Corporate Practice Series Portfolio No. 67-2nd, Limited Liability Companies: Legal Aspects of Organization, Operation, and Dissolution, examines certain aspects of the organization, operation, and dissolution of limited liability companies. It discusses state LLC statutes and the Uniform and Prototype LLC acts; the entity's operating agreement and articles of organization; various issues relating to members and managers of the entity; mergers, consolidations, and conversions of an LLC; tax treatment of LLCs; securities law issues relating to LLCs; and professional LLCs.

Portfolio 67-2nd: Limited Liability Companies: Legal Aspects of Organization, Operation, and Dissolution

I. Introduction
    . Introductory Material
    A. Basic Features of an LLC
    B. Historical Background
         1. Genesis of LLCs
         2. Flexible vs. bulletproof LLC statutes
    C. LLC Statutes After Check-the-Box Regulations

II. Comparison of Limited Liability Companies With Other Business Entities
    A. Federal Taxation
    B. Formation
    C. Capitalization
    D. Distributions
    E. Management
    F. Liability of Members
    G. Derivative Actions
    H. Transferability of Ownership Interests
    I. Withdrawal Rights
    J. Dissolution
    K. Merger and Conversion

III. Forming the Limited Liability Company
    . Introductory Material
    A. The Operating Agreement
    B. Certificate of Formation
    C. Content and Timing of Filing of Certificate
    D. Execution of Certificate and Place of Filing
         1. In general
         2. Filing of certificate
              a. Certificate as notice
              b. Liability for false statements
              c. Amendments, corrections, and restatements

IV. Operating the Limited Liability Company
    . Introductory Material
    A. Permitted Purposes and Activities
    B. Powers
    C. Members and Managers
         1. Members
              a. Admission and transfer
              b. Withdrawal
              c. Classes
              d. Series
              e. Meetings, voting, records, and access to information
         2. Management
              a. Management by members
              b. Management by managers
         3. Managers
              a. Admission and withdrawal
              b. Classes
              c. Meetings and voting
         4. Ongoing financial matters
              a. Contributions
              b. Allocation of profits and losses
         5. Distributions
         6. Standard of care and fiduciary obligations
              a. Standards for managers
              b. Standards for members
              c. In general
         7. Liability of members and managers to third parties
              a. Members
              b. Managers
         8. Remedies for breach of operating agreement by members or managers
              a. Remedies for breach by members
              b. Remedies for breach by managers
         9. Indemnification

V. Mergers, Consolidations, Conversions, and Domestications
    . Introductory Material
    A. Mergers and Consolidations
         1. Types of entities available for merger or consolidation
         2. Agreement of merger or consolidation
         3. Certificate of merger or consolidation
         4. Effective date
         5. Appraisal rights
         6. Nonstatutory methods for accomplishing business combinations
    B. Conversions
    C. Domestications
         1. Non-U.S. entity domesticating as an LLC
         2. LLC domesticating as a non-U.S. entity
    D. Divisions

VI. Dissolution of Limited Liability Companies
    A. Causes of Dissolution
         1. Expiration of term of the LLC
         2. Events specified in the LLC's operating agreement
         3. Written consent of all members of the LLC
         4. Events terminating membership
         5. Judicial dissolution
         6. Other dissolution events
    B. Filing and Notice of Dissolution
    C. Winding Up
    D. Distribution of Assets
    E. Termination of the LLC
         1. Upon completion of winding up
         2. Termination by merger or consolidation

VII. Legal Actions By and Against Members and Managers
    . Introductory Material
    A. Actions Against Members and Managers
    B. Actions by Members and Managers
         1. Individual actions
         2. Derivative actions
         3. Class actions

VIII. Transacting Business in Other Jurisdictions
    A. Interstate Activity
    B. Qualification of Foreign LLCs

IX. Tax Treatment of Limited Liability Companies
    A. Federal Income Tax Classification
         1. Historical background
         2. Check-the-box regulations
              a. Purpose
              b. Overview
              c. Application of the check-the-box regulations to LLCs
              d. Making a classification election
                   (1). Initial classification elections
                   (2). Change in classification
              e. Entity conversions
                   (1). Entity classification conversion regulations
                   (2). Entity classification conversions involving single-member LLCs
         3. Single-member LLCs
              a. In general
              b. Single-member LLCs with more than one member
              c. Disregarded single-member LLCs as partners for purposes of federal tax law
              d. Tax planning opportunities for disregarded single-member LLCs
                   (1). Tax-free corporate reorganizations
                   (2). Section 1031 like-kind exchanges
         4. Classification of entities owned as community property
         5. Collection of federal tax liability
              a. Reaching assets of an LLC for the sole member’s tax liability
              b. Members not liable for LLC’s employment taxes
         6. Tax treatment of self-employment earnings
    B. State Tax Treatment
    C. Entity-Level Taxes and Fees

X. Securities Law Issues
    . Introductory Material
    A. Are LLC Interests Securities?
         1. Classification under federal law
         2. Classification under state law
    B. Consequences of Classification as a Security

XI. Effect of Bankruptcy
    . Introductory Material
    A. Eligibility of an LLC to Be a Debtor
    B. Authority to Commence a Bankruptcy Proceeding
    C. Bankruptcy of a Member

XII. Professional Limited Liability Companies
    . Introductory Material
    A. Limited Liability Partnerships
    B. LLC Statutes
    C. Rules Governing Professionals
         1. Lawyers
         2. Accountants
 

Portfolio 67-2nd: Limited Liability Companies: Legal Aspects of Organization, Operation, and Dissolution

Wks. 1 Delaware Limited Liability Company Act

Wks. 2 Limited Liability Companies State-by-State Summary

Wks. 3 Form of Certificate of Formation

Wks. 4 Form of Certificate of Amendment

Wks. 5 Form of Amended and Restated Certificate of Formation

Wks. 6 Form of Certificate of Correction

Wks. 7 Form of Certificate of Conversion

Wks. 8 Form of Certificate of Limited Liability Company Domestication

Wks. 9 Form of Certificate of Merger

Wks. 10 Form of Certificate of Cancellation

Wks. 11 Form of Certificate of Revival

Wks. 12 Form of Limited Liability Company Bylaws—Manager-Managed

Wks. 13 Short-Form Limited Liability Company Agreement—Member-Managed

Wks. 14 Short-Form Limited Liability Company Agreement—Manager-Managed

Wks. 15 Long-Form Limited Liability Company Agreement

Wks. 16 Revised Uniform Limited Liability Company Act

David A. Harris
Morris, Nichols, Arsht & Tunnell LLP
Wilmington, Delaware

Louis G. Hering
Morris, Nichols, Arsht & Tunnell LLP
Wilmington, Delaware

Stanford L. Stevenson
Morris, Nichols, Arsht & Tunnell LLP
Wilmington, Delaware