BE

LLC Veil Piercing

**Members do NOT lose limited liability b/c of participation in management of of LLC (unlike w/ CPs) courts will NOT pierce the veil b/c formalities were not followed Courts WILL pierce the veil and find member liability for a. commingling member and LLC funds b. inadequate capitalization c. failure to maintain a separate entity identity By STATUTE courts can pierce the veil of LLA for a. fraud b. breach of professional duty c. other negligent or wrongful conduct member is more than likely to be held PERSONALLY LIABLE FOR TORTS OR CRIMES he personally committed IF the member's conduct directly involved a contract between the claimant and the LLC that situation weighs against holding the member personally liable for the conduct

Withdrawal of Partnership

*FIXED TERM* -The fact that term could be extended does not change fact that it is a fixed term As a partner for a fixed term neither partner is allowed to withdraw from the partnership without unanimous consent of the other partners UNLESS one of the other partner has failed to perform a material obligation *INDEFINITE TERM* may withdraw for any reasons at any time provided adequate notice is given to partnership/LLC in good faith and at a time that is not unfavorable to the partnership WRONGFUL WITHDRAWAL -statute is silent, implying no such thing -thus would effectively remain a partner

Foreign LLC actions not considered transacting business

1. defending or settling lawsuit in La 2. holding a director's or shareholder's meeting in La 3. maintaining bank accounts in La 4. maintaining offices or trustees in La for transfer, exchange and registration of securities 5. soliciting or procuring orders if such orders require acceptance outside of La before becoming binding contracts 6. creating evidence of securing or collecting debts, mortgages or liens within Ls 7. transacting any business in interstate or foreign commerce 8. conducting isolated transaction completed within 30 days 9. acquiring and disposing of property in LA not as part of any regular business activity

Limited Liability Company (LLC) defined

2 primary attributes 1. limited liability that shareholder of corp enjoy, and 2. tax treatment of partnership By law neither the members nor the managers of an LLC are personally liable for any debts

What percentage vote of the shareholders is necessary to amend the articles of incorporation?

A majority of votes entitled to be cast must vote in favor of an amendment Ex: if Corp. has issued 1000 shares, 501 shares must vote in favor of the amendment. - This is true regardless of how many or few shareholders attend the meeting during which the vote occurs The Articles of Incorporation MAY if previously included require a greater percentage vote (But NOT lesser)

Assignment of Membership Interest LLC

A member's membership interest in the LLC is an incorporeal movable a member has NO interest in the LLC's property Default = membership interest is "assignable," in whole or in part -- only entitled assignee to receive the DISTRIBUTIONS the assignor would have been entitled to receive does NOT entitle assignee to exercise RIGHTS/POWERS of assignor as a member of the LLC, unless/until other members approve her as a member by UNANIMOUSLY IN WRITING If other members DO approve assignee to become a new member of LLC, assignee then assumes ALL rights and obligations of assignor (EXCEPT: not obligated for liabilities UNKNOWN to her at time of admission to membership)

Manager-Manger LLC v. Member Managed LLC

A member-managed LLC is one managed directly by all the members of the LLC. -If the article do not provide otherwise, this is the default management form article may provide for the LLC to be manager-managed -manager-managed is one managed by the manager -the managers would consist of one or more persons elected by the members who may be but need not be members -If the LLC is member-managed, 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, and 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 (require unanimity), may be decided by a majority vote of the members -if the LLC is manager-managed the same mandatary authority and voting power are held by the managers rather than the members except for a. the few decisions that require unanimous approval by the members, and b. certain important matters such as: merger or an amendment to the articles of the operating agreement, which require approval by a majority of members -those who are entrusted with management have a fiduciary duty of care and loyalty much the same as a corporate director or officer would Recommend that an LLC be established as manager-managed. If it is manager managed it can choose only to have members as managers, but if the members want to step back from day to day management, or elect a non-member as a manager they can do so. Manager-managed LLC is somewhat more flexible than a member-managed

Individual partner liability

A partner is liable to the partnership for any amount that she agreed to contribute courts have consistently held that a third party creditor of the partnership that cannot collect from existing partnership assets may sue to enforce/collect the unpaid contribution.

Obligations of partners toward each other

A partner owe a FIDUCIARY DUTY to partnership and to the other partners -Partner may NOT appropriate any partnership asset, including a PROSPECTIVE BUSINESS OPPORTUNITY, for his own personal profit in a manner contrary to what he perceives to be in the best interests of the partnership -PARTNERS may not conduct any activity contrary to this duty and prejudicial to the partnership -IF PARTNER VIOLATES HSI FIDUCIARY DUTY, the partnership may recover damages for the harm suffered -If breaching partner profits form the breach of fiduciary duty, then the partnership may recover the profits the accrued to the partner

If a lawsuit is brought by a third party against the partner of a general partnership on account of his/her status as a partner, and the partner successfully defends the suit, is the partner automatically entitled to reimbursement from the partnership for the reasonable attorney's fees incurred in defending the suit?

