#8798 - Limited Liability Companies - Agency and Other Unincorporated Businesses

LIMITED LIABILITY COMPANIES

4 Main Characteristics of LLC:

Limited Liability

Free Transfer of Assets

Central Management

Perpetual Life

-Must file a form w/ State Gov.

Form must comply w/ the state statute (certificate of formation, articles of organization, etc.)

-Should also but not required to have a private LLC Operating Agreement

-Must have a registered agent for service of process IN THAT STATE (since can form LLC any where you want w/o have to live there)

-MUST be either (each state has a default of one of these, and if don’t like it have otherwise in your operating agreement)

Member-managed

• Partnership model (except not 1 person 1 vote)

• Each member full authority bind, daily activity, act for LLC

• Member=someone who owns interest in the LLC

Manager-managed

• Manager=a legal position

• Only managers can act for the LLCs

• Manager is a person or entity that is designated as such

• Nonmanagers have no powers (like shareholders only)

Meyer v. Ok ABLE Commission

Issue: can an LLC own a liquor license? (constitution of OK written pre LLC existence)

LLC is hybrid of a corp and p’ship

Ct. said for these purposes (due to Limited Liability & constitutional intent) is more like corp and cannot hold liquor license.

Kuhn v. Tumminelli

Member of the LLC was taking customer checks as payment, cashing them and then misusing the funds.

The issue was whether he had authority to do so cause if didn’t then bank was liable…

So had to decide if taking $ for personal use was a separate act from endorsing the check cause if so then no auth and bank liable but if was separate then had auth for the endorsement and bank not liable.

Ct. held that he did have authority: actual by default of NJ cause is default member- management & thus each member had authority to bind LLC, and it is not limited to the scope of the business of the LLC. (if want it limited in scope can do so on your form filed)(in OK must be bus of LLC)

(also prob had apparent auth due to forms and signature, etc. )

Maitland v. Intl Registries LLC

50/50 LLC member-managed

So when disagree=deadlock

So can’t hire a lawyer if have disagreement & no controlling majority cause is not part of the day to day business and a change involved

Cooper v. Creative Homes

Generally members not personally liable for LLC debts cause is an LLC and managers are not l iable under agency law

*Employees not being paid by Creative Homes as the LLC

*But, Quick, after fired, continued to do work similar to her role previously, & was still the “registered agent” for the company.

*LLC argues Quick not authorized to hire any employees

*Cooper argues apparent authority & so required manifestations by LLC as Principal that there was authority in the purported agent to the 3^rd party. (still registered agent, still poa, signing c hecks)

*You need one authorized agent of the LLC to create authority in another, cause LLC itself is entity and can only act through an agent.

*If member-mangaged and members knew but took no action then can use Estoppel

*But if manager-managed then members knowing irrelevant and wouldn’t be able use Estoppel

Katris v. Carroll

Manager-managed

Managers=Katris & Hamburg

Members= Katris, Hamburg, Doherty, & Szlendak

(but each given a title but the form says only K & H managers)

-Doherty went off & competed w/ LLC in conjunction w/ defendant Carrol & Ernst

-Under the Statute in a manager-managed LLC the members who are not managers don’t own any fiduciary duties (cause are not agents)

-In member-managed LLC’s all members owe fiduciary duties (cause are agents)

BASICALLY ONLY AGENTS OWE DUTIES

But here, while Doherty isn’t a manager and didn’t have fiduciary duties of a manager, he was still and agent of the LLC as the Director & so should still of an agents fiduciary duty under reg agency law.

Walker v. Redeco LLC (member-managed)

So all members are agents

3 bills terminate W ownership interest in LLC by letter in effort to expel him from the LLC. (but cant do this cause is theft, you can’t “terminate” someones ownership interest)

In member-managed LLC can’t expel member but can buy him out, dissolve LLC, reform the current LLC Operating Agreement to say manager-managed maybe, but in all cases you would have to pay him.

In LLC Act here: every member can bind the LLC (broader than P’ship act which needs be in course of bus)

Contract/operating agreement doesn’t provide an option here of expulsion and neither did the Delaware...