Limited Liability Companies Flashcards
(16 cards)
What is a limited liability company (LLC)?
An unincorporated association having one or more members, organized and operated pursuant to a state’s LLC statute
An LLC can be formed to conduct any type of business and is treated like a corporation for limited liability purposes.
What is a Professional LLC?
An LLC organized for the sole purpose of rendering professional services, with members who are licensed or authorized to render those services
Examples include lawyers, doctors, and accountants.
What must LLCs file with the secretary of state?
Articles of Organization
These must contain specific information as required by the state’s LLC statute.
What must the articles of organization include?
A statement that the entity is an LLC, the name of the LLC, and the address of the LLC’s registered office and its registered agent
The name must distinguish itself from other LLCs and include specific terms.
What is the purpose of an Operating Agreement in an LLC?
It governs the LLC’s internal affairs, similar to a corporation’s bylaws
This document outlines management structure and profit-sharing.
Who can form an LLC?
One or more individuals or entities
Admission of initial and subsequent members requires consent from all members unless stated otherwise in the operating agreement.
How are losses handled in an LLC?
Members are liable for losses up to the amount they contributed; the LLC covers losses
Members are not personally liable beyond their contributions unless the company veil is pierced.
What is a member-managed LLC?
An LLC where members manage the company without appointing managers
Members have equal rights in ordinary business activities unless specified otherwise.
What duties do managers of a manager-managed LLC owe?
Duties of care and loyalty similar to those owed by directors of a corporation
Operating agreements can alter fiduciary duties.
What does it mean to pierce the company veil?
Courts may hold members personally liable under certain circumstances, like alter ego liability or inadequate capitalization
This is similar to piercing the corporate veil in corporations.
What are direct and derivative suits in an LLC?
Direct actions are for personal injury by the LLC; derivative actions are on behalf of the LLC
Derivative actions require a demand unless demand is futile.
What happens to an LLC upon dissolution?
Its activities and affairs must be wound up
Dissolution can occur by events specified in the operating agreement, member consent, or court order.
What notice must an LLC provide during dissolution?
Notice of dissolution to creditors, explaining how they can enforce their claims
This is required under the ULLCA.
True or False: A member can be held liable for the debts of the LLC.
False
Members are not personally liable for the LLC’s debts unless they engage in wrongful conduct.
Fill in the blank: An LLC is treated like a corporation for _______ purposes.
limited liability
This protects members, managers, and agents from the company’s obligations.
What is the requirement for an LLC name?
It must be distinguishable from other LLCs and include ‘limited company’ or ‘limited liability company’ or their abbreviations
It cannot imply association with a government entity.