A partner sued in her capacity as a partner is not specifically entitled to reimbursement for expenses incurred in defending the suit. This is true regardless of whether the partner is successful in defense of the action.

Decisions affecting the partnership

Affecting Structure: unanimity required: (unless otherwise agreed 1. amend the partnership agreement 2. admit new partners 3. terminate the partnership Decisions affecting management: majority vote (unless otherwise agreed)

Conversion from Previous Partnership Form (RLLP)

An RLLP can ONLY be formed by conversion of a previously existing LA partnership. Procedures for conversion: 1. Must FILE APPLICATION for conversion with secretary of state, stating: -- (A) name of RLLP (must end w/ "LLP" or contain words "registered limited liability partnership) -- (B) address of principal office -- (C) # of partners (names not required); and -- (D) brief statement of the RLLP's business 2. App must be SIGNED by a majority in interest of the partners (not nec a majority of the partners!) 3. pay registration fee 4. LENGTH OF REGISTRATION (RENEW EVERY YEAR!) -- Registration = only effective for ONE YEAR from date registration is filed (or until it is voluntarily withdrawn by a majority in interest of the RLLP, whichever comes first) ---> Registration must be RENEWED at end of year, or else reverts to its former partnership status

Operating Agreement (LLC)

Any agreement, written OR oral, of the members as to the AFFAIRS of an LLC and the CONDUCT of its business." -- Sets out terms of relationships between members, how LLC will be governed, how cash will flow, rights/duties of parties, etc. -- (Equivalent to bylaws) Can be more than one Operating agreement, if not inconsistent -- If inconsistent: 1. WRITTEN Operating agreements prevail over ORAL; then 2. More RECENT Operating agreements prevails over older Operating agreement CAN be oral, but not recommended (only v small LLCs w/ mostly default rules could realistically not have it written)

Liability for Voting Wrongful Distributions (LLC)

Any mangers/members who, either KNOWINGLY or without exercising REASONABLE CARE and INQUIRY, votes IN FAVOR of a wrongful distribution are JOINTLY AND SEVERALLY to the LLC for the amount of EXCESSIVE distribution any member/ manger who pays more than her proportionate share is entitled to CONTRIBUTION from other who are also liable 2 year statute of limitations

Management duties

Any member/manager entrusted with managing the business shall stand in a FIDUCIARY relationship with LLC and shall act "in good faith, with diligence, care, judgment, and skill which an ordinary person in a like position would exercise" RELIANCE ON GOOD FAITH AND ADVISORS MEET THIS Standard any manager/member who fulfills these duties in good faith will not be liable for her actions taken on behalf of the LLC

Distribution of Assets Upon Dissolution LLC

Assets of dissolved LLC are distributed in the following priority order: 1. all CREDITORS of LLC (secured creditors first, as to the secured assets) 2. members already OWED approved distributions; 3. members for return of capital CONTRIBUTIONS; 4. members for distribution of SURPLUS (in proportion to their designated share for distributions -- default = equal shares)

Distributions LLC

Distribution PROHIBITED if: 1. LLC would be unable to pay its debts as they came due (short-term INSOLVENCY); 2. LLC's total assets would become less than its total liabilities OR *3. the distribution violates a provision in Articles or in Operating agreement (like corps -- designed to protect CREDITORS) in deciding to pay distributions, LLC may rely on financial statements repaired using reasonable accounting methods

Partnership Elements

Elements 1. Both mutually consented to a relationship that involved the combing of their resources 2. And effort in determined proportions to collaborate at mutual risk for their common profit or benefit Oral promises are acceptable considerable in partnership and are enforceable in partnership

REGISTERED LIMITED LIABILITY PARTNERSHIPS (RLLPs)

Insulates partners from personal liability for the "debts and obligations of the partnership arising from errors, omissions, negligence, incompetence, or malfeasance committed in the course of the partnership business by another person or a representative of the partnership." A partner in an RLLP is NOT a proper party in any legal proceeding by or against the RLLP, the object of which is to enforce any debts or obligations. LLP does not protect the partnership's assets from any kid of partnership liability An RLLP does not protect an individual PARTNER from personal liability for: 1. Her VIRILE SHARE of RLLP debts and obligations (K obligations, non-tort liability); OR 2. RLLP debts resulting from the partner's OWN actions of any type, including negligence. If a partnership is an RLLP at the time a tort is committed, but is no longer an RLLP --> liability is determined at the time the tort was COMMITTED

