LLC

Question 1

UNDER RULLCA AN LLC IS PRESUMED TO BE MEMBER MANAGED UNLESS

Answer 1

OP AGREEMENT PROVIDES OTHERWISE

Question 2

MANAGER MANAGED LLC IS RUN BY

Answer 2

ELECTED GROUP OF MANAGERS, WHO MANAGE THE BUSINESS

Question 3

TO CONSTITUTE A MANAGER MANAGED LLC THE OP AGREEMENT MUST STATE THT THE LLC

Answer 3

WILL BE MANAGER MANAGED

Question 4

EACH MEMBER IN A MEMBER MANAGED LLC OR MANAGER IN A MANAGER MANAGED LLC HAS

Answer 4

EQUAL RIGHTS IN THE MANAGEMENT AND CONDUCT OF THE CO ACTIVITIES

EACH MEMBER/MANAGER HAS AUTH TO BIND THE LLC FOR K’S WITHIN ORD BUSINESS OF THE LLC

Question 5

UNDER RULLCA AND GENERAL AGENCY PRINCIPLES, EACH MEMBER OR MANAGER OF AN LLC GENERALLY HAS AUTHORITY TO

Answer 5

BIND THE LLC FOR THE PURPOSE OF ITS BUSINESS

Question 6

A MEMBER/MANAGER HAS _______ TO BIND THE LLC UPON RECEIVING SAID AUTH FROM OP AGREEMENT OR FROM THE MANAGING MEMBERS/MANAGERS

Answer 6

EXPRESS ACTUAL AUTHORITY

Question 7

THE OP AGREEMENT MAY RESTRICT CERTAIN ACTIVITIES W/O

Answer 7

UNANIMOUS OR MAJORITY CONSENT

Question 8

A DIFFERENCE AMONG MEMBERS FOR AN ACT WITHIN THE ORD COURSE OF THE LLCS BUSINESS MAY BE DECIDED BY

Answer 8

A MAJORITY OF THE MEMBERS

Question 9

EXTRAORDINARY ACTS MAY BE UNDERTAKEN ONLY W

Answer 9

CONSENT OF ALL MEMBERS

Question 10

A MEMBER/MANAGER HAS ______ TO TAKE ACTIONS THAT ARE REASONABLY INCIDENTAL OR NECESSARY TO ACHIEVE THE MEMBER/MANAGERS AUTHORIZED DUTIES

Answer 10

IMPLIED ACTUAL AUTHORITY

Question 11

A MEMBER/MANAGER HAS ___ TO BIND THE LLC FOR ALL ACTS APPARENTLY CONDUCTED W/IN THE ORD COURSE OF THE LLC’S BUSINESS

Answer 11

APPARENT AUTHORITY

Question 12

A MEMBER/MANAGER’S ACT WILL NOT BIND THE LLC IF

Answer 12

1) THE MEMBER LACKED AUTHORITY
&

2) THE 3RD PARTY KNEW (ACTUAL KNOWLEDGE) OR HAD NOTICE THT THE MEMBER/MANAGER LACKED AUTHORITY

Question 13

AN ACT OR TRANS IS W/IN ORD COURSE OF BUSINESS IF ITS

Answer 13

NORMAL AND NECESSARY FOR MANAGING THE BUSINESS-

A PERSON WOULD REASONABLY CONCLUDE THE ACT IS DIRECTLY AND NECESSARILY EMBRACED W/IN THE CO’S BUSINESS

Question 14

a member of a Member-Managed LLC
owes the fiduciary duties of care and loyalty to the company
and its members.

DUTY OF CARE:

Answer 14

A member owes the duty of care
to act: 

(1) with the care that a person in a like
position would reasonably exercise under similar
circumstances;  AND

(2) in a manner the member
reasonably believes to be in the best interests of the
company. 

If a member meets the requirements above, they CANNOT be held personally liable under the Business Judgment Rule.

Question 15

The duty of care requires that members be

Answer 15

reasonably informed on the decisions they make. 

A member may rely in good faith upon opinions,
reports,
statements,
or other information provided by another person that

the member reasonably believes
is a competent and
reliable source for the
information.

Question 16

DUTY OF LOYALTY OF A MEMBER

Answer 16

(1) to account for any property,
profit, or benefit the member derived from the LLC’s
activities or property, or from appropriation of an LLC
opportunity; 

(2) to refrain from dealing with the LLC when an adverse interest to the LLC exists (unless the transaction was fair to the LLC);  AND

(3) to refrain
from competing with the LLC before its dissolution.

HOWEVER, after full disclosure of all material facts, ALL members may authorize an act or transaction that otherwise would violate the duty of
loyalty.

Question 17

IN A MANAGER MANAGED LLC THE FIDUCIARY DUTIES OF CARE AND LOYALTY ONLY APPLY TO THE

Answer 17

MANAGERS

Question 18

DUTY OF LOYALTY IN MANAGER-MANAGED LLC

Answer 18

1) only the members (not the managers) may authorize an act or transaction that otherwise would violate the duty of loyalty.

