Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

July 2023 MEE > Limited Liability Companies MEE > Flashcards

Limited Liability Companies MEE Flashcards

1
Q

Limited Liability Company

A

hybrid business organization between a corporation and partnership that is (1) taxed like a partnership, (2) offers its owners (members) the limited liability of shareholders of a corporation, and (3) can be run like either a corporation or a partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Separate Entity

A

LLC is treated as a separate legal entity distinct from its owners

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Operating Agreements

A

LLC members may adopt operating agreements to control most aspects of the LLC’s business and management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

RULLCA

A

revised uniform limited liability company act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

LLC Formation

A

an llc is formed by filing a certificate of organization with the secretary of state - LLC must have one member

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Certificate of Organization Requirements

A

(i) name of the LLC
(ii) the address of the LLC’s registered office AND
(iii) name and address of its registered agent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Name of the LLC

A

the name should contain words “limited liability company” or the abbreviation LLC or L.L.C.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Management and Operation - Operating Agreement

A

the operation and governance of an LLC is typically found in an operating agreement - can displace almost all of the statutory provisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Management and Operation - Operating Agreement May Alter Duties

A

(a) agreement may eliminate the duty of loyalty and alter the duty of care if doing so is not manifestly unreasonable
(b) similarly the operating agreement may not eliminate the contractual obligation of good faith and fair dealing but it may prescribe standards for measuring the performance of the obligation if doing so is not manifestly unreasonable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Presumption of Management and Operation

A

management of the LLC is presumed to be by all members

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Ordinary Business Decisions

A

a majority vote of the members (or managers) is required to approve most decisions - ordinary business decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Authority to Bind the Company in Member Managed LLC

A

each member of a member managed LLC has authority to bind the company to contracts apparently carrying on the ordinary business of the company unless the member lacks actual authority to do so and the other party to the contract has notice that the member lacks authority

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Authority to Bind the Company

A

each member of a member managed LLC has authority to bind the company to contracts apparently carrying on the ordinary business of the company unless the member lacks actual authority to do so and the other party to the contract has notice that the member lacks authority

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Authority to Bind the Company in the Manager Managed LLC

A

only the manager(s) have authority to bind

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Extraordinary Business Decisions

A

a unanimous vote of members (or managers if manager-managed) is required to approve extraordinary business decisions, including amending the operating agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Financial Rights LLC

A

if an LLC makes any distributions to its members the distribution must be made to the members in equal shares unless the operating agreement provides otherwise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Rights to Demand Distributions in Other Forms

A

a member or transferee does not have a right to demand or receive a distribution from the LLC in any form other than money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Liability of Members and Managers

A

generally are not personally liable for the LLCs obligations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Liability of Members and Managers

A

members and managers generally are not personally liable for the LLCs obligations and can lose only the amount of their investments

19
Q

Piercing the LLC Veil

A

courts may pierce the LLC veil of limited liability to reach the members and managers personal assets to satisfy the LLC obligations under circumstances similar to those under which courts would pierce the veil of a corporation

20
Q

Fiduciary Duties owed by Manager or Member

A

the fiduciary duties owed by members and managers to the LLC and to its other members are the fiduciary duties of care and loyalty - must discharge their duties and exercise any rights consistently with the contractual obligation of good faith and fair dealing

21
Q

Duty of Care - Only to Managers

A

members or managers must act with the care that a person in a like position would exercise under similar circumstances, in a manner reasonably believed to be in the best interests of the LLC

22
Q

Business Judgment Rule

A

members or managers cannot be held liable for negligent decisions

23
Q

Duty of Loyalty - Only to Managers

A

a member must:
(1) account to and hold for the LLC any benefit they derive from the LLC’s activities or from the appropriation of an LLC opportunity;
(2) refrain from dealing with the LLC as, or on behalf of, a person who has an adverse interest in the LLC
(3) refrain from competing with the LLCs business

all members may authorize or ratify a specific act by a member

24
Q

Members Ability to Ratify Acts of Manager

A

only the members may authorize or ratify an act by a manager that would otherwise violate the duty of loyalty