Foreign Limited Liability companies

LA gives foreign LLC doing business in LA the liability protections accorded by its home state's laws Before a foreign LLC may transact business in La, must first get a CERTIFICATE OF AUTHORITY from secretary of state Application for certificate must include 1. name of LLL and its jurisdiction of legal organization 2. any word, abbreviation, distinguishing term that the LLC will use in La in order to conform to LA law concerning company names 3. the date of organization and period of duration of the LLC 4. address of LLC"s registered office and principal place of business in it home jursidiction 5. address of LLCs principal business, registered office and registered agent in LA 6. nature of business that LLC proposes to transact in La 6. any other info necessary

corporation formation *Articles of Incorporation*

Mandatory provisions are: 1. the name of the corporation 2. number of shares the corporation is authorized to issue 3. the street address of the corporation's initial registered office AND if different the street address of the corporation's initial principal office 4. the name and street address of the corporation's *initial registered agent* 5. whether the corporation accepts, rejects, of limits LA's limited liability for directors and officers 6. the name and address of each incorporator *affidavit of acceptance of corporation's registered agent*

Contribution LLC

Membership requires consideration Can be ANYTHING of ECONOMIC VALUE -- cash -- property -- services rendered -- BINDING PROMISE of future cash/prop/services (promise must be WRITTEN/SIGNED to be binding; must still be fulfilled by estate if member dies; but can be compromised/changed by unanimous vote of other members)

Limited Liability Company (LLC) Annual Report

Must be filed with secretary of state every year on or before the anniversary date of formation Annual report MUST: -- Be SIGNED by A manager (or member if it is member-managed); AND -- Include statement of: 1. municipal address of the registered OFFICE 2. name and municipal address of each registered AGENT 3. name and municipal address of each MANAGER (or each member if member-mgmt) EFFECT OF FAILURE TO FILE ANNUAL REPORT -Secretary of state shall revoke articles of organization of a domestic LLC if it fails to file an annual report for 3 CONSECUTIVE YEARS (vs. corps = 90 days) -- Secretary of state must give LLC 30 DAYS NOTICE of delinquency (opportunity to cure defect) -- LLC may be reinstated within 3 years following revocation if it files an application and cures the failure

Removal of member LLC

NO procedure in statute for removal/expulsion of a member from LLC (so probably, NO WAY for members to EXPEL another member) -- but it's an open Q! -- NB: Members who want to expel one member CAN get same result as expulsion thru a MERGER (other members form new LLC w/out unwanted member, approve merger between the two LLCs by majority vote in both, then designate new LLC as the surviving LLC)

Does a director of a corporation acting alone have the authority to sign contracts on behalf of a corporation and thereby bind the corporation?

No, unlike partners of LLC, a corporate director in his capacity a a director has *no authority to act on behalf of the corporation as it mandatary* AND thus a director acting alone as a director does not have authority to sign contracts on behalf of the corporation and thereby bind the corporation. only duty authorized officers or employees have such authority ordinarily nothing precludes a director from also being an officer or employee in which capacity they can then sign contracts and bind the corporation as to matters within their authority

Optional Elements in Articles of Incorporation

Optional: 1. If there is only one class of stock authorized, the par value of each share or a statement that all of the shares are without par value 2. If there is more than one class of stock: -- A. # of shares in each class -- B. whether shares = par or no par stock -- C. preferences and rights of each class of stock 3. A limited corporate purpose 4. SH preemptive rights (if not included, don't exist) 5. SH cumulative voting rights (when voting for directors) (if not included, don't exist) 6. Escheat provisions (unclaimed dividends reverts to corp treasury otherwise they revert to the state) Anything lawful may be put in the articles

Corporate Promoter

PROMOTERS = People who want to start the corp, who initially invest (typically become the initial board of directors) promoters enter into contracts with third parties who are interested in becoming shareholders of the corporation once it is formed Promoters have fiduciary relation toward each other, prohibited from secretly pursuing personal gain at the expense of their fellow promoters or the corporation to be formed when enters into a transaction in the name of the corporation PRIOR to its officially coming into existence the promotor is PERSONALLY LIABLE on that contract when the corporation does subsequently COME INTO EXISTENCE, it only becomes liable on that contract if it formally "RATIFIES" the contract or de facto ratifies it by accepting the "benefits of bargain" or if either the de facto corporation or corporation by estoppel doctrines apply LLC does not have specific provision deals with pre-organization promoter liability but no reason think different approach would be used

Cessation of Membership (partnership)

Partner ceases to be member of the partnership upon: 1. death 2. interdiction 3. bankruptcy 4. seizure of his interest (if effected under writ of execution and not released w/in 30 days -- cessation retroactive to date of seizure) *5. expulsion *6. withdrawal 7. in accordance with the partnership agreement Partnership does not terminate with a partner ceases his membership UNLESS only one partner is left

Partners as Mandataries

Partner has the authority to act as a mandatary of the partnership in matters involving the ordinary course of the partnership business OTHER THAN alienation, lease, encumbrance of the partnership's immovables EFFECT OF PARTNER CLASSIFIED AS NOT A MANDATARY - a provision in the partnership agreement or a resolution by a majority of the partnership to the effect that a partner is not mandatary DOES NOT affect the rights of third persons who in good faith transact business with the partner