2) a manager must refrain from competing with the LLC until winding up is completed (the duty does not end upon dissolution).

Both members and managers MUST discharge their duties
and exercise any rights consistently with the contractual obligation of good faith and fair dealing.

Question 19

A MEMBER OF AN LLC MAY BRING A DIRECT ACTION AGAINST ANOTHER MEMBER, A MANAGER, OR THE LLC AND MUST PROVE

Answer 19

AN ACTUAL/THREATENED INJURY THT IS NOT SOLELY THE RESULT OF AN INJURY SUFFERED BY LLC

Question 20

TO BRING A DERIVATIVE ACTION ON BEHALF OF LLC

Answer 20

(1) be a shareholder at the time of the act or omission or became a shareholder by operation of law from such a shareholder; 

(2) be a shareholder through
entry of judgment;

(3) fairly and adequately represent the interests of the corporation;  AND

(4) must make a written demand upon the corporation to take suitable
action.

EXCEPT:  (1) the action may be brought within a reasonable time after the demand;  and

(2) the demand requirement may be waived if the demand is deemed futile.

Question 21

MEMBER MANAGED LLC DEMAND MUST B MADE ON

Answer 21

OTHER MEMBERS

Question 22

MANAGER MANAGED LLC
DEMAND MUST BE MADE ON

Answer 22

THE MANAGERS

Question 23

Under RULLCA, a person has the power to dissociate as a
member of the LLC at

Answer 23

any time (rightfully or wrongfully).

Question 24

A member becomes dissociated from the LLC upon

Answer 24

(1) notice of member’s express will to withdraw;  (NOTICE)

(2) occurrence of an agreed upon event in the Operating
Agreement;  (AGREED EVENT)

(3) expulsion pursuant to the Operating Agreement;  (EXPULSION)

(4) expulsion by the unanimous vote of the other members if it’s
(a) unlawful to carry on the LLC
business with that member, or (b) there has been a transfer of
all or substantially all of that member’s transferable interest
in the LLC (other than a transfer for security purposes);  (EXPULSION)

(5)
by judicial order for misconduct;  (JUDICIAL ORDER/MISCONDUCT)

(6) (BANKRUPTCY)

(7) (INCAPACITY OR DEATH); 

(8) APPT OF PERSONAL REP or receiver; 
OR

(9) TERMINATION OF ENTITY MEMBER (who is not an individual, partnership, LLC,
corporation, trust, or estate).

Question 25

Upon dissociation, the member

Answer 25

loses his right to participate
in management of the LLC. 

Question 26

the dissociated
member will have a right to receive

Answer 26

distributions from the
LLC if issued

Question 27

The dissociated member has no right to

Answer 27

payment for his LLC interest, unless the Operating Agreement
provides otherwise.

Question 28

A person’s dissociation is deemed wrongful when it is: 

Answer 28

in breach of the Operating Agreement;  OR

(b) occurs before
the termination of the LLC and (i) the person withdraws as
a member by express will; 

(ii) the person is expelled as a
member by judicial order; 

(iii) the person becomes a debtor in bankruptcy; 

(iv) the person is expelled;  or

(v) the member
entity is willfully dissolved or terminated. 

Question 29

A person that
wrongfully dissociates as a member is liable to

Answer 29

the LLC and
other members for damages caused by the dissociation.

Question 30

Under RULLCA, dissociation of a member DOES NOT
result in

Answer 30

dissolution of the LLC.

Question 31

Under RULLCA, an LLC is dissolved upon:

Answer 31

(a) the
occurrence of an event in the Operating Agreement causing
dissolution; 

(b) the consent of all members; 

(c) the passage
of 90 consecutive days during which the LLC has no
members;  or

(d) judicial dissolution of the LLC.

Question 32

A court may grant judicial dissolution of an LLC upon an
application by a member on any of the following grounds:

Answer 32

(a) managers or controlling members have/will/are
acting in a manner that is illegal or fraudulent; (ILLEGAL/FRAUD)

(b) that the
managers or controlling members have/are acting in a manner that is oppressive and directly harmful to the member;  (OPPRESSIVE)

(c) conduct of all or substantially all of the LLC’s activities is unlawful;  (UNLAWFUL ACTIVITY) OR

(d) it is not reasonably practicable to carry
on the LLC’s activities in conformity with the Certificate of Organization and the Operating Agreement. (NOT PRACTICAL TO CARRY ON/ CONFLICT)

Question 33

Upon dissolution, the LLC’s activities must be wound up.  As part of the winding up process, the LLC must provide notice of the dissolution to

Answer 33

creditors.

Question 34

Under RULLCA, the notice
sent to creditors must set forth the steps that are necessary for

Answer 34

enforcing their claims against the dissolving LLC.