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Table of Contents
Chapter 1
Introduction to LLCs
§1:10 Definition
§1:20 History
§1:30 The LLC Comes to the United States
§1:60 Current Classification Regulations
§1:70 Current State Issues
§1:80 Glossary
§1:90 Separate Entity Case Law
Chapter 2
Using LLCs
§2:10 Comparisons With Other Entities
§2:20 General Partnership Compared
§2:30 Limited Partnership Compared
§2:40 Registered Limited Liability Partnership Compared
§2:50 S Corporation Compared
§2:60 Regular Corporation Compared
§2:70 Corporation Tax Comparison: Employment Taxes
§2:80 Different Uses for the LLC
§2:81 Operating an LLC as a Corporation
§2:82 LLC Election to Become a Corporation
§2:83 Sample Provisions for an LLC to Become an S Corporation for Tax
Purposes
§2:90 Case Studies
Chapter 3
Considerations in Using the LLC
§3:10 Knowing the Client
§3:20 Ethical Considerations
§3:30 Conflicts of Interest
§3:40 Former Clients
§3:50 Privilege and Confidentiality
§3:60 Management Misconduct
§3:70 Multiple Representation
§3:80 The Office "Early Warning System"
§3:90 Criminal Law Considerations
§3:100 Securities Law Considerations
§3:110 Howey Approach
§3:120 Risk Capital Approach
§3:130 Stock Characteristic Approach
§3:140 State Statutory Grounds Approach
§3:150 Partnership Guidelines for LLCs
§3:160 Federal and State Securities Laws
§3:170 Uniform Securities Act
§3:180 Registration of State Securities
§3:185 LLC Case Law—Securities
§3:190 Ownership Interest
§3:200 Concurrent Ownership
§3:210 Tenants-in-Common
§3:220 Joint Tenants with Rights of Survivorship
§3:230 Tenancy by the Entireties/Community Property
§3:240 Concurrent Ownership and 26 C.F.R. § 1-301.7701 Classification
Issues
§3:250 Concurrent Ownership Interests and LLC Voting Interests
§3:260 Concurrent Ownership and State Law Events of Dissolution
§3:270 Concurrent Ownership and Creditors
§3:275 Use of Trusts
§3:280 Conversion from Existing Entities
§3:285 Using LLCs in Corporate Mergers
§3:290 Preliminary Considerations
§3:300 Conversion Procedures
§3:305 LLC Case Law—Conversion
§3:310 Forum Shopping
§3:320 Miscellaneous Considerations
Chapter 4
Forming the LLC
§4:10 Role of the Advisor
§4:20 Pre-Formation Issues
§4:30 Factors to Consider Pre-Formation
§4:40 Organic Documents
§4:45 Signing of Articles of Organization
§4:50 Members
§4:51 Non Member Contractual Rights
§4:55 Protecting the Minority Owner
§4:60 Ownership Forms
§4:70 Capital Structure and Contributions
§4:71 The LLC as an Exempt Organization
§4:72 LLCs as Joint Venture Vehicles Under IRS 501[c]
§4:73 Formation of the LLC as an Exempt Organization
§4:80 Management
§4:90 Company Name
§4:100 Trade Name Protection
§4:110 Duration
§4:120 Out-of-State Operation
§4:130 Business Purpose
§4:140 Registered Agent and Office
§4:150 Secretary of State Rules, Regulations or Instructions
§4:160 Effective Filing Date
§4:165 Professional LLCs
§4:166 Formation Choices—Non-Tax Considerations
§4:167 Formation Choices—Tax Considerations
§4:170 Pre-Formation Case Law
§4:171 Who Is the Client?