Partner's Ability to Inform Self of Business and Records

Partner may inform herself of the partnership business and consult any records a contrary agreement among partners is NULL

Partner Can Be Creditor of the Partnership

Partner who acts in good faith for the Partnership may be a CREDITOR of the partnership for sums she disburses, obligations she incurs and losses she sustains thereby

Initial Report (LLC)

REQUIRED SIGNATURES -- *Must be SIGNED by each person (or his agent) who signed Articles* CONTENT -- Must state: 1. name, location, and municipal address of *LLC itself*; 2. name, location, and address of each of its *registered AGENTS*; and 3. name, location, and address of *each person vested wITH MANAGEMENT powers* 4. *NOTARIZED AFFIDAVIT OF ACKNOWLEDGEMENT AND ACCEPTANCE signed by each of the registered agents*

Sale of land in LLC

Sale of the remaining land in the original tract constitutes a disposal of all or substantially all of the LLC's assets. Sale must be approved by the majority of the members.

Effect of a Wrongful Withdrawal LLC

Statute is SILENT on the effect of a wrongful withdrawal (so probably, attempting to withdraw improperly is simply NOT EFFECTIVE -- member remains a member, like w/ PPs)

Under what circumstances may the voting approval requirements and/or method of calculating votes be changed (in an LLC)?

The approval/counting requirements can be changed by the members by amending the Articles of Organization or including an appropriate provision in a written operating agreement.

commendam partnership formation requirements

The partnership contract creating a commendam partnership, which must be in writing and filed with the Secretary of State's office, must at a minimum 1. contain the name of the partnership (*which must identify it as a commendam partnership*) 2.the names of the commendam partners and what each is to contribute, AND 3. its value, in exchange for the partnership interest (which contribution must not be managerial services or else the commendam partner loses protection from personal liability).

Valid Contribution to LLC

There are essentially no restrictions on what can constitute a valid contribution in the LLC statute since valid contributions can be "cash, property, services rendered or a promissory note or other binding obligation to contribute cash of property to perform services. PROMISES TO CONTRIBUTE **Promises to contribute are unenforceable if not in writing signed by the member *** CANNOT be compromised except with unanimous consent of the other members, unless agreed otherwise Member's obligation to contribute to LLC is NOT discharged b/c of death or disability -if he cannot perform he or his representative must forfeit membership interest -member of his estate remains liable for the obligation to ANY CREDITOR who extended credit to the LLC before the forfeiture, to the extent that the LLC refuses or is unable to pay the creditor

If a lawsuit is brought by a third party against the director of a corporation on account of his/her status as a director, and the director successfully defends the suit, is the director automatically entitled to reimbursement for the reasonable attorney's fees incurred in defending the suit?

There is a specific statutory authority entitling the director to reimbursement for amounts spent in defense of claims where the director was successful on the merits or otherwise. ***NO SPECIFIC STATUTORY AUTHORITY FOR LLCS

What vote is required by members of LLC to sell or lease immovable property owned by LLC?

UNLESS the articles of organization or a written operating agreement provides otherwise, *the alienation, lease or encumbrance of immovable property can be authorized only by a MAJORITY VOTE of the members, whether or not the LLC is managed or manager-managed*

LLC Dissolution

Unless the articles or a written operating agreement provides otherwise, LLC is dissolved and its affairs wound up upon any of the following 1. an EVENT specified in Articles or in Operating agreement; 2. MAJORITY VOTE of members; OR 3. entry of a JUDICIAL DECREE of dissolution, upon application of a member, when it is no longer "reasonably practicable" for LLC to carry on its business (Involuntary dissolution)

Extent of Liabilities Under Assignment LLC

Unless the articles or a written operating agreement provides otherwise, an assignee who becomes a member assumes all of the rights and obligations of the assignor, except that the assignee is not obligated for liabilities unknown to her at the time she became a member.

Creditors' Order of Preference (partnership)

Upon liquidation, creditors of Partnership are paid in the following order of priority: 1. Secured creditors (both partners and nonpartners) 2. Unsecured creditors who are NOT partners 3. Unsecured creditors who are partners 4. Capital contributions are restored 5. Surplus divided proportionally (if any) (only THEN are creditors of INDIV Pr's paid)

If a stockholder who is also director votes against authorizing unlawful dividends does the stockholder have any exposure for the dividend distribution approved by the other directors?

Yes. a shareholder whether or not he is director is liable as a director for an unlawful divided if voted against the distribution not liable as director but as shareholder (regardless of knowledge of unlawfulness of the distribution received) is liable to indemnify any director who is held liable for payment of an unlawful dividend The Shareholder must return (through the indemnity) the amount they received from the unlawful distribution.

