The limited liability company, a form of business , seeks to combine
- Limited Liability - the most sought-after features of a corporation
- "Flow through" federal taxation - with those of partnership, as does the limited partnership form.
As under partnerships law, an LLC has great freedom to structure its internal governance by agreemtn. Like a corporation, an LLC is an entity so that it can, for example, hold property adn sue and be used in its on name.
Unlike limited partnership law, LLC law permits unlimited paritcipation in the business by some or all the owners, seen as another advantage to the LLC form of entity.
There are two types of LLCs
- 1) "member managed" (similar to partnership) - managed by their members
- 2) "manager managed" (similar to corporation and board of directors) - managed by managers who may or may not be members.
A practitioner forms an LLC by filing a brief document, know as the certificate, with a state offical, often the secretary of state. The heart of an LLC is the operating agreement. THe operating agreement contains governance provisions (e.g., choice between member versus manager managed, limitations on managers' authority, procedures for election ...
A hallmark of teh LLC is nearly unlimited flexibility. For the reason, lengthy agreeemtns may be necessary to select from a wide array of possible choice. Because the agreement are lengthy and often hand-tailored, attorneys charge higher fees to form an LLC as opposed to a corporation.
588-592 The LLC statutes are highly variable. THis note will describe the central characteristics of LLCs under prevailing statutory patterns. Bear in mind that as to any given characteristic there will usually be some LLC statutes that fall otuside the major patterns this Note describes.
- Formation - articles of organization; power
- operating agreements
- voting by members
- member-managed LLCs
- manager-managed LLCs
- the Delaware statute
- Inspectiion of Books and Records
- Fiduciary Duties
- Derivative Actions
- Members' interests