§4:172 Intent to Form
§4:173 Integration of Organic Documents
§4:174 Purpose
§4:175 Effect of Filing Articles
§4:176 Formation Requirements
§4:177 Professional LLCs
§4:178 Pre-Formation Liability
§4:179 Joint Ventures with Exempt Organizations
§4:180 Formation Choices—Tax Considerations
Chapter 5
Articles of Organization
§5:10 Introduction
§5:20 Statutory Mandates
§5:25 Terminology
§5:30 Drafting Issues
§5:40 Default Rules
§5:50 Compliance With State Statutes and Regulations
§5:60 Privacy Concerns
§5:70 Purpose Clause
§5:80 Voting
§5:90 Opt-In Features
§5:95 Step-by-Step Article Drafting
§5:100 Articles Checklist
§5:110 The Opt-In Checklist
§5:115 Signing the Articles of Organization
§5:120 Sample Clauses and Completed Articles
§5:125 Drafting Tree
§5:130 Filing Articles of Organization
§5:140 Amendments
§5:150 Mandatory Amendment
§5:160 Permissive Amendment
§5:170 Uniform Act
§5:180 Forms
§5:190 Formation Case Law
Chapter 6
Operating Agreements
§6:10 Introduction
§6:20 Drafting Issues
§6:30 Avoiding Abuse by Majority Owners
§6:40 Avoiding Future Management Problems
§6:50 Avoiding Potential Operational Deadlock
§6:60 Distribution of Profit and Allocations of Tax Gains and Losses
§6:70 Voting Rights and Percentages
§6:80 Divorce and Community Property
§6:90 Arbitration and Mediation
§6:100 Default Rules
§6:105 Foreign or Out-of-State Operation.
§6:110 Opt-In Features
§6:120 Opt-In Checklist
§6:130 Form and Content of the Operating Agreement.
§6:135 Preparing the Operating Agreement/Management Provisions
§6:140 Drafting Outline
§6:145 Operating Agreement as Contract
§6:150 Maintenance of the Operating Agreement
§6:160 Withdrawal of Member
§6:170 Tax Provisions in Operating Agreements
§6:171 Tax Allocations Can Affect the Economic Consequences of the Members
§6:172 Distributions
§6:173 Self-Employment Taxes
§6:174 Capital and Profits Interest
§6:175 Special Allocations, Special Distributions, and Contributed
Property Issues
§6:176 Elections Under I.R.C. §754
§6:177 Tax Matters Member
§6:180 Operating Agreement
§6:190 Forms on CD: Operating Agreements
Chapter 7
Uniform Limited Liability Company Act
§7:10 Introduction
§7:15 LLC as Separate Entity
§7:20 Key Provisions of the Uniform Act
§7:30 Articles of Organization
§7:40 "Opt-In" Feature
§7:50 Name
§7:60 Purpose and Powers
§7:70 Duration
§7:80 Term Company
§7:90 Management
§7:95 One-Member LLCs Permitted
§7:100 Registered Office and Agent
§7:110 Other Matters
§7:120 Filing
§7:130 Amendment of Articles
§7:140 The Operating Agreement
§7:150 Default Rules: A Uniform Act Checklist
§7:160 Events of Dissociation
§7:170 Assignment of Ownership Interest
§7:180 Continuation
§7:190 Agency
§7:200 Party in Interest
§7:210 Limited Liability
§7:220 New Members
§7:230 Records
§7:240 Annual Report
§7:250 Conversion and Merger
§7:260 Distributions and Allocations
§7:270 Disclosure of Members
§7:280 Creditor's Rights
§7:290 Foreign LLCs
§7:295 Derivative Actions
§7:300 The Future of the Uniform Act
§7:400 Uniform Act Case Law
Chapter 8
Operations
§8:10 Introduction
§8:15 Step-by-Step Procedure for Organizational Meeting
§8:20 Organizational Meeting
§8:25 Annual Check-Up
§8:30 Appointment of Committees
§8:40 Corporation as Manager
§8:50 Officers
§8:60 Meetings of Members or Management
§8:70 Notice Requirements
§8:80 Voting
§8:90 Voting Trust and Pooling Agreements
§8:100 Voting Trust Defined
§8:110 Pooling Agreements Defined
§8:120 Classification Issues in LLC Block Voting
§8:130 Examples of Block Voting Arrangements
§8:140 Specific LLC Operational Issues
§8:150 Liability
§8:160 Piercing the LLC Veil
§8:170 Rights and Remedies of Creditors of Members
§8:180 Management
§8:190 Fiduciary Duty
§8:200 Agency
§8:210 Ownership Certificates
§8:211 Transfer of LLC Interest
§8:215 Personal Residences or Vacation Home LLCs
§8:220 Reorganization, Dissolution and Reinstatement
