Started in the ‘70s in Wyoming but began to catch on in the 1990s.  When states were converting, people would start to convert their lp’s into LLCs

Limited liability Company. owners are not partners but rather members.

It has the best of both worlds of having corporate and partnership attributes

What is so great about LLC's?

What created LLC's?

It is a creature of statute. All the members have limited liability. and the LLC cast like a corporation and has the corporation attributes.

So the members can have control or they can have a board have form.

It can be member managed or managed by a manager.

It can be member managed or managed by a manager

When an LLC is manager managed, who has the authority to bind the LLC?

Does the manager have to be a member of the LLC?

If it’s manager managed, only a manager or managers have the ability to bind the llc. The manager does not necessarily have to be a member.

If you bring in an outside manager, it will be governed by an employment contract.

Then in order to determine how profits and losses will be shared and you will use an operating agreement.

How do LLC's determine their operations?

What happens if they fail to do this?

Many states require that  LLC’s have operating agreements but if there is no operating agreement then the statute will govern

What is a single-member LLC?

Why might it be formed?

There are single-member LLCs that only have on partner. If keeps your liability down as opposed to being in a sole proprietorship.

What have LLC's been replacing?

Why?

LLC’s have been replacing LP’s because you could bring in manager and silent partners.

LLC formation you must file a form or certificate of something.

This is typically called an articles of organization.

There are also series llcs. Where the co. has different  groups that are series a and series b so all the profits for series a that does x, stays within a and then series b deals with y and keeps its profits. Some members may be members of both series a and series b. They can have two operating agreements or be combined into one.

members are owners and they have owner’s rights. The default rule is that members manage usually. If you want managers to manage then you would need to say that in your certificate. Other states it’s the opposite. All member has the right to approve/vote on the certificate of formation.

For the bigger stuff like changes to the organization’s members will be involved in but if it’s smaller stuff like switching registered agents would not need the membership agreement.

How do LLC's admit to new members?

In the employment contract with manager there should be the right to remove the manager and then members have the right to vote on that. Only the owners have the right to file the company.

Any member has the right to information about the company, to audit and take a look at the books.

The members also have the right to have meetings (like a regular annual meeting to discuss the business and how to change the day-to-day operations

Hopefully the agreement would allow for a special meeting either at the behest at a certain number of membership agreemnt or manager.

Hopefully the agreement would allow for a special meeting either at the behest at a certain number of membership agreement or manager.

The operating agreement and other similar agreement are PRIVATE agreements. They are not filed with the state. They are contracts between the members/partners. It is never filed.

These agreements are similar and look the same because they all address the same and similar business agreement. So you can insert language from a partnership agreement to an operating agreement

When we form, we have to ratify that we filed the articles of organization and ratify the adopting an operating agreement.

It states how much each entering member is contributing to the LLC in exchange for membership in the LLC.

If a subscription agreement is signed an a new entity or shareholder sign a subscription agreement to make a contribution to become a member

What do LLC's need to open bank accounts?

How/When should this be addressed by LLC?

What kind of agreement do they need?

You cannot open a bank account without showing that you have a filed certificate of filing of llc (articles of organization) with a file copy and a certified copy of the bank. Also need the employer id number and the resolution of the members of the llc member to open the bank account so at first meeting need to have a banking agreement.

The resolution/bankging  agreement will also state who can withdraw money from the account

every single entity can operate in the jurisdiction where it originated or where it was formed.  It you are formed in one state but want to do business in another state, you can apply to do business in another jurisdiction.

1) Pass through taxation status

2) Limited Liability/ Full management

3) One- person llc's (keeps liability down in place of sole proprietorships)

4) International recognition- most foreign countries have similar entities

1) Unless otherwise provided for in an operating agreemtn, an LLC member may transfer his or her financial interest to another, but the transferre cannot becoem a member w/o all memebers' consent

2) B/c LLC's are so new, there is relatively little case law interpreting LLC statutes

3) You have to file something with the state- this costs $$ and means you probably need legal counsel