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Category Archives: LLC

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 1)

October 24, 2015

As many of you know, an LLC’s assets are generally not subject to claims by creditors of LLC members for their personal debts. The LLC and its owner are generally considered separate legal entities with their own assets and liabilities. In our previous blog series on LLC statutes (available here), however, we mentioned that creditors of LLC members can get to the assets of the LLC by applying for a charging order, if the state law so provides. A charging order gives the creditor the right to receive distributions from the LLC to which the debtor/member would otherwise be entitled, if any, but does not confer any right to order distributions or participate in the LLC’s management.… Read the rest

Comparison of LLC Statutes

August 10, 2015

Other Considerations

So, now that you have done your research, you decide to form your LLC in Delaware and file the required forms in Delaware.  Is that all you need to do?  It depends on where you actually conduct business.  Most, if not all, states require foreign LLCs (i.e., LLCs formed under the laws of another jurisdiction) to register or apply for authority to do business in that state, if the LLC does business there.  What constitutes “doing business” in a particular state is often debatable, but having a principal place of business or regularly engaging in transactions would most likely count as such, subjecting the entity to the state’s foreign LLC filings, fees, and taxes.… Read the rest

Comparison of LLC Statutes

August 6, 2015

Court System: Who Will Hear My Case?

At times, even with careful planning and drafting, business relationships may turn sour and amicable resolution impossible.  This is where being a Delaware entity might prove to be decisively advantageous.  Delaware houses the nation’s oldest business court, the Delaware Court of Chancery established in 1792.[1]  As a court of equity, it has broad jurisdiction over disputes involving the internal affairs of Delaware business entities and has developed a respected body of case law interpreting Delaware business law.… Read the rest

Comparison of LLC Statutes

August 3, 2015

Series Availability: The Latest Option

Another interesting difference among LLC statutes is the availability of series LLC.  This relatively new concept is said to have its origin in offshore financial institutions as a way of allocating assets and risks among a series of companies.  Series LLC offers numerous advantages, which include flexible structure, greater protection against liability, and lower filing fee and administrative burdens, but is also fraught with uncertainty, particularly with respect to its treatment under federal bankruptcy law and the laws of states that do not recognize series LLCs. … Read the rest

Comparison of LLC Statutes

July 30, 2015

Fiduciary Duties: Do Managers Owe Special Duties to the LLC or Its Members?

A fiduciary duty is a legal duty to act solely in another party’s interests.  For those familiar with the context, a fiduciary duty is often likened to the duties of a trustee to hold property in trust.  Fiduciary duties generally encompass the duty of care (i.e., duty to act in good faith and exercise reasonable care in carrying out their obligations to the LLC) and the duty of loyalty (i.e.Read the rest

Comparison of LLC Statutes

July 27, 2015

Creditors’ Rights: Can My Creditors Go After the LLC’s Assets?

In Delaware, as in most other states, LLC members are generally not liable for the debts, obligations, and liabilities of the LLC.  We say generally, because there are situations where LLC members can be personally liable for business debts so as to allow courts to “pierce the corporate veil” based on, for example, fraud, intermingling of personal and business affairs, and improperly drafted operating agreements.  This is a highly fact-intensive analysis, the result of which may vary significantly depending on the specific circumstances and the jurisdiction.… Read the rest

Comparison of LLC Statutes

July 23, 2015

Comparison of LLC Statutes: Delaware, New York, and Texas

Should I Form My LLC in Delaware or Elsewhere?

Business owners often ask us where they should form an LLC.  Delaware has long been the preferred state of incorporation for businesses.  Indeed, of the corporations that make up the Fortune 500, more than one-half are incorporated in Delaware.[1]  There are many advantages of forming a company in Delaware, including the state’s flexible business law and highly respected business court, among others, which provide more guidance and certainty in conducting business than anywhere else in the country.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.