LLC

Question 1

to form an LLC, need to file:

Answer 1

rticles of organization & initial report with sec of state

Question 2

articles of organization required content

Answer 2

must be in writing
they must be in english
and must be signed by someone (who doesnt have to be a member or manager)

must include:

(1) name of LLC
(2) purpose of the LLC
(3) statement as to whether LLC will be a low profit LLC

you can note that you have limited mandatary authority
you can spell out the details seperately and dont have to file that
you can include a declaration as to whether it will be member managed OR manager managed
can include a term

Question 3

initial report requirements

Answer 3

must also be signed by same person who signed articles

include also:
name of LLC
municipal address of LLC — cannot be a PO Box
include name of person or persons who will be managing the LLC
name of person who will be designated as agent for service of process AND a notarized acknowledgement (affidavit) from that person

Question 4

after initial report and articles of organization filed, subsequently must file

Answer 4

annual report with secretary of state – keep all information up to date

must be signed by either manager or member (whoever managing LLC) and that person’s municipal address
must state the municipal address of the LLC
state name and municipal address of agent for service of process

if no annual report for 3 years, SoS can terminate LLC by revoking articles

Question 5

LLC established effective as of date of ___

Answer 5

The LLC’s legal existence begins upon the issuance of a certificate of organization by the secretary of state, but it is effective retroactively to the date the articles were filed (or to the date of notarization of the articles if that was within five days of filing).

Question 6

promoter pre-organization liability

Answer 6

most likely result is that once LLC is actually formed, the liabilities from pre-organizational ctivities will be imputed to the LLC and the promoter will not have personal liability
not established though

Question 7

immovable property acquired before organization rules

Answer 7

once creation occurs, title will retroactively vest in the LLC

exception: if the retroactive effect prejudices the rights of third parties, then retroactivity does not occur

Question 8

operating agreement definition

Answer 8

more specific rules of management –
not publicly filed
details how the LLC will function; may alter default rules
no requirement that this exists. default rules can just be allowed to proceed

Question 9

member managed versus manager managed

Answer 9

default rule = all members are in charge.
if you want multiple managers (a “board”) then must specify in the articles that it will be managed by a committee of managers, 1+ of whom may not be members.

if manager-managed, non-manager members have no fiduciary duties but also no mandatary authority for LLC

Question 10

how to select a manager

Answer 10

plurality vote of members (“Straight voting”)

Question 11

how to remove a manager

Answer 11

majority vote of members

Question 12

fiduciary duties of manager

Answer 12

manager must act in good faith, with the diligence, care, judgment, and skill which an ordinary prudent person in a like position would exercise –> duty of care
and
in the manner he reasonably believes to be in the best interest of the LLC –> duty of loyalty

note: reasonably reliance on expert advice satisfies duties

Question 13

Veil piercing:

Answer 13

allowed if:
member and LLC funds comingled;
inadequate capitalization;
failure to maintain a separate entity identity;

also by statute:
acts constituting fraud, negligence, breaches of professional duties, or general wrongdoing;
if member’s behavior is a tort;
if member’s behavior is a crime.

Question 14

agency of managers

Answer 14

managers are mandataries for the LLC – except may not lease alienate or encumber immovable property of the LLC

Question 15

Voting:

Answer 15

each member gets single vote unless provided otherwise

no default relationship between voting rights and capital contributions unless articles provide otherwise

Question 16

majority vote of members required for

Answer 16

dissolve LLC
disposal or encumbrance of all or substantially all of LLCs assets
merger or consolidation of LLC
incurrence of any debt other than debt in the ordinary course of business
alienation encumbrance or lease of any immovable
amendment to the articles or operation agreement

Question 17

proxy voting in LLC?

Answer 17

yes, in writing and signed. for 11 months default up to 3 years, revocable at will.

Question 18

Conflicted transactions, how to allow?

Answer 18

allowed when the interest was disclosed to other voters AND a disinterested majority approved
OR
the transaction was fair at the time it was approved

Question 19

default profit and loss allocation

Answer 19

all profits and loss shared equally unless otherwise contracted

Question 20

distributions allowable unless

Answer 20

would cause LLC to become insolvent
or LLC would be unable to pay debts
or would violate any provision in the articles

liability for wrongful distribution = solidary liability of members for 2 years

Question 21

Assignment of membership interests:

Answer 21

if you become an assignee of the membership interest, you don’t get governing rights - only get right to receive distributions

if assignee wants to become full governing member, need unanimous, written, approval from all existing members to become full member

Question 22

Exiting term LLC:

Answer 22

(1) unanimous consent of all members

2) can remove herself if she has just cause arising from another member’s failure to perform a material obligation

Question 23

exiting at-will LLC (no term)

Answer 23

operating agreement can provide a mechanism for withdrawal

or if not, then member may give 30 days written notice to other members

Question 24

rights of member at withdrawal

Answer 24

entitled to be paid fair market value for her member interests

Question 25

Dissolution of LLC

Answer 25

articles or operation agreement can specify how dissolution can happen

majority vote of members

court order can dissolve LLC if:
a lawsuit is brought by member AND
no longer practicable for business to continue
often happens when members have fallen out.

then after one of above, articles of dissolution filed with secretary of state

and the business is “wound up”

Question 26

liquidation of LLC heirarchy

Answer 26

sell everything, distribute cash

(1) creditors of LLC (secured creditors entitiled to sale of collateral, unsecured creditors sharing pro rata)
(2) members receive any distributions owed
(3) then members receive any capital contribution they made
(4) then if any thing left over, members receive remainder in proportion to distribution %s.

Question 27

out of state LLC wants to conduct business. what do they have to do?

Answer 27

Foreign LLCs must procure a certificate of authority from the secretary of state before transacting business in Louisiana.

Question 28

matters requiring a majority vote of members in an LLC

Answer 28

dissolution
liquidation of all or substantially all of assets 
mergers 
extraordinary debt incurrence
disposal of immovables 
amending the articles