§8:230 Withdrawal of Members
§8:240 Merger, Consolidations and Acquisitions
§8:250 Pre-Merger Notification
§8:251 State Merger Provisions
§8:260 Terminating the LLC
§8:270 Conversion from Existing Entities
§8:280 Preliminary Considerations
§8:290 Conversion Procedures
§8:291 Conversion of General Partnership to LLC
§8:292 Conversion of Limited Partnership to LLC
§8:293 Conversion of General Partners of a Limited Partnership into a LLC
§8:294 Conversion of Professional Partnership to LLC
§8:300 Records
§8:310 Recommended Items
§8:320 Records
§8:330 LLC Documentation
§8:340 Members' Access to Records
§8:350 Annual Report
§8:360 Contributions of Capital, Distribution of Profits and Return of
Capital
§8:370 Transfer of Ownership Interest
§8:380 Pledge of Ownership Interest as Security for Debt
§8:390 Buy-Sell Agreements
§8:400 Types of Buy-Sell Agreements
§8:410 Enforceability of Buy-Sell Agreements
§8:420 Funding of Buy-Sell Agreements
§8:430 Valuation of Buy-Sell Agreements
§8:440 Drafting the Buy-Sell Agreement
§8:445 Foreign LLCs
§8:450 Business Operations Outside the Home State
§8:460 Effect of Failure to Obtain Certificate of Authority
§8:470 Liability Issues in Non-Home State Operations
§8:480 The Single-Member LLC
§8:490 Single-Member Taxation
§8:500 Disregarded Single-Member LLC
§8:510 Single-Member LLC Issues
§8:520 Single-Member Operating Agreement
§8:530 Single-Member Liability Protection
§8:540 Operations Case Law
§8:600 Buying and Selling LLCs
§8:610 Methods of Purchase
§8:620 Steps in LLC Purchase Process
§8:630 Operations Case Law
Chapter 9
Asset Protection and Estate Planning
§9:00 Introduction
§9:10 Asset Protection
§9:15 Asset Protection Strategy
§9:20 Traditional Approaches to Asset Protection
§9:21 Offshore Uses
§9:30 Case Studies
§9:40 Case Study 1 (Overthrust Joint Ventures)
§9:50 Case Study 2 (Paradise Valley Ranch)
§9:60 Case Study 3 (Smedley and Smedley-Lopez Law Office)
§9:70 Case Study 4 (Good Times Auto Dealer)
§9:80 Estate and Family Succession Planning
§9:90 Discussion
§9:100 State LLC Acts
§9:110 The Alaska Approach
§9:120 The Uniform Act Approach
§9:130 The Wyoming Approach
§9:131 Modified Wyoming Close Approach
§9:140 The New Mexico Approach
§9:150 Estate Valuation Discounts
§9:160 Drafting Solutions
§9:170 The Alaska Approach
§9:180 The Uniform Approach
§9:190 The Wyoming Approach
§9:191 Modified Wyoming Close Approach
§9:200 Other Uses of Assignees in Estate Planning
§9:210 LLC Control and Estate Planning
§9:220 Ancillary Probate and LLCs
§9:230 Family LLCs and Income-Splitting
§9:240 Annual Gifting
§9:300 Asset Protection/Fraudulent Conveyance
§9:310 Asset Protection Articles
§9:320 LLC Estate Planning Case Law
Chapter 10
International
§10:10 The International LLC
§10:20 Classification of International LLCs
§10:30 Taxation of an International LLC
§10:40 The International Hybrid LLC
§10:50 International LLC Tax Considerations
§10:60 Transfers to International LLCs
§10:70 Federal Tax Treatment
§10:80 10-50 Corporations
§10:90 Foreign Tax Credits
§10:100 Tax-Free, Foreign-Owned U.S. LLCs
§10:110 Tax Returns
§10:120 U.S. Income Tax Withholding
§10:130 Withholding Requirements
§10:140 Non-Effectively Connected Income
§10:150 Effectively Connected Income
§10:170 Immigration and LLCs
§10:180 Treaty Trader/Investor LLC
§10:190 International LLC Forms
Chapter 11
Litigation
§11:10 Introduction
§11:20 Step-by-Step Access to LLC Records
§11:30 Validity of LLC's Existence
§11:40 Single-Member LLCs
§11:45 Articles’ Purpose Clause
§11:50 Mandatory Amendment to Articles of Organization
§11:60 Failure to Follow Documents
§11:70 Threshold Issues
§11:80 Formation
§11:90 Continuing Validity
§11:100 Member Definition
§11:110 Jurisdiction for Federal Diversity
§11:115 Service of Process
§11:120 Theories of Recovery
§11:125 Appropriate Court
