How to Form and Operate a Limited Liability Company : A Do-It-Yourself Guide

by Damman, Gregory C.

• ISBN13: 9781551804033
• ISBN10: 1551804034
• Edition: 3rd
• Format: Paperback
• Copyright: 2003-01-01
• Publisher: Natl Book Network

Author Biography

Gregory C. Damman received a BS in Journalism from the University of Kansas in 1985 and a JD from the University of Nebraska in 1989. He owns and operates Damman Legal Research

Table of Contents

What is a Limited Liability Company?	1	(8)
History	2	(1)
The Wyoming experience	2	(1)
The IRS reversal	2	(1)
The LLC explosion	2	(1)
The major benefits of doing business as an LLC	3	(1)
Limited liability	3	(1)
Partnership tax status	3	(1)
LLC flexibility	4	(1)
A potpourri of additional LLC benefits	4	(1)
International participation	4	(1)
Confidentiality	4	(1)
Estate planning	5	(1)
LLC disadvantages	5	(1)
Uncertain interstate recognition	5	(1)
Evolving tax status	6	(1)
Filing statistics	6	(3)
Uniformity	6	(1)
Professionals	7	(1)
Sole proprietors	7	(2)
Is an LLC the Proper Entity for Your Business?	9	(6)
What to consider when choosing a form of business	9	(1)
Nature of the business	9	(1)
Type of owners	9	(1)
Tax considerations	10	(1)
Management considerations	10	(1)
Liability considerations	10	(1)
Record keeping considerations	10	(1)
Entity comparison	10	(5)
Sole proprietorship versus LLC	11	(1)
General partnership versus LLC	11	(1)
S corporation versus LLC	11	(1)
C corporation versus LLC	12	(1)
Limited partnership versus LLC	12	(3)
How to Form an LLC	15	(6)
Filing the necessary documents (ULLCA section 202)	15	(4)
Articles of Organization	15	(2)
Drafting the Articles of Organization	17	(1)
Amendment of the Articles of Organization (ULLCA section 204)	18	(1)
LLC name and identification (ULLCA sections 105, 106, 107)	19	(1)
The filing fees	19	(1)
Other potential requirements	19	(1)
Choosing the state in which to form an LLC	20	(1)
The Operating Agreement	21	(18)
Contents of the operating agreement	21	(1)
Signature requirements	22	(1)
Changing the operating agreement	22	(17)
Converting an Existing Business into an LLC	39	(4)
Converting a partnership (ULLCA sections 902, 903)	39	(1)
Converting a corporation	40	(3)
S corporation	40	(1)
C corporation	40	(1)
Corporate LLC conversion alternatives	40	(3)
The Basics of LLC Membership	43	(6)
LLC membership in general	43	(1)
What do I get? What do I want?	43	(1)
Who may be an LLC member?	43	(1)
The nature of an LLC membership interest (ULLCA section 501)	44	(2)
Membership contributions (ULLCA sections 401, 402)	44	(1)
Membership transfers (ULLCA section 502)	45	(1)
Leaving an LLC	46	(3)
Withdrawal or dissociation (ULLCA sections 601, 602(a))	46	(1)
Wrongful dissociation (ULLCA section 602)	47	(1)
What happens when an LLC member dissociates? (ULLCA section 603)	47	(2)
Liability of Members	49	(4)
The nature of an LLC's ``limited liability'' (ULLCA sections 302, 303)	49	(1)
Piercing the LLC veil	50	(2)
Inseparability	51	(1)
Undercapitalization	51	(1)
Illegal purpose	51	(1)
Lack of compliance with formalities	51	(1)
Equity and justice	51	(1)
How to avoid having the LLC veil pierced	52	(1)
The Sources of Management Responsibility (ULLCA Section 404)	53	(4)
Management provisions in the articles of organization	53	(1)
Management provisions in the operating agreement	53	(4)
Conducting the Business of an LLC (ULLCA Section 301(a))	57	(8)
General management considerations	57	(2)
Member agents	57	(1)
Selecting managers	58	(1)
Manager agents	59	(1)
Special responsibilities of members and managers (ULLCA section 409)	59	(2)
Distributions (ULLCA sections 405, 406, 407)	61	(4)
``Check the Box'' Tax Status	65	(4)
A simplified process	65	(1)
Firms ineligible for ``check the box'' status	65	(1)
Making the election	65	(1)
Taxation of member contributions	65	(1)
Possible taxation at the state level	66	(3)
General LLC Tax Considerations	69	(10)
What tax forms must be filed?	69	(2)
Due date for Form 1065	69	(1)
Where to file	69	(1)
Failure to file Form 1065	69	(1)
Taxable year	69	(1)
Tax matters member	70	(1)
Signing the return	70	(1)
Audits	70	(1)
Accounting method	70	(1)
Details of form 1065	71	(1)
Cost of goods sold	71	(1)
Other information	71	(1)
Partners' share of income	71	(1)
Balance sheets	71	(1)
Reconciliation of income	71	(1)
Analysis of partners' capital accounts	71	(1)
Capital gains and losses	72	(1)
Self-employment taxes	72	(1)
The LLC accountant	72	(7)
Will My LLC be Recognized in Other States?	79	(4)
Interstate recognition of LLCs --- in general	79	(1)
How to avoid interstate problems	79	(4)
Form a manager-managed LLC	79	(1)
Include a choice of law statement in documents	80	(1)
Properly identify the LLC	80	(1)
Educate members and employees	80	(1)
Form other entities and make them members	80	(1)
Obtain adequate insurance coverage	80	(1)
Register in other states	80	(3)
Is My LLC Membership Interest a Security?	83	(2)
What is a security?	83	(1)
LLCs and the federal securities laws	83	(1)
Avoiding application of the securities laws	84	(1)
What Types of Businesses are Forming as LLCs?	85	(6)
LLCs are suitable for nearly any type of business	85	(5)
Real estate ventures	85	(1)
Natural resource development	86	(1)
Accounting firms	87	(1)
High technology firms	87	(1)
Law firms	87	(1)
Medical practices	87	(1)
Agricultural holdings	87	(1)
Family businesses: Estate planning	88	(2)
Some businesses may not operate as LLCs	90	(1)
The LLC Lawyer	91	(4)
Is an LLC lawyer necessary?	91	(1)
How to select an LLC lawyer	91	(1)
Services and fees	92	(3)
Peace-of-mind service	92	(1)
Start-up service	92	(1)
Full service	93	(2)
Terminating an LLC	95	(4)
The basics of dissolution (ULLCA sections 801, 802)	95	(2)
Winding up	95	(1)
Filing matters	96	(1)
Agency considerations (ULLCA section 804)	96	(1)
Distributions	96	(1)
Creditors' rights upon dissolution	97	(1)
Terminating an LLC through merger	97	(2)
Miscellaneous Issues	99
LLC records	99	(1)
Keeping up with LLC changes	100	(1)
Annual fees and reports	100	(1)
Workers' and unemployment compensation	100	(1)
Is an LLP more appropriate?	101	(1)
A final note	101	(2)
APPENDIXES
1. Uniform Limited Liability Company Act	103	(34)
2. State-by-State Directory of Information	137
SAMPLES
Operating Agreement	24	(43)
Form 8832	67	(6)
Form 1065	73	(4)
Schedule K-1	77