Limited Liability Companies

Limited Liability Companies Wiki

Limited Liability Companies

Combines nontax advantages of the corporation and the favorable tax status of partnerships

Wyoming in 1977 passed first LLC statute

Uniform Limited Liability Company Act of 1996

–          Provides default rules to govern in absence of contract

–          Ullca is similar to rupa


Tax treatment of LLC’s

May elect to be taxed like corporation or partnership

Usually elect for partnership

–          No federal income tax

–          All income and losses reported on individual income tax

–          Oftentimes used as tax shelter

Formation of LLC’s

One or more persons must file articles of organization with SoS

Must include name of LLC


Name must include LLC in its name

Owners are called members

Must state if it is member managed or manager managed

Manager managed requires name of managers listed initially

If no term is stated, member may disassociate at will

Operating agreement typically set up

Foreign LLC’s may require certificate of authority, must be filed by SoS


Member Rights And Liabilities

Limited Liabilities

LLC member has no individual liability on LLC contracts unless contract is signed in personal capacity

Liability is limited to capital contributions and torts committed


Management Rights

Each member in member managed llc is equal

Manager managed have managers elected and removed by majority vote

Each manager has equal authority


Member’s Distributions

Member’s most important right is to receive distributions

Profits shared equally unless contracted otherwise


Member’s Ownership Interest

Ownership interest in a LLC is the member’s personal property

Limited ability to transfer rights in LLC to other

-may transfer distributional interest to other

-transferee has no right to manage

–unless agreement contracted out to allow so


Members’ Dissociations and LLC Dissolution

When member disassociates or dies, entity survives

Can leave at any time

Leave if declare bankruptcy, incompetent, expelled

Wrongful dissociation can lead to liability for damages

Must pay distributional interest to disassociated member

-llc must purchase interest within 120 days

Distribution of Dissolved LLC’s Assets- proceeds first go to creditors, member’s contributions are returned next, remainder handed out to members


In Re Garrison-Ashburn LV ph 951


Limited Partnerships and Limited Liability Limited Partnerships

Limited Partnerships

Managers want an infusion of capital to the business but do not want to give up control to those that do

Investors want to contribute but limit their liability and not manage

Limited Partnership has 2 kinds of owners

General partners – manage

Limited partners – only contribute


Variation form is limited liability limited partnership pg 953 elected limited liability status

Limited liability is a concept whereby a person’s financial liability is the value of a person’s investment


Uniform Limited Partnership Acts


Use of limited partnerships and LLLP’s

Primarily in real estate investment, oil drilling, sports



Differences in partnerships, limited liability partnerships, limited liability limited partnerships, and limited liability companies.


Partnerships- A partnership is an arrangement where parties agree to cooperate to advance their mutual interests


Limited Liability Partnerships- partners not liable for others actions,

Limited liability limited partnerships




Intrastate is best filed in state where business will be done

Interstate can be filed with best rates

–          Delaware has low rates


Limited Liability Companies Wiki

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