BE (LLC)

Question 1

LLC Functions

Answer 1

1. limited liability that shareholder of corporations have
2. tax treatment of a partnership

Question 2

Personal Liability

Answer 2

neither owners (members) nor managers are personally liable for any debts

Question 3

Tax Benefits

Answer 3

not subject to federal or LA income tax at entity level

Question 4

Compare - S corps

Answer 4

largely the same except limits to who qualifies as s corp

Question 5

Compare - Limited Partnership

Answer 5

general partner is still personally liable for entities debts

Question 6

Formation Requirements

Answer 6

Articles of organization AND initial report must be filed with secretary of state

existence begins upon issuance of a certificate of organization by secretary of state

Question 7

Promotor Liability

Answer 7

Statute is silent

probably same rules as pre-incorporation

Question 8

Articles of Incorporation Formalities

Answer 8

1. must be in english
2. signed by AT LEAST ONE person (need not be member or manager

Question 9

Mandatory Words in Articles

Answer 9

1. name of the LLC
2. Purposes for LLC is formed or purpose is to engage in any lawful activity (EXCEPT INSURANCE UNDERWRITING)
3. whether the LLC is a low-profit LLC

Question 9

Initial Report

Answer 9

1.must be signed by each person (or agent) who signed the articles

2. must state the name, location, and municipal address of LLC itself (no PO BOX) OR each of its registered agents, and the persons with power to manage LLC
3. Must contain a notarized affidavit of acknowledgement and acceptance signed by each of the registered agents

Question 9

Name Requirement

Answer 9

must contain words or abbreviation indicating LLC (L.L.C., L.C., limited liability company)

Question 10

Operating Agreement

Answer 10

written or oral of the members of an LLC as to the affairs of the LLC and the conduct of its business (analogous to corp bylaws)

Question 11

Conversions

Answer 11

any type of already formed LA business can convert to LLC by submitting a conversion application to the secretary of state

Question 12

Mergers

Answer 12

can be merged or consolidated with other business by filing a merger or consolidation agreement with the secretary of state and the conveyance records of each parish

Question 13

Members’ inspection rights

Answer 13

1. inspect and copy LLC record upon reasonably request during business hours
2. obtain a) trues and complete information regarding state of business and financial condition b) copy of tax returns c) other information regarding affairs
3. demand formal accounting of the LLCs affairs whenever reasonable

Question 14

Operational Requirements

Answer 14

only need to continuously maintain a registered office and one registered agent in the state

Question 15

Members

Answer 15

no restrictions on who can be a member

Question 16

Member-managed

Answer 16

unless delegated to managers ALL members will manage the business

subject to provisions in articles or WRITTEN operating agreement

Question 17

Risk of Managing Members

Answer 17

no risk to limited liability of members if they participate in management and control of the LLC

Question 18

Manager-Managed

Answer 18

if members want one or more board person to be nonmembers, articles must specifically state it will manager managed need not be members

Question 19

Selecting and Removing

Answer 19

each manager position will be filled by plurality vote of the members (straight voting)

manager may be removed w/o cause by a majority vote

Question 20

Duties

Answer 20

fiduciary relationship and must act in good faith with the diligence, care, judgment, and skill which an ordinary prudent person in a like position would

duty of care and duty of loyalty

Question 21

Limits on Liability

Answer 21

articles or written operating agreement may
1. eliminate or limit monetary liability
2. provide for indemnification (no automatic like corps)

Question 22

Piercing the Veil

Answer 22

commingling member and LLC funds

inadequate capitalization, or failure to maintain separate entity identity

statute allows courts to pierce for fraud, breach of professional duty, other negligent or wrongful conduct

Question 23

Agency Authority

Answer 23

each manager/member is a mandatary for all matters in ordinary course of its business EXCEPT alienation, lease, or encumbrance of the LLCs immovable property

Question 24

Removal of Authority

Answer 24

mandatary authority may be taken away 1. in the articles 2. operating agreement 3. by majority vote provided 3p knows they lack authority

Question 25

Nonmanager Members

Answer 25

in a manager-managed LLC nonmanagers do NOT have manadatary authority OR duties of care or loyalty Purely equity

Question 26

Voting Requirements - Management Decisions

Answer 26

each manager/member entitled to single vote, all decisions made by majority vote (UNLESS PROVIDED OTHERWISE)

Question 27

Voting by Members

Answer 27

unless provided otherwise, majority vote of the MEMBERS is required (even if management is vested in less than all members) when: 1. dissolution and winding up 2. disposal or encumbrance of all or substantially all LLCs assets 3. merger or consolidation 4. debt other than ordinary course of business 5. alienation, lease, or encumbrance of immovables 6. amendment to articles or operating agreement

Question 28

Proxy Vote

Answer 28

must be written and signed by member or agent and filed in the registered office of LLC automatically expire 11 months after execution no case longer than 3 years

Question 29

conflict of interest

Answer 29

not void provided: 1. interest was disclosed and disinterested majority approved; OR 2. transaction was fair to the LLC at the time it was approved

Question 30

Profits and Losses

Answer 30

shared equally unless provided otherwise

Question 31

Contributions

Answer 31

may be in any form (cash, property, services, promissory note, binding obligation) Promise to contribute must be in a signed writing

Question 32

Distributions

Answer 32

not allowed if: 1. LLC would be unable to pay debts 2. would be insolvent 3. violate a provision

Question 33

Withdrawal w/LLC term

Answer 33

only if: 1. unanimous consent of members 2. just cause for withdrawal arising out of another member's failure to perform a material obligation

Question 34

Withdrawal NO term

Answer 34

may withdraw either 1. immediately upon the occurrence of an event specified in written operating agreement 2. any reason if given 30 days notice

Question 35

Entitlements upon withdrawal

Answer 35

entitled to continue to receive the profits (unclear about losses) until LLC pays FMV within a reasonable time

Question 36

Removal of Member

Answer 36

no procedure provided by statute

Question 37

Dissolution

Answer 37

1. even specified in articles or operating agreement 2. consent of a majority 3. judicial decree

Question 38

Winding Up

Answer 38

give notice of authorization of dissolution and file articles of dissolution with SOS

Question 39

Distribution of Assets upon dissolution

Answer 39

1. creditors 2. members owed approved distributions 3. members receive return of capital contributions 4. members divide the rest in proportion the share in distributions