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43 Cards in this Set
- Front
- Back
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What must be done to validly form a LLC company?
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Two documents must be filed in the Office of the SOS (no parish level filing is required). The first is the Articles of Organization and the second is the initial report.
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Articles of Organization
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must be acknowledged or executed by authentic act and contain:
1. the name (including LLC designation) and 2. The purposes of the LLC or an "all lawful purposes" statment |
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Initial Report
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must be signed by the same persons who signed the articles (or a duly authorized agent) and must state:
1. the location and municipal address of the LLC's registered office 2. the name and municipal address of the LLC's registered agents 3. a notarized affidavit of the acceptance executed by each of the registered agents, and 4. the names and municipal addresses of the initial members or, if the LLC is to be manager managed, the initial managers |
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What are the options for management of the LLC?
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The LLC may be managed directly by the members of the LLC (member managed) - which is the default choice. or, if the articles of the LLC so provide, managers elected by the members (manager managed)
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Member Managed
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each member is a mandatary of the LLC for all matters in the ordinary course of the LLC's business EXCEPT for dispositions (alienation, lease or encumbrance) of the LLC's immovable property.
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LLC Member -Managed Voting Power
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Each member receives one vote on matters brought before the members. All matters, EXCEPT for the admission of new members or the compromise of a member's contribution obligation (which requires unanimity) may be decided by a majority vote of the members.
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LLC Manager-Managed.
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all of the normal mandatary authority and voting power is held by the managers rather than members, EXCEPT for:
a. the few decisions that require unamious approval by members (admission of new member and compromise of member's contribution obligation) and b. certain important matters such as a merger or an amendment to the articles or operating agreement, which require approval by a majority of the members. |
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LLC Member Managed vs. Manager Managed
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member managed LLC could draft articles in such a way to exclude from the board of managers (essentially identical to Member-Managed form) EXCEPT, member managed form allows members to add a third party (non-equity) manager in the future should they choose to do so, so the manager-managed form gives them a bit more flexibility down the road without having to go back and amend the LLC's articles.
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What can be done to safeguard one member's voting rights regarding the selling of a building?
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While no individual manager has the authority to alienate, lease, or encumber the LLC's immovable property without an express restriction in the articles or written operating aggreement, the members may dispose of or encumber all or substantially all of the LLC's assets, including any immovables by majority vote. If a member is in the minority he could insist as a condition of his participation in the business that a provision be included in either the articles or a written operating agreement requiring that a unanimous vote of the members is required before any immovable property can be sold (and he would also have to include a provision indicating that this provision requiring unanimous member approval as well as this provision itself cannot be amended out of the articles or operating agreement without unanimous member approval.
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In a manager managed LLC, who is generally responsible for signing any operating agreement for the company
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An operating agreement is an "agreement, written or oral, of the members," which means that only hte members can enter into or sign an operating agreement.
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In a manager Managed LLC, whose consent is generally required to amend an operating agreement under this scenario?
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a Majority vote of the members is required to amend the articles or an operating agreement, whether or not the LLC is member managed or manager managed.
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What types of contributions of capital are valid and enforceable against members in a LLC?
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The contribution of a member may take the form of cash, property, services rendered or a promissory note or other binding obligation to contribute cash property or to perform services. A promise by a member to contribute to the LLC is not enforceable unless set forth in writing.
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What type of contributions are valid under a Partnership Agreement?
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There are no restrictions on what can constitute a valid contribution in the partnership articles of the Civil Code EXCEPT the implicit requirement that each partner contribute something that has economic value.
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When can a partner withdraw from a partnership?
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If the partnership is for a specific term (20 years), then a partner may not withdraw during the term without the consent of the other partners unless another partner fails to perform a material obligation. If a partnership is constituted without a term - a partner may withdraw at any time from a partnership constituted without a term provided she gives notice in good faith at a time that is not unfavorable to the partnership.
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In a partnership, can the partners be held personally liable for any amounts that may be owed as a result of a judgment?
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The partnership is primarily liable for its debts, and a partner may plead discussion (tell the creditor where to locate the partnership's assets), but each partner is personally secondarily liable for the debts of the partnership if partnership assets cannot satisfy the debt.
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To what extent is each partner personally liable in a partnership?
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The extent to which each partner is liable is her virile share. It does not matter, in terms of liability to third parties, if the partners have agreed to share profits and losses among themselves on other than an equal basis.
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Can a partner form a new business with competing interests against the partnership of which partner is a member?
