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27 Cards in this Set

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Limited liability company
An unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations
Taxation of LLC's
A LLC is taxed as a partnership unless it elects to be taxed as a corporation. Thus, an LLC is not taxed at the entity level, but its income or losses flow through to the members individual tax returns.
Why is it important to know that income and loss flow through?
Because LLC's are not subject to the double taxation a corporation would face.
2 types of duration for LLC's
1. at will LLC
2. term llc
At will LLC
An llc is an at will LLC (i.e. no specified terms) unless it is designated as a term llc. An at will has no specified term of duration.
Term LLC
An LLC that has a specified term of duration. Can be specified in any manner that sets forth a specific and final date for dissolution of the LLC.
Capital contributions can be in the form of
money, personal property, real property, any tangible property, intangible property, services, contracts for services to be performed, promissory notes, or other agreements
Does death, diability, or other inability to perform excuse a member's obligation to contribute capital?
NO
If a member dies, becomes disabled, or is unable to contribute what they promised what must they do?
Must contribute money equal to the value of the property or services promised.
Who can enforce hte promised obligation?
The LLC or any creditor who extended credit to the LLC in reliance on the promised contribution may enforce it.
Dividing profits
Unless otherwise specified, profits are shared equally. Default rule that members can and usually do override in their partnership agreement. They can specify that they want profits to be divided in proportion to capital contrbutions
Dividing losses
Losses shared equally unless specified. SOmetimes they don't want to divide losses equally or maybe not even in the same as their capital contributions. Losses can sometimes be offset against gains from other sources so embers may wayt to agree to divide losses os members who can use them get more share of the loss.
Can profits and losses be divided in different proportion?
YES
Members
An owner of an LLC
limited liability
The liability of LLC members for the debts and obligations and liabilities only to the extent of their capital contributions.
The debts, obligations, and liabilities of an LLC, whether arising from contracts, torts, or otherwise belong solely to
The LLC
Is failure of LLC to observe usual company formalities grounds for imposing personal liability on LLC members?
NO
Member managed LLC's
Members of LLC have equal rights in the management of the business of the LLC, regardless of the size of his or her capital contribution. Any matter relating to the business of the LLC is decided by a majority vote of the members.
Manager managed LLC's
THere are members and nonmembers hwo are designated managers. The members who are not managers have no rights to manage the LLC unless otherwise specified. Each manager has equal rights in management and conduct of the business.
How are managers appointed and removed?
A manager must be approved by a vote of a majority of the members. A manager may also be removed by a vote of the majority of the members.
Certain actions cannot be delegated to managers but must be voted on by all members
1. Amending articles
2. Amending operating agreement
3. Admitting new members
4. Consenting to dissolve
5. Consenting to merge
6. Selling, leasing, disposing.
Member managed authority to bind
In a member managed LLC, all members have agency authority to bind the LLC to contracts.
Manager managed LLC authority to bind
In a manager managed LLC, the managers have authority to bind the LLC to contracts, but nonmanager members cannot bind the LLC to contracts.
Duty f loyalty
A duty owed by a member of a member-managed LLC and a manager of a manager-managed LLC to be honest in his or her dealings with the LLC and not to act adversly in the interest of the LLC.
What does this duty of loyalty encompass?
CAnnot usurp LLC opportunities, make secret profits, secretly deal with the LLC, secretly compete with the LLC, or represent any interests adverse to those of the LLC.
Limited liability partnership
A special form of partnership in which all partners are limited partners, and there are no general partners.
Who does the law restrict limited liabilty partnerships to?
Restricted to certain types of professionals such as accountants, lawyers, and doctors. Nonprofessionals cannot use the LLP form of partnership.