§11:130 Piercing the LLC Veil
§11:140 State Approaches/Cases
§11:150 Creditors Rights
§11:160 Involuntary Bankruptcy
§11:170 LLC as Bankruptcy Debtor
§11:180 Treatment
§11:190 Dissolution Litigation
§11:200 Liquidation Procedures
§11:210 Loss of Liability
§11:220 Continuation
§11:230 Recovery Theories
§11:240 Derivative LLC Suits
§11:250 Establishing an Event of Dissolution
§11:255 Dissociation
§11:260 Defenses
§11:270 Capitalization Issues
§11:280 Characterization of Member Contributions
§11:290 Parties and Standing
§11:300 Recovery
§11:310 Defenses
§11:320 Amount of Recovery
§11:330 Case Law
Chapter 12
Taxation
§12:10 Federal Tax Considerations
§12:20 Classification
§12:30 Check-the-Box Regulations
§12:40 Elective Classification System
§12:50 Late Classification Filing
§12:60 Key Definitions
§12:70 Classification Process
§12:80 Taxpayer I.D. Numbers in Multi-Member LLCs
§12:90 Election Classification Process
§12:100 Single-Member Taxation
§12:110 Introduction
§12:120 Single-Member LLC Taxpayer Identification Numbers
§12:121 Single-Member LLC May Affect Basis in Another LLC
§12:130 Conversion to Single-Member LLC
§12:140 Conversion from Single-Member LLC to Multi-Member
§12:150 Single-Member LLCs and Marital Property/Tenancy by the Entireties
and Community Property
§12:170 LLC Partnership Taxation
§12:180 In General
§12:190 Taxation of Member Contributions
§12:200 Tax Allocations with Respect to Contributed Property
§12:201 Allocation of Deductions Attributable to Contributed Property
§12:202 Allocation of Deductions of Appreciated Property and Other
Consequences after Admitting a New Member
§12:203 Allocation of Income and Deductions
§12:210 Pass-Through Taxation
§12:220 Basis and Distribution
§12:230 Effect of Debt on Member's Basis
§12:240 Allocation of Partnership Tax Items
§12:250 Termination
§12:260 Member Withdrawal and Retirement
§12:270 Section 734 and Section 743 Basis Adjustment
§12:280 Application of At-Risk Rules
§12:290 Members Affected
§12:300 Suspended Losses
§12:310 Real Estate Exception
§12:320 Passive Loss Restrictions
§12:330 [Reserved]
§12:340 General Rule
§12:350 Material Participation
§12:360 General Rule
§12:370 Application to Limited Partners
§12:380 Application to Members and Managers
§12:390 Audits
§12:400 Formation and Operation Issues
§12:410 Contribution of Appreciated Property
§12:420 Classes of Ownership
§12:430 Securities
§12:440 Distributions
§12:450 Allocations
§12:460 Deductions of LLC Losses by Members
§12:470 Limitations on Deductions
§12:480 Merger, Consolidation and Conversion Issues
§12:490 Overview
§12:500 Partnership Conversion
§12:510 Conversion of Limited Partnership to LLC
§12:520 Professional Partnership Conversion
§12:530 Corporation Conversion
§12:540 Dissolution Issues
§12:550 Continuation or Winding Up
§12:560 Application to Managers
§12:570 Tax Matters Partner
§12:580 Designation
§12:590 Power to Represent LLC
§12:600 Accounting Methods; Taxable Year
§12:610 Overview
§12:620 Self-Employment Tax Issues
§12:630 Single-Member Employment Taxes
§12:640 Multiple-Member LLCs Employment Taxes
§12:650 Estate and Gift Tax Valuation Discounts
§12:660 Family LLCs and Income-Splitting
§12:710 Employer Trust Funds
§12:720 Overview
§12:730 Definition of "Responsible Person"
§12:740 Steps to Minimize Liability
§12:750 Single-Member LLCs and Responsible Person
§12:760 Levying on Assets of LLC/Collection Activity
§12:770 The LLC as an Exempt Organization
§12:780 Use of the LLC as an Exempt Organization
§12:790 Anti-Abuse Regulations
§12:800 Overview
§12:810 State Tax Considerations
§12:820 Overview
§12:900 Use of LLCs in Like-Kind Exchanges
State & Territory Specific Chapters
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Guam
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Index
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