Expulsion of partner

a partnership may by MAJORITY VOTE of the partners expel a partner for JUST CAUSE

Conflict of interest Transactions LLC

a transaction voted on by a manger/member having a financial interest in the transaction is not void or voidable solely b/c she participated in the meeting or created a quorum provided either 1. the interested manager/member's interest was disclosed to the other voters and disinterested majority approved the transaction, or 2. the transaction was fair to the LLC at the time it was approved

Who may be held liable for unlawful dividends issued by the corporation and when must such an action be brought?

all directors *who knowingly or without due care vote in favor of an unlawful dividend are jointly and severally liable to the corporation for the amount of the dividend that was paid unlawfully* any director who is liable for an amount of an unlawfully paid dividend -may then seek to be repaid that amount from the shareholders who received the unlawful dividend, whether they received it knowing it was unlawful or not, for the proportionate amount of the unlawful dividend received by each shareholder

Joint Venture

arise only where parties intended the relationship to exist and they are ultimately predicated upon contract, either express or implied fiduciary in character

manager/member liability LLC

articles or written agreement may 1. eliminate or limit a manager/member's monetary liability to the LLC for breach of the duties described above, although liability for receipt of an improper benefit or international violation of criminal law cannot be eliminated 2. provide for indemnification and/or insurance for a manager/member for any judgments, settlements, penalties, fines or expenses incurred as a manager/member UNLIKE CORPORATIONS: no provision for LLC statute that provides fro automatic reimbursement of costs and attorney fees for members/managers who successfully defend a suit brought against them for conduct undertaken in their official capacity

Stock Certificate

at a minmum must state 1. the name of the corporation and the fact that it is organized under LA law 2. the name of the person to whom the stock is issued and 3. the number and class of shares Certificates must be signed by the president and secretary or by two officers designated in the bylaws or by the board of directors only corp. are required to issue stock certificate since no other type of business entity's ownership shares are represented by stock

Effect of Termination of partnership

authority of partners to act as mandataries terminates except as to acts necessary for liquidation a partner who has NO knowledge of the termination can still bind the partnership does not affect the rights of third persons who in good faith transact business with the partnership

New partner joins after debt is incurred

civil code is silent but in all other states new partner not liable for preexisting debts so likely courts here will agree

Voting Requirements for Management Decisions LLC

default each manager/member is entitled to one vote and all decisions made majority vote Managers DO NOT have the right to vote by proxy UNLESS that right is list in provision of articles of organization or operating agreement

Participation of partners

default= share equally in profits, losses and distribution of assets UNLESS otherwise agreed

Provision stating partner does not share in losses

does not affect third persons such agreement is binding as between partners

Liability for Receiving Wrongful Distributions

each member who received wrongful distribution is liable to the LLC for the amount received in violation of the rule, even if the amount was received without knowledge of the violation 2 year statute of limittions

Member/manager Agency authority LLC

each member/manager is a mandatary of LLC for all matters in ordinary course of business EXCEPT alienation, lease, or encumbrance of the LLC's immovable property mandatary authority may be taken away 1. in the articles 2. in the operating agreement 3. majority vote, provided third party with whom manager.member deals has knowledge of fact she lacks such authority NONMANGER MEMBERS -in manager-managed system: does not have such agency authority nor does she have duties of care and loyalty -such member is purely an equity owner with no authority of fiduciary duties

Partnership/Partner Liability for Debts

each partner is secondarily liable for her virile share of the partnership's debts BUT may plead DISCUSSION of the partnership's assets if sued individually-which means the partner can require the creditor to seize specifically identified partnership assets to satisfy the debt before seizing the partner's personal assets Partner's liability is joint not solidary, unless have contracted otherwise

Partner contribution

each partner must make contribution that has ECONOMIC VALUE there are no restrictions on the type of property or services that may be contributed EACH PARTNER OWS PARTNERSHIP WHAT HE AGREED TO CONTRIBUTE if a partner fails to make the contribution, a third party creditor of the partnership may sue to enforce the obligation to contribute

Members' Rights to Profits and losses (LLC)

equally distributed among members, unless agreed otherwise

Members LLC

equity owners in LLC no restrictions on who can be member foreigners or non-human entities are permitted any number of different classes of members may be created, with different rights and voting power unless management of LLC is delegated to managers, ALL members of LLC will manage the business subject to any provision in the articles or a written operating agreement restricting or enlarging the rights and duties of any member of class of members

Legal duties owed by directors and officers to a Corp.

owe the corporation and its shareholders a fiduciary duty of both loyalty and reasonable care 1. duty of loyalty -requires that a director or officer always act in the best interests of the corporation as he sees it over his own -to act in good faith 2. Duty of reasonable care -requires that a director or officer discharge the duties of his positions with the diligence, care, judgment and skill which ordinary prudent men would exercise under similar circumstances in like positions director or officer will NOT be found to have violated his duty unless he acted in a grossly negligent or worse manner *An officer is also an agent of the corporation and would owe the duties of a mandatary under the Civil Code*

