Limited Liability Company (LLC) Flashcards
LLC
Enjoys pass-through tax advantage of a partnership and the limited liability of a corporation
Creation
File ARTICLES OF ORGANIZATION with secretary of state
Must include name of the LLC, its registered agent, office, and duration
Business Purpose
Generally, an LLC may engage in any lawful business or purpose, including non-profit activities
Operating Agreement
Governs business
Can be oral or in a record
Default management arrangement is member-manager
Membership
Must have at least one member
New members require consent of all other LLC members
Member-Managed
Management of LLC vested in its members
Manager-Managed
Manager appointed by members to manage the LLC, as provided in the articles or operating agreement
Manager does not have to be a member
Can have multiple managers
LLC Distributions
Member generally entitled to receive distributions from LLC only as specified in operating agreement
Voting Rights: Member-Managed
Each member has right to vote about management and conduct of LLC’s activities and affairs
Voting Rights: Manager-Managed
Each manager has equal rights in the management and conduct of LLC’s activities and affairs
Liability: Member-Managed
Act of member binds LLC unless member had no authority to act and person with whom member was dealing knew that the member lacked authority
Liability: Manager-Managed
Act of manager is treated in same manner as act of member
Inspection Rights
Similar to those of shareholder in corporation
Member Withdrawal
Requires 30 days written notice
Transformation of LLC
Must be approved by all LLC members and all economic interest holders of the other entity
