LLC Flashcards
UNDER RULLCA AN LLC IS PRESUMED TO BE MEMBER MANAGED UNLESS
OP AGREEMENT PROVIDES OTHERWISE
MANAGER MANAGED LLC IS RUN BY
ELECTED GROUP OF MANAGERS, WHO MANAGE THE BUSINESS
TO CONSTITUTE A MANAGER MANAGED LLC THE OP AGREEMENT MUST STATE THT THE LLC
WILL BE MANAGER MANAGED
EACH MEMBER IN A MEMBER MANAGED LLC OR MANAGER IN A MANAGER MANAGED LLC HAS
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
UNDER RULLCA AND GENERAL AGENCY PRINCIPLES, EACH MEMBER OR MANAGER OF AN LLC GENERALLY HAS AUTHORITY TO
BIND THE LLC FOR THE PURPOSE OF ITS BUSINESS
A MEMBER/MANAGER HAS _______ TO BIND THE LLC UPON RECEIVING SAID AUTH FROM OP AGREEMENT OR FROM THE MANAGING MEMBERS/MANAGERS
EXPRESS ACTUAL AUTHORITY
THE OP AGREEMENT MAY RESTRICT CERTAIN ACTIVITIES W/O
UNANIMOUS OR MAJORITY CONSENT
A DIFFERENCE AMONG MEMBERS FOR AN ACT WITHIN THE ORD COURSE OF THE LLCS BUSINESS MAY BE DECIDED BY
A MAJORITY OF THE MEMBERS
EXTRAORDINARY ACTS MAY BE UNDERTAKEN ONLY W
CONSENT OF ALL MEMBERS
A MEMBER/MANAGER HAS ______ TO TAKE ACTIONS THAT ARE REASONABLY INCIDENTAL OR NECESSARY TO ACHIEVE THE MEMBER/MANAGERS AUTHORIZED DUTIES
IMPLIED ACTUAL AUTHORITY
A MEMBER/MANAGER HAS ___ TO BIND THE LLC FOR ALL ACTS APPARENTLY CONDUCTED W/IN THE ORD COURSE OF THE LLC’S BUSINESS
APPARENT AUTHORITY
A MEMBER/MANAGER’S ACT WILL NOT BIND THE LLC IF
1) THE MEMBER LACKED AUTHORITY
&
2) THE 3RD PARTY KNEW (ACTUAL KNOWLEDGE) OR HAD NOTICE THT THE MEMBER/MANAGER LACKED AUTHORITY
AN ACT OR TRANS IS W/IN ORD COURSE OF BUSINESS IF ITS
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
a member of a Member-Managed LLC
owes the fiduciary duties of care and loyalty to the company
and its members.
DUTY OF CARE:
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.
The duty of care requires that members be
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.
DUTY OF LOYALTY OF A MEMBER
(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.
IN A MANAGER MANAGED LLC THE FIDUCIARY DUTIES OF CARE AND LOYALTY ONLY APPLY TO THE
MANAGERS
DUTY OF LOYALTY IN MANAGER-MANAGED LLC
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.
A MEMBER OF AN LLC MAY BRING A DIRECT ACTION AGAINST ANOTHER MEMBER, A MANAGER, OR THE LLC AND MUST PROVE
AN ACTUAL/THREATENED INJURY THT IS NOT SOLELY THE RESULT OF AN INJURY SUFFERED BY LLC
TO BRING A DERIVATIVE ACTION ON BEHALF OF LLC
(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.
MEMBER MANAGED LLC DEMAND MUST B MADE ON
OTHER MEMBERS
MANAGER MANAGED LLC
DEMAND MUST BE MADE ON
THE MANAGERS
Under RULLCA, a person has the power to dissociate as a
member of the LLC at
any time (rightfully or wrongfully).
A member becomes dissociated from the LLC upon
(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).
