Limited Liability Companies (LLC) & Limited Liability Partnerships (LLP)

Duration

A LLC is an at-will LLC if no term is specified. If a term is specified, the LLC is a term LLC, and the term must be included in the articles of organization.

Members

A member is not personally liable for these matter unless he or she is also the tortfeasor (person who actually committed the tort).

LLC

An unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations. Owners are called members.

Dissolution of LLC

If a member disassociates from an at-will LLC, the LLC pays out to him or her that members distributional interest and the LLC must give proper notice of the disassociation of the member to avoid the illusion that this member has apparent authority to act on behalf of the LLC. If the members do not wish to continue the LLC, the business of the LLC is wound up and the distribution of the assets of the LLC are distributed, the existence of the LLC is terminated by filing articles of termination with the secretary of state.

Powers

LLC has the same powers as an individual to do all things necessary to carry on Its business and affairs, including owning and transferring personal and real property, mortgaging real property, making contracts and guarantees, borrowing and lending money, issuing notes and bonds, suing and being sued, and taking other actions to carry on business.

Liability of LLC and Members

LLC, Members, and Manager

Manager-managed LLC

Members hire a manger or mangers to manage the LLC and delegate their managerial rights to the manager. Members are not agents, therefore, they cannot bind the LLC in contract. Also they are not fiduciaries, so don't owe any fiduciary duties.

Operating Agreement

Members may enter into an operating agreement that will regulate the affairs of the business, the way in which the LLC conducts its business, and govern relations between the members, managers and company. The law does not a LLC to have an operating agreement, but it is strongly recommended.

Limited Liability Partnerships, LLP

Most states do not allow certain professionals, such as attorneys, physicians, dentists and accountants to form a LLC, but the do authorize these professions to form a Limited Liability Partnership, LLP. A LLP is created by filing Articles of Limited Liability Partnership with a chosen state's secretary of state. In this state the LLP will be a domestic LLP. To do business in another state, the LLP must register as a foreign LLP

Formation

Must file Articles on Organization with the secretary of state of the state in which the LLC elects to organize. Similar to a corporation, an LLC can only be organized in one state but can do business is all other states as well. Articles of Organization must contain: 1) Name 2) address of initial office 3) name and address of the initial agent for service of process 4) Name and business address of all organizers. 5)Whether the LLC is a term LLC, and , if so, the term 6) Whether LLC is a manager-managed LLC or a member-managed LLC 7) Whether one or more of the members of the LLC are going to be personally liable for the debts and obligations of the LLC

LLC

The LLC, itself, (remember it is a separate legal entity) is liable for any loss or Injury resulting from a wrongful act or omission by a member, manager, agent or employee of the LLC committed during the ordinary course of Business.

Distributional Interest

This is a member's ownership interest in the LLC. A member's distributional interest is personal property and, as such, can be transferred in whole or in part. However, transfer of a distributional interest does not allow the recipient of the interest to become a member of the LLC or to exercise any of the rights of a member. The transferee of a distributional interest is entitled to receive only the distributions to which the transferor would have been entitled.

Division of Profits and Losses

Unless specified in the operating agreement, members share profits and losses equally regardless of the value of each member's capital contribution.

Manager

do not have personal liability for torts committed by other during the ordinary course of business.

Member-managed LLC

managed LLC - All members have the right to manage the LLC. All members are agents of the LLC, therefore have the capacity to bind the LLC in contract. All members are fiduciaries of the LLC and other members so they owe the usual duties such as Duty of Loyalty and Duty of Care.

Taxation

taxed as a partnership. Income flow through the LLC to the individual Members.