Limited Liability Companies
Why are LLCs considered to be a cross between a partnership and a corporation?
LLCs feature the limited liability of a corporation but the tax benefits of a partnership.
What financial interests to members of LLCs hold?
Members of LLCs share in profits and losses on the basis of their contribution. Unless the operation agreement specifies otherwise, an LLC member can assign a financial interest.
May capital call contributions be used to recover from members of an LLC?
No. In Racing Investment Fund 200, LLC v. Clay Ward Agency, Inc. the court refused to use a capital call contributions clause to circumvent the limited liability of an LLC and hold the members personally liable.
May fiduciary duties be shaped by agreement?
Yes. In McConnell v. Hunt Sports Enterprises, the court enforced an agreement expressly permitting partners to compete with the partnership. Partners may define the scope of the duty of loyalty owned to each other.
Must the existence of the LLC be disclosed for limited liability to apply?
Yes. In Water, Waste & Land, Inc. d/b/a Westec v. Lanham the court held that a man who only identified his principal as "PII," not as being a limited liability company, may be held personally liable.
