LLCs

Question 1

Management of LLC’s, Two types

Answer 1

Member managed, and
Manager managed

Question 2

Who can bind the LLC?

Answer 2

Any member or manager unless otherwise stated in the operating agreement

Question 3

rules for member managed LLCs

Answer 3

(1) Each member has equal rights in the management and conduct of the company’s activities and affairs.

(2) A difference arising among members as to a matter in the ordinary course of the activities and affairs of the company may be decided by a majority of the members.

Question 4

rules for manager managed LLCs

Answer 4

(1) Any matter relating to the activities and affairs of the company is decided exclusively by the manager, or by a majority of the managers.

(2) Each manager has equal management rights

Question 5

In both management types of LLCs, the affirmative vote or consent of all members is required for . . .

Answer 5

(1) undertake an act outside the ordinary course of the company’s activities and affairs; or

(2) amend the operating agreement.

Question 6

Fiduciary duties

Answer 6

duty of care and loyalty

duty to deal in good faith

Question 7

For LLC transactions, the duty of loyalty includes

Answer 7

Fair dealing, and
1) Structure,
2) Timing,
3) Disclosures, and
4) Approvals of the transactions

Fair price

Question 8

What are the transfer rights for LLCs?

Answer 8

Unless the operating agreement provides otherwise, a member can transfer their economic rights but not their management

Question 9

default distributions for LLCs?

Answer 9

equal

Question 10

Dissolution of an LLC occurs when

Answer 10

(1) vote by all members
(2) event specified in the operating agreement
(3) judicial dissolution

Question 11

Haley v Talcott, case on judicial dissolution

Answer 11

A court may dissolve an LLC when it is not reasonably practical to carry on and the LLC agreement does not provide a sufficient exit mechanism.

• No way to know who takes over
• Yes, exit mechanism, but no details on winding up personal obligations