For those of you who follow New Hampshire tax developments, here is an excellent current overview by Tax Notes concerning current negotiations between New Hampshire’s governor and the New Hampshire Legislature concerning New Hampshire business taxation as applicable to LLCs and other entities.
The new post by Peter Mahler under the link below discusses the above subject. In my view, all well-drafted LLC operating agreements should provide that if a member is expelled from the LLC by the other members for misconduct, the buy-out price paid to the expelled member, if any, should reasonably reflect any decrease in the value of the LLC caused by the misconduct. All of the model operating agreements in my Wolters Kluwer LLC book so provide. However, Peter’s post makes clear that any such provision must be carefully drafted and may generate litigation.
Here is the link:
A growing number of states are adopting “junction box statutes” which provide uniform cross-entity rules for all of the various types of entities available under their laws with respect to entity transactions such as name reservations, mergers, conversions and interest exchanges. Pennsylvania has just adopted such a statute, effective July 1, 2015. Here’s a link with a post from the law firm of McCarter & English about the new statute:
The implied contractual covenant of good faith and fair dealing is a rule of contract interpretation that underlies and governs every LLC operating agreement. The link below is to a recent post in the Morris James LLP Delaware litigation blog about an LLC case called Charlotte Broadcasting LLC. This post should make it clear to drafters of operating agreements in Delaware (and perhaps in many other states) that giving an LLC member or manager “absolute discretion” in handling LLC matters specified in an operating agreement won’t override the implied covenant.
Here’s the link:
Under the link below is a brief but interesting current blog post about the history of discounts and about current alleged threats to their continued validity. The first post in the blog is the relevant one, but you may also find that the older posts are also of interest to you.
Here’s the link:
I’ve just published the article under the link below in a number of New Hampshire journals, and the law governing the general partnerships and LLCs discussed in the article is New Hampshire law. However, I think the main points under the article apply in most or all other U.S. jurisdictions.
The basic point in the article is this: If you’re operating your business as a general partnership, convert it to an LLP or an LLC.
Here’s the link:
Here is a cite, which I received from a WestLaw Alert, to a new law journal article on some key issues in structuring the federal tax provisions in the operating agreements of multi-member LLCs taxable as partnerships:
Polyatskiy, STRUCTURING LLC WITH CAPITAL INTEREST, PROFITS INTEREST, NCO, COMPENSATORY OPTION, AND CONVERTIBLE DEBT AND EQUITY, 27 DCBA Brief 32 (July, 2015).
I haven’t been able to find a link to the article, but if I do, I’ll post it.
The core document in any LLC formation practice is, of course, the LLC’s operating agreement. The first thing clients and other readers will see in the agreement will be its title.
You form an LLC under your state’s LLC act for individuals X, Y and Z under the Delaware Limited Liability Company Act. XYZ will be member-managed and it will be taxable as a partnership. What guidelines should you apply in fashioning a title for its operating agreement?
- Most LLC lawyers will entitle XYZ’s operating agreement “Operating Agreement of XYZ, LLC.” Period. This isn’t a good title.
- The five most important things about any LLC are its name, the LLC act under which it has been formed, its ownership structure, its management structure and its federal tax structure. If your clients and other readers of XYZ’s operating agreement know those five things upfront, this will give them a powerful basis for understanding the terms and conditions in the body of the agreement. A good operating agreement title will tell them all five things in one fell swoop.
- Thus, the title of XYZ’s operating agreement should read as follows:
OPERATING AGREEMENT OF XYZ, LLC
A MEMBER-MANAGED THREE-MEMBER
DELAWARE LIMITED LIABILITY COMPANY
TAXABLE AS A PARTNERSHIP
Every LLC lawyer needs to have a detailed understanding of the meaning and practical effect of the LLC statutory charging order provisions under each of the LLC acts under which the lawyer forms LLCs. The blog post under the link below deals with a recent Virginia charging order case, but it contains one of the best brief explanations of LLC charging order law and practice I’ve yet encountered and its relevance extends far beyond Virginia.
Here’s the link:
For NY and non-NY lawyers for whom ideas about NY LLCs may be useful: I use WestLaw to keep me up to date about law journal articles about LLCs. Below are five articles about NY LLCs from the current issue of the Touro law journal.
- Matthew J. Moisan, The New York LLC Act at Twenty: A Look at the Publication Requirement in the New York Limited Liability Company Law, 31 Touro L. Rev. 403 (2015).
- Meredith R. Miller, The New York LLC Act at Twenty: The New York Limited Liability Company Law at Twenty: Past, Present & Future, 31 Touro L. Rev. 439 (2015).
- Jack Graves & Yelena Davydan, The New York LLC Act at Twenty: Fiduciary Duties of LLC Managers: Are They Subject to Prospective Waiver under the New York LLC Statute? 31 Touro L. Rev. 477 (2015).
- Kristen Curley, The New York LLC Act at Twenty: Achieving the Purpose of Federal Diversity Jurisdiction: Why Courts Should Abandon the Current Treatment of LLCs Under Section 1332, 31 Touro L. Rev. 411 (2015).
- Miriam R. Albert, The New York LLC Act at Twenty: Is Piercing Still “Enveloped in the Midst of Metaphor”? 31 Touro L. Rev. 411 (2015).