Corporations Generally

owners of corporations (shareholders) are not personally liable for the obligation of the corporation; nether are the director's or officers Generally, only corporation itself can be held liable for corporate obligations centralized management in a board of directors who usually delegate day to day management duties to officers Generally ownership is freely transferable, shareholder can sell his shares to whomever he wants whenever he wants

Sharing partnership with third person

partner may share here interest in the partnership with a 3rd person but the 3rd person DOES NOT become a member of partnership the partner sharing her interest with the third person is liable for any damages the third person cause the partnership

PARTNERSHIPS IN COMMENDAM (LIMITED PARTNERSHIPS) Definition

partnership with 1 or more commendam partners who have limited powers, rights, and liability and 1 or more general partners Limited partners: not personally liable for debts of partnership

Managers LLC

persons, designated by members, to manage business of LLC Members can be and often are managers LLC not required to have manager Articles of LLC must specifically state that the business of the LLC will be managed by a group of managers, once specified LLC will be managed by board of directors deemed Manager-managed NUMBER OF MANAGERS -Management may be by 1 or more managers - NUMBER OF MANGERS WILL BE SPECIFIED IN OR FIXED ACCORDANCE WITH THE ARTICLES OR IF NOT DONE IN ARTICLES IN THE OPERATING AGREEMENT METHOD OF SELECTION each manger shall be filled by PLURALITY VOTE OF THE MEMBERS and a manger may be removed, with or without cause, by a majority vote of the members

Article of Organization

promoter(s) must file with the Sec. of state both article of organization and an initial report FORMALITIES article must be written in English and signed by at least one person, who need NOT be a member or manager a. *the name of the LLC* -must be distinguishable -must contain words "limited liability company" or LLC or LC -for low profit LLC the name must contain the words "low-profit limited liability company" or L3C or L3c -may be reserved in advance with filing an application with sec. of state b. *the purposes of which the LLC is formed OR that its purpose is to engage in any lawful activity for which LLCs may be formed* -EXCEPT insurance underwriting -L3C established with primary goal of furthering a charitable or educational purpose *c. whether the company is low profit limited liability company* if LLC wishes to amend the article or organization it mist first file articles of amendment *If any document filed with the secretary of state is inaccurate or deficient, the LLC should file a "CERTIFICATE OF CORRECTION"*

*What business records is a corporation required to maintain at its offices for inspection by shareholders?*

required to maintain at its offices for inspection by eligible shareholders: 1. its articles of incorporation 2. its bylaws 3. board resolution creating or defining rights of classes of stock 4. 3 years worth of minutes of shareholders meeting 5. 3 years wroth of written communications from the corporation to the shareholders 6. the name and addresses of the members of the board fo directors 7. the company's most recent annual report

Mergers and consolidations LLC

requires a filing a merger or consolidation agreement with secretary of state and the conveyance records office of EACH parish in which any party has immovable property for which title will be transferred

Foreign LLC revocation of certificate

revoked by secretary of state if: 1. LLC has failed to pay any taxes or penalties as prescribed by law 2. LLC has failed to maintain a registered agent or a registered office in LA 3. LLC has failed to update any change to required info such as registered office, registered agent or name 4.LLC has made a material misrepresentation in application 5. LLC has abused authoirty 6. LLC has dissoved 7. LLC delinquent in filing its annual report BEFORE REVOKING secretary of state must give LLC at least 60 days notice, in writing of the ground on which the proposed revocation is abed LLC has chance to correct flaw within 60 day period

Partner Sued in Capacity as Partner

sued in his capacity as a partner is NOT entitled to any INDEMNIFICATION! (or reimbursement of litigation expenses, whether successful in the defenses of the claims or not) (diff from corporations) However, indemnification/reimbursement may be required by LA mandate law...

Permitted inclusions (articles of organization)-LLC

the article may but are not required to state: 1. wether and the extent to which there are limitations on the authority of members to bind the LLC or that such limitations are constrained in a separate written operation agreement 2. IF LLC will be managed by members or managers (state any OR that such restrictions are contained in a separate written operating agreement 3. TERM: Latest date, if any, on which LLC is to dissolve ---> default = perpetual 4. ANY other provision not inconsistent with LLC law that the members choose to include

Formation of De Jure corporation

to form a de jure corporation under the LBCA incorporators must file 2 documents 1. the articles of incorporation, and 2. an affidavit of acceptance of the corporation's registered agent, with the state and must pay whatever fees the state direct

Withdrawing Partner Entitled to Value of Partnership Interest (cessation of membership)

value interest is determined at the time the partner departs and has to be paid in cash Value determined by several manners: -book value -market value of underlying partnership assets fair market value of partnership -or other means can eek judicial termination as amount to be paid

