to another form or merge one into another by getting the owners’ approval and filing appropriate documents.