By , September 22, 2017 7:00 am

The issue of oppression of minority LLC members by majority members is a key issue in drafting any operating agreement for multi-member LLCs.  LLC lawyers can learn a lot about this issue from studying corporate oppression cases.  Under the  link below is an excellent discussion by Peter Mahler concerning a New York case involving truly draconian shareholder oppression.

Here’s the link:  http://www.nybusinessdivorce.com/2017/08/articles/family-owned-businesses/award-oppressive-conduct-majority-shareholder-goes/


By , September 19, 2017 10:23 am

I’m leery of using foreign LLC acts to protect the assets of individuals and families residing in the U.S.   I think doing so can create far more problems than it solves.  But many LLC lawyers disagree with me.

Below are the citation, title and first paragraph of a very clear and thoughtful new law journal article about recent amendments to the Nevis LLC Act.

31-OCT Prob. & Prop. 56
Probate and Property
September/October, 2017
Gary A. Forster
Copyright © 2017 by American Bar Association; Gary A. Forster


The Nevis Limited Liability Company (Amendment) Ordinance (NLLCAO), 2015 (the “New Ordinance”) strengthens and clarifies the prior Nevis Limited Liability Company Ordinance (NLLCO) of 1995 (“Prior Ordinance”). Among the improvements made by the New Ordinance are the addition of (1) fraudulent transfer provisions governing assets contributed to a Nevis LLC, (2) language prohibiting enforcement of foreign judgments against member equity, and (3) enhanced limitations on creditor remedies. This article explores several significant aspects of the New Ordinance.


By , September 13, 2017 11:34 am

The handling of LLC break-ups because of member deadlocks is a key area of LLC practice.  Set forth below are the title, citation, and and an excerpt of the introduction to an article about business entity break-ups by judicial dissolution.  The article is focused on NY law, but it has important implications in every other state.

38 Cardozo L. Rev. 1541
Cardozo Law Review
April, 2017
Roxanne Makoff
Copyright © 2017 by Yeshiva University; Roxanne Makoff

This Note addresses the issues that arise when member relations in New York LLCs become irreconcilably fractious and require judicial intervention. Because New York’s LLC Law does not provide exit-rights, parties who wish to sever relations with other members must either draft an operating agreement that provides for withdrawal or expulsion, negotiate an exit-right under hostile conditions, or persuade a court to order the remedy in the context of a judicial dissolution action.  Under current New York case law, disagreement–deadlock–between LLC members is not an independent ground for judicial dissolution. Rather, the petitioner must convince the court that the LLC is unable to practicably achieve its purpose or is financially unfeasible. The New York standard, which rejects the application of corporate and partnership principles to LLCs, gives extreme deference to the operating agreement and is more stringent than the same standard in Delaware, whose Limited Liability Company Act (Delaware LLC Act) is, like New York’s LLC Law, also grounded on principles of freedom of contract. Faced with an increasing number of petitions for judicial dissolution due to irreconcilable deadlock between LLC members, New York judges are finding creative ways to circumvent the current standard in order to grant dissolution.

This Note argues that New York should replace its current, flawed approach with a standard similar to that of Delaware, which permits deadlock as a ground for judicial dissolution. Under the Delaware standard, New York courts could order judicial dissolution when the relations between the parties have become so hostile that continuing to work together is futile. The Delaware standard, which can aptly be described as “deadlock-plus,” is desirable because it does not give judges unfettered freedom to order judicial dissolution. Rather, under the “deadlock-plus” standard the parties must show deadlock plus the nonexistence of an enforceable and adequate exit-mechanism within the four corners of the operating agreement, or, if an acceptable exit-mechanism is indeed provided for in the operating agreement, the continuation of the LLC is financially unfeasible. Ultimately, the “deadlock-plus” standard, as evidenced by Delaware case law, preserves principles of freedom of contract while promoting functioning business relationships.


By , September 11, 2017 11:12 am

LLC lawyers, like all other business lawyers, find themselves dealing from time to time with agreements to negotiate, as entered into by their clients or other persons.  The post under the link below discussed a recent Delaware case holding the agreement to negotiate in issue in that case to be invalid.  The case seems to me to have implications in most or all non-Delaware jurisdictions

Here’s the link:  https://delawarechancery.foxrothschild.com/case-summaries/chancery-denies-relief-under-agreement-to-negotiate/?utm_source=Fox+Rothschild+-+Delaware+Chancery+Law+Blog&utm_campaign=96e6e7ad79-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_86821ff155-96e6e7ad79-70733165


By , September 7, 2017 9:13 am

An important issue in drafting operating agreements for multi-member LLCs is whether these agreements should provide for dispute resolution among the members and managers by litigation or by arbitration.  The post under the link below is a brief but excellent overview about arbitration.



By , September 5, 2017 9:18 am

Roughly 70% of all LLCs are single-member LLCs whose members are individuals.  Thus, single-member LLCs are central to any LLC practice.  You literally can’t know too much about them.  Below are a citation to and the introductory paragraphs of an important law journal article about single-member LLCs:

36 Va. Tax Rev. 323
Virginia Tax Review
Spring, 2017
Philip Manns, Jr., Timothy M. Todd
Copyright © 2017 by The Virginia Tax Review Association; F. Philip Manns, Jr., Timothy M. Todd

The single-member LLC (SMLLC) is ubiquitous. Despite its ubiquity, the Internal Revenue Code (Code) does not squarely address its tax consequences nor even contemplate its existence. This article examines the tax lifecycle of an SMLLC through its formation, operation, and exit event (e.g., sale, gift, or deathtime transfer).

This article identifies and isolates a tax asymmetry that arises from the U.S. Tax Court’s decision in Pierre v. Commissioner. Despite the check-the-box regulations, which disregard the SMLLC, Pierre regards the SMLLC for federal gift tax purposes. This asymmetry has several tax consequences, including a potential prophylactic immunization of transfers to SMLLCs against application of section 2036–which claws back into the federal gross estate transfers when the transferor retains an interest–in the family partnership context.

Consequently, this article demonstrates that the SMLLC can be used to blunt the negative effects of section 2512 (a gift tax provision), section 1015 (an income tax provision), and section 2036 (an estate tax provision). In effect, due to the Pierre asymmetry, the SMLLC is the ideal initial entity in a gifting strategy.


By , August 31, 2017 8:59 am

The case discussed in the post under the attached link concerns the payment of compensation to shareholders of close corporations, and the case is a Delaware case.  However, the case applies equally to the payment of manager compensation to members of multi-member LLCs.

Here’s the link:  http://www.nybusinessdivorce.com/2017/08/articles/delaware/navigating-rocky-shoals-safe-harbors-board-members-fix-compensation/


By , August 30, 2017 9:11 am

For those interested in New Hampshire taxation:

2017 Business Tax Law Changes


Date July 21, 2017

A Technical Information Release is designed to provide immediate information regarding tax laws administered by the Department or the policy positions of the Department as a service to taxpayers and practitioners. A Technical Information Release represents the position of the Department on the limited issues discussed herein based on current law and Department interpretation. For the current status of any tax law, practitioners and taxpayers should consult the source documents (i.e., Revised Statutes Annotated, Rules, Case Law, Session Laws, etc.). Questions should be directed to Taxpayer Services at (603) 230-5920.

 The purpose of this Technical Information Release (TIR) is to provide taxpayers and tax practitioners with a convenient