Cumulative voting

*Method of electing corporate directors with the following characteristics* 1. all of the directors seats up for election at any given time are determined from a single slate of all candidates running for the board of directors 2. each share of stock is entitled to a number of votes equal to the number of board seats up for election at that time 3. a shareholder may cast all of the votes he hold for his shares for one candidate or distribute these votes among any two or more candidates in whatever manner he wishes, and 4 when all the votes are counted the candidate are ranked according to the number of votes they received and the top vote getters up to the eats to be elected are then elected ONLY available if that method is expressly provided for in article of incorporation b/c generally directors are elected by plurality vote with each seat voted on separately A shareholder might want cumulative voting if he owns a *significant minority stake* in the corporation. *In that circumstance, the shareholder would not be able to elect any directors under the default plurality system, but would be entitled to some board representation using cumulative voting.*

corporation definiton

*legal entity distinct from its owners* corporations generally have the following characteristics *1. limited liability for owners, directors and officers* *2. centralized management* *3. free transferability of ownership* *4. continuity of life*

Formation of Limited Liability company (LLC)

1. commencement 2. articles of organization 3. initial report 4. annual report requirement 5. operating agreement 6. conversions 7. mergers and consolidations 8. interstate application

ENTITLEMENTS FROM WITHDRAWAL LLC

-member who withdraws is entitled to continue to receive her share of the profits until the LLC pays her the fair market value of her membership interest as of the date of withdrawal which is required to be done within reason

formation Limited liability partnership

1. *application:* already existing partnership must file application stating a. the name of the partnership b. the address of its principal office c. the number of partners d. a brief statement of the business in which the partnership engaged 2. *signed with fee* application must be signed by a majority interest of the partners and the partnership and partnership must pay a registration fee with secretary of state 3. *time* registration effective only for one year from the date the registration is filed or until voluntarily withdrawn by a majoirty interest *Must be REFILED within 12 months of the previous filing since the registration is EFFECTIVE for only 1 year*

Liability for partnership debts General Partners

1. General Partner -secondarily liable for her virile share of all partnership debts, although a partner sued individual for such liability may plead "DISCUSSION" of the partnerships's assets, meaning the partner can require the creditor to seize specifically identified partnership asset to satisfy the partnership debts before seizing the partner's personal assets

Winding Up LLC

1. LLC gives NOTICE of dissolution 2. LLC PURPOSE changes/narrows (only authorized to liquidate assets/pay obligations/wind up biz affairs/distribute contributions+surplus) 3. LLC files ARTICLES OF DISSOLUTION with secretary of state

In an LLC the six circumstances where a vote of the members in an is REQUIRED in order to approve an action, regardless of whether management is vested in members or managers

1. The dissolution and winding up of the limited liability company 2. The sale, exchange, lease, mortgage, pledge, or other transfer of all or substantially all of the assets of the LLC 3. The merger or consolidation of the LLC 4. The incurrence of indebtedness by the LLC other than in the ordinary course of its business 5. The alienation, lease, or encumbrance of any immovables of the LLC 6. An amendment to the Articles of Organization or an Operating Agreement.

Termination of Partnership

1. Unanimous CONSENT; 2. JUDGMENT of termination; 3. BANKRUPTCY of partnership; 4. Reduction of membership to ONE PR (natural or juridical); 5. Expiration of partnerships TERM; 6. The attaining of or impossibility of attaining OBJECT of partnership; or 7. In accordance with provisions of partnership AGREEMENT a partnership may be expressly or tacitly continued after term expires, its object attained, or the parties agree to terminate it if the object becomes impossible may be continued for a different object

Requirement for shareholders to be able to inspect the books and records of the company?

1. a shareholder or group of shareholders that has been the shareholder(s) of record at least 5% of all outstanding shares of any class of the corporation's stock for at least 6 months 2. must give to the corporation at least 5 days written notice 3. notice states a proper purpose for inspection

A corporation has failed to file its annual report, which was due 150 days ago. What effect, if any, does this have on the corporation's existence, and what steps must be taken to remedy this situation?

Corporations are required to file an annual report by statute The Statute directs the Secretary of State to terminate the existence of a corporation if it has failed to file an annual report for 90 days. It accomplishes this termination by giving the corporation a 30 day notice and then filing a certificate of termination. If the corporation is 150 day delinquent, it is likely that the Secretary of State has already accomplished the administrative termination of the corporation. To remedy the situation, the corporation must file Articles of Reinstatement with the Secretary of State. If the filing of the Articles of Reinstatement complies with all the provisions of the reinstatement statute, the corporation's existence is reinstated retroactively, and the corporation continues to exist as if the termination had never occurred.

LLC Commencement of Legal Existence

Existence begins on issuance of CERTIFICATE OF ORGANIZATION by Secretary of state -- BUT is effective retroactively to date articles were FILED (and CAN be effective to date articles were SIGNED/notarized, if then filed w/in 5 DAYS ) LLC statute is silent as to the liability of LLC PROMOTERS who engage in transactions prior to LLC existence (so most likely, courts will adopt same rules that apply to pre-incorporation activities of corporate promoters)

Partnership ownership of immovables

General rule: -must be in writing at time of acquisition -otherwise property is owned indivison by partners Ownership with respect to 3rd parties -partnership DOES NOT own immovables with respect to rights of third parties unless the partnership agreement is filed with the secretary of state -if agreement NOT FILED third parties can treat partnership immovables as the partners' individual property Retroactive ownership of immovable property -if immovable property is acquired in the name of a partnership that has not yet been created and that partnership is subsequently created, the partnership's existence will be deemed to be retroactive to the date of the acquisition of the immovable property -such retroactive effect will not prejudice the rights of any 3rd party that validly acquired right in that property between the date of acquisition of the property and the actual creation of the partnership

Withdrawal from LLC

If LLC is NOT constituted for a set TERM: Member may withdraw EITHER: 1. immediately, upon occurrence of an EVENT specified in Operating agreement; OR 2. for ANY reason, if withdrawing member gives LLC and other members 30 DAYS WRITTEN NOTICE If LLC is constituted for a TERM: Member may ONLY withdraw if EITHER: 1. gets UNANIMOUS CONSENT of the other members; OR 2. has "JUST CAUSE" for withdrawal ("arising out of another member's failure to perform a material obligation") (like PPs)

LLC Manager's personal use of company property

If a manager uses company property for personal benefit, he must prove the fairness of the transaction under strict judicial scrutiny to avoid the obligation to account

Effect of Death of a Member LLC

If a member DIES: 1. Decedent member's heir becomes ASSIGNEE of decedent's membership interest in LLC 2. Other members MUST choose EITHER: -- A. Admit heir as new member (heir slides into shoes of decedent member); OR -- B. Pay out decedent's membership interest to heir at fair market value (heir withdraws decedent's membership from LLC)

Retroactive Ownership of Immovable Property (LLC!)

If immovable property is acquired in name of LLC that has not yet been issued a certificate of organization, LLC's existence will be deemed retroactive to date of ACQUISITION of immovable property -- BUT: retroactivity will NOT prejudice rights of third parties that validly acquired rights in that immovable property (between date of acquisition + issuance of certificate)

Liability for partnership debts Limited Partners (commendam partner)

generally not personally liable for the debts of the partnership only liable for extent of commendam partner's contribution unless she (this MAKES LIMITED PARTNER TO GENERAL): 1. allows her name to be used in business dealings of the partnership -If limited partner has SAME NAME as general partner does not come within the use of name prohibition 2. if she participates in the management or administration of the partnership or, 3 if she conducts business with third parties on behalf of the partnership

Preemptive Rights

if they exist are the right of a corporate shareholder to purchase the same percentage of any newly issued stock as the shareholder currently holds of the current outstanding voting shares *Shareholders DO NOT have preemptive rights UNLESS the corporate articles expressly grant them*

Partner exceeds his authority

in such cases where a partner transact business with a third party in excess of his actual authority to do so, the partnership may recover any damages suffered from obligating partner who exceeded his authority

Incorporator corporations

incorporator is simply a person who signs the article is corporation under LBCA only 1 incorporator is necessary but can be more than 1 Incorporators must be persons "capable of contracting" and may be either natural persons or artificial entities

Partnership defined

juridical person, distinct from its partnerS, created by written or oral contract between two or more "legal persons" to combine efforts and/or resources in agreed upon proportions and to collaborate at mutual risk for common profit or commercial benefit PARTIES IN PARTNERSHIP MUST ONLY INTEND TO CREATE THE RELATIIONSHIP PARTNERSHIP MAY BE INFERRED EVEN IF THE PARTIES DID NOT CONSCIOUSLY CONSIDER OR INTENT IT TO BE A PARTNERSHIP default form of BE

S Corporations

limited to 100 or fewer shareholders

Creation corporation

must follow LA business and corporation act a corporation formed with all applicable laws is a DE JURE corporation a business may still be treated as a corporation under DE FACTO CORPORATION doctrine if there was a good faith attempt to incorporate

Limited Partnership contribution

must make contribution but it can be cash, any type of property or performance of nonmanageral services Limited partner liable only for debts up to extent of contribution

Operational requirements LLC

no operational formalities required Need ONLY continuously maintain a registered office and at least one registered agent in the state

Formation of general partnership requirements

no requirements for forming can be oral or written default form of business entity that can be created without the partners intending to become partners PARTNERSHIP CANNOT OWN IMMOVABLE PROPERTY UNLESS THE PARTNERSHIP HAS A WRITEN PARTNERSHIP AGREEMENT if an agreement is written must be filed in registry in baton rouge office, it must include: 1. Partnership name -may adopt name with out without names of any of the partners -IF NO NAME adopted business must be conducted in the name of all the partners 2. partnership's address 3. Each Partner's name/address