25
Q

Transferability of Financial Rights

A

unilaterally transferable

26
Q

Transferability of Management Rights

A

not unilaterally transferable

27
Q

Assignment of Membership Rights

A

transfers only the members right to receive distributions

28
Q

How Does One Become a Member

A

one can become a member only with the consent of all members or as provided in the operating agreement

29
Q

Dissociation

A

a person has the power to dissociate as a member of an LLC at any time, rightfully or wrongfully, by expressly withdrawing as a member

30
Q

Dissolution

A

an LLC will be dissolved when any of the following events occur:
(1) an event or circumstance that the operating agreement states causes dissolution
(2) the consent of all of the members
(3) the passage of 90 consecutive days during which the LLC has no members

31
Q

Judicial Dissolution

A

a member may also apply for judicial dissolution of the LLC - a court may grant if:
(a) the conduct of all or substantially all of the LLCs activities is unlawful
(b) it is not reasonably practicable to carry on the company’s activities in conformity with the certificate of organization and the operating agreement
(c) the controlling members have acted, are acting, or will act in a manner that is illegal or fraudulent
(d) the controlling members have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the member applying for dissolution

32
Q

Administrative Dissolution

A

secretary of state may dissolve an LLC administratively when the LLC fails to submit a required fee or annual report

33
Q

Effect of Dissolution

A

an LLC that has been dissolved continues its existence but is not allowed to carry on any business except that which is appropriate to winding up its activities

34
Q

Barring Claims Against LLC - Undistributed Assets

A

a claim can be asserted against a dissolved LLC to the extent of the LLCs undistributed assets

35
Q

Barring Claims Against LLC - Distributed Assets

A

if the assets have been distributed to the members, a claim can be enforced against each member to the extent of the member’s proportionate share of the claim or to the extent of the assets distributed to him, whichever less

36
Q

Cutting Short time For Claims Against

A

an LLC can cut short the time for bringing known claims by notifying claimants in writing of the dissolution and giving them a deadline of not less than 120 days in which to file their claim - time for filing unknown claims can be limited to 5 years by publishing notice of the dissolution in a newspaper in the county where the LLCs known place of business is located

37
Q

Taxation of an LLC

A

partnerships and LLCs are taxed on a pass through basis - business income is passed through the owners and reported to the owners individual tax returns

38
Q

Right to Information in a Member-Managed LLC

A

a member has a right to inspect and copy any record concerning the LLCs activities, financial condition, and so on, material to the members rights and duties - must automatically be furnished unless they reasonably believe the member already knows the information

39
Q

Right to Information in Manager-Managed LLC

A

the managers have the same right to information and the duty to furnish information

40
Q

Right to Information in a Manager- Managed LLC

A

pg 49

41
Q

Members’ Actions against the LLC - When Injured by LLC

A

a member who has been injured personally by his LLC can bring a direct action against the LLC to recover

42
Q

Members’ Actions Against the LLC - When Management Fails

A

a member may bring a derivative action on behalf of the LLC if they make a demand on the other members (or managers) unless demand would be futile

43
Q

Who May Bring a Derivative Suit

A

a derivative action may be maintained only by a person who is a member at the time the action is commenced and who remains a member while the action continues

44
Q

Indemnification

A

members of a member-managed and managers of a manger-managed LLC have a right to be indemnified for debts, obligations, and other liabilities incurred in the course of their activities on behalf of the company, provided that they complied with the duties of loyalty and care, and they also have a right to reimbursed for expenses they incur on the company’s behalf

45
Q

Charge of Transferable Interest

A

a judgment creditor of a member or transferee of a member may charge (attach) the transferable interest of the judgment debtor to satisfy the judgment

July 2023 MEE (16 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions