Chapter 15: Limited Liability Companies, Limited Liability Partnerships, and Special Forms of Business

License

A business arrangement that occurs when the owner of intellectual property (the licensor) contracts to permit another party (the licensee) to use the intellectual property.

Certificate of interest

A document that evidences a member's ownership interest in an LLC.

Duty of loyalty

A duty owed by a member of a member-managed LLC and a manager of a manager-managed LLC to be honest in his or her dealings with the LLCS and to not act adversely to the interests of the LLCS

Area franchise

A franchise in which the franchisor authorizes a franchisee to negotiate and sell franchises on its behalf in designated areas. The area franchisee is called subfranchisor.

Chain-style franchise

A franchise in which the franchisor licenses a franchisee to make and sell its products or distribute its services to the public from a retail outlet serving an exclusive territory.

Distributorship franchise

A franchise in which the franchisor manufactures a product and licenses a franchisee to distribute the product to the public.

Processing plant franchise

A franchise in which the franchisor provides a secret formula or process to the franchisee, and the franchisee manufactures the product and distributes it to retail dealers.

Distribution interest

A member's ownership interest interest in an LLC that entitles the member to receive distributions of money and property from the LLC.

Uniform Limited Liability Company Act (ULLCA)

A model act that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCS.

Torfeasor

A person who intentionally or unintentionally (negligently) causes injury or death to another person. A tortfeasor is liable to person he or she inures and to the heirs of person who die because of his or her conduct.

Revised Uniform Limited Liability Company Act (RULLCA)

A revision of the ULLCA that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCS.

Limited liability partnership (LLP)

A special form of partnership in which all partners are limited partners, and there are no general partners.

Manager-managed LLC

An LLC that has designated in its articles of organization that it is a manager-managed LLC, and its nonmanager members give their management rights over to designated managers.

Member-managed LLC

An LLC that has not designated that it is a manager-managed LLC in its articles of organization and that is managed by its members.

Operating agreement

An agreement entered into among members that governs the affairs and business of the LLC and the relationships among members, managers, and the LLC.

Franchise agreement

An agreement that a franchisor and franchisee enter into that sets forth the terms and conditions of a franchise.

Franchise

An arrangement that is established when one party (the franchisor) licenses another party (the franchisee) to use the franchisor's trade name, trademarks, commercial symbols, patents, copyrights, and other property in the distribution and selling of goods and services.

Member

An owner of an LLC. Some states refer to members as shareholders.

Limited liability company (LLC)

An unincoprorated business entity that combines the most favorable attributes of general partnerships, limited partnership, and corporations.

Articles of organization

The formal documents that must be filed at the secretary of state's office of the state of organization of an LLC in order to form the LLC.

Articles of limited liability partnership

The formal documents that must be filed at the secretary of state's office of the state of organization of an LLP in order to form the LLP.

Limited liability of members of LLCs

The liability of LLC members for the LLC's debts, obligations, and liabilities, which is limited to the extent of their capital contributions. Members of LLC's are not personally liable for the LLC's debts, obligations, and liabilities.

Limited liability of partners of LLPs

The liability of LLP partners for the LLP's debts, obligations, and liabilities, which is limited to the extent of their capital contributions. Partners of LLPs are not personally liable for the LLP's debts, obligations, and liabilities.

Licensee

The party to whom a license is granted.

Franchisor (licensor)

The party who grants a franchise and license to a franchisee in a franchise arrangement.

Licensor

The party who grants a license.

Franchisee (licensee)

The party who is granted a franchise and license by a franchisor in a franchise arrangement.