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A partner owes a fiduciary duty to the partnership to act in the best interest of the partnership and may not conduct any activity for herself that is contrary to this fiduciary duty. Such fiduciary duty means that a partner may not expropriate any property, including a prospective business opportunity for herself. If a partner does this, he or she is liable tot he partnership for any profits earned in side business.
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What happens when a creditor causes the partnership interest of one partner to be seized under a writ of execution?
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The seizure of a partner's interest in the partnership causes her membership in the partnership to cease if the writ of execution is not released within 20 days of being issued. A partner ceasing to be a partner, does not, however, cause the partnership to terminate although the partnership would have to pay the seizing creditor an amount equal to the value of of seized partners share at the time of her ceasing to be a member.
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What must be done to validly form a Louisiana Corporation/
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To form a valid Louisiana corporation:
1. The promoters must file a copy of the articles of incorporation and a copy of the initial report with the SOS. T 2. Within 30 days of filing these documents with the SOS, a certified copy of each are to be filed in the office of the recorder of mortgages in the parish in which the corporation's registered office is located, but the failure to do so does not affect the formation or continued valid existence of the corporation. |
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What corporate officers, if any, are required to be elected and who elects the officers?
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A corporation's board of directors must at a minimum elect a president, a secretary, and a treasurer as corporate officers.
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What is the minimum number of persons that must be elected to fill the required number of offices (3) for a corporation?
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Two of the three offices may be combined in the same person, so the minimum number of persons required to be elected officers is TWO (2).
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What type of personal liability, if any, are directors, officers and shareholders individually exposed to for acts or omissions of the corporation?
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Ordinarily, the directors, officers, and shareholders of a corporation including those arising because of any acts or omissions (torts) of the corporation. However, directors and officers have a fiduciary duty to the corporation, and any directors and/or officers may become personally jointly and severally liable for the damages arising from the acts or omissions of the corporation arising as a result of the breach of that duty (gross negligence) Likewise, in rare instances, a dominant or sole shareholder of a corporation may become personally liable for the debts of a corporation, including those arising from acts or omissions, if justice requires it under circumstances justifying a court to pierce the corporate veil.
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Who is authorized to execute contracts on behalf of the corporation with third persons and thereby bind the corporation?
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Only officers or other employees authorized to bind the corporation with respect to the subject of the particular matter may execute binding contracts on behalf of the corporation.
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What if anything creates such contractual authority in officers or other authorized employees?
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Authority to enter into a contract with respect to a particular matter may be conferred on the officer or other employee by:
1. virtue of the inherent authority of her position 2. by the articles or by-laws of the corporation. 3. by the board of directors |
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Is there any statutory authority for expelling a shareholder from the corporation? If so, how is such shareholder removal lawfully accomplished?
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No, absent an express provision in the articles to the contrary, there is no statutory authority for expelling a shareholder from a corporation (forcing a shareholder to sell his shares back to a corporation). If shareholders owning a sufficient number of shares (ordinarily a majority of voting shares) want to be rid of a shareholder, the only mechanism for doing so would be to dissolve the corporation and then reform a new corporation without the undesired shareholder as a participant.
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Does a shareholder have the right to acquire any of the newly issued shares of its corporation?
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No, a shareholder does not have a right to purchase new shares being issued by the corporation unless there is an express provision in the article granting the shareholders preemptive rights.
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Does a shareholder have the right to inspect the books and records of its corporation?
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A shareholder who has owned at least 5% of the outstanding shares for at least six months and who is not a competitor or represents a competitor of the corporation has the right, with five days written notice, to examine any and all of the records of the corporation. If the shareholder is a competitor or represents a competitor, ownership of 25% of the outstanding shares is required. Two or more shareholders may aggregate their shares to reach the required percentage. The shareholders must have a proper purpose to inspect (such as names and addresses for a proxy fight). This right cannot be limited by the articles or by-laws. However, the articles or by-laws can extend the right to inspect to others (like creditors).
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Is a corporation required to have more than one director?
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No. The corporation does not have to have more than one director. Since 1998, the board of directors of a Louisiana corporation may be comprised of only one natural person.
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Business Judgment Rule
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where the director claims his decision was a reasonable one that turned out badly. A director is not liable for a breach of the duty of care if she:
1. does not have a conflict of interest 2. reasonably believes that she has appropriately informed herself about the matter in question, and 3. reasonably believes that she acted in the best interests of the corporation and its shareholders, UNLESS the director's conduct constituted gross negligence. |
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Does a director owe any duty to ABC Corporation to first offer the corporation the opportunity to acquire land before she personally purchases the land?
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It depends on if the corporation had a known interest in purchasing the land first. If so, then yes, there is duty. As a director of the company, a fiduciary duty is owed to act in the best interests of the corporation. when a director purchases land for personal use, without first offering it to corporation (assuming director knew corporation wanted land), then she has acted with a conflict of interest and has failed to distrust her duties of her office as corporate director in good faith. this is clearly a violation.
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Shareholder Meetings
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There are two types of shareholder meetings. Annual and Special. A shareholder has a right to call an annual shareholders meeting only if the corporation has not held an annual meeting for at least 18 months. Otherwise, shareholders can call a special meeting if those holding at least 1/5 (20%) of the total voting power make a written request for such a meeting.
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Directors dismissal and filling vacancies.
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a director may be removed with or without cause by a vote of a majority of the total voting power at any special meeting called for the purpose. Likewise, a vacant director's seat may be filled by a majority vote of the shareholders at a special meeting, including the meeting at which a director was removed.
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Board of Directors v. Shareholders
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A BOD vacancy can be filled either by the Board or the shareholders, whichever acts first. However, if the board acts firs, shareholders can remove the new director through the procedure outlined in the previous note card.
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Board of Directors (BOD) - declaring vacant offices of directors and then appointing new directors
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may declare vacant the office of a director if:
1. she is adjudicated a bankrupt 2. she is interdicted or adjudicated an incompetent 3. she becomes incapacitated by illness or other infirmity to perform her duties for a period of six months or longer, or 4. she ceases to have the qualifications required by the articles or by-laws. A Board vacancy can be filled for the remainder of the vacant term by a majority vote of the remaining directors, even if they do not constitute a quorum. |
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Can partners be expelled from a partnership? If so, for reason and by what vote?
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Yes, a partner can be expelled from a partnership for just cause by a majority vote of the partners.
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Explain the circumstances in which a member of a limited liability company (LLC) may withdraw from the LLC and require the LLC to purchase his/her membership interest in the LLC?
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Just as in a Partnership context, a member of an LLC constituted for a term may withdraw only if either:
1. she gets the consent of all of the other members, or 2. there is "just cause" for the withdrawal resulting from the failure of another member to perform a material obligation. A member of an LLC constituted without a term may withdraw for any reason at any time if the withdrawing member gives the LLC and the other members thirty days notice. |
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How long does a registered Limited Liability Partnership retain its status and effectiveness as a registered LLP?
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a registered limited liability partnership can retain its status and effectiveness indefinitely , but registration as a registered LLP is effective only for one year from the date it is filed unless voluntarily withdrawn. Thus, for a registered LLP to remain and have effect as such, it must renew its registration every hear by filing an executed application and paying the required $100 fee.
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What activities, if any, must a partner in commendam avoid in order to preserve his/her limited liability protection?
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to avoid losing her limited liability protection as a commendam partner, such partner must not:
1. permit her name to be used in the business dealings of the partnership in a menner that implies she is a general partner 2. participate in the management or administration of the partnership 3. conduct business with third parties on behalf of the partnership. |
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Who normally possesses the authority and power to adopt and alter corporate bylaws?
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Normally, the power and authority to adopt and amend corporate by-laws rests with the board of directors.
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Do shareholders ordinarily have the power to change or repeal bylaws specifically adopted by directors?
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Yes. The power of the board of directors to adopt and amend the by-laws is expressly subject to the power of the shareholders to change or repeal any by-laws so made.
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Where does the authorization to issue stock come from?
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The authorization to issue shares of stock must be contained in the articles of incorporation. Any provision in the by-laws purporting to change the number of shares, whether that by-law provision was approved by the board and/or shareholders, is simply invalid.
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What action can shareholders take to ensure that the corporation cannot issue any further shares of stock?
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The only way that the shareholders could take away the board's authority to issue stock as yet authorized but unissued shares would be to amend the articles of incorporation to reduce the number of authorized shares. To accomplish this, shareholders holding at least 20% of the outstanding shares would need to sign a petition calling for a special meeting of the shareholders for the purpose of voting on this proposed amendment to the articles. The petition would have to be filed with the corporate secretary. At the special meeting claled for this purpose, two-thirds of the shares represented at the meeting would have to be voted in favor of the amendment.
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Who are shareholder agreements binding on?
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they are binding on those who become shareholders after the agreement is entered into only if the terms of the agreement are set forth or summarized, or a reference thereto and information as to where those terms may be inspected is set forth, in the certificates representing the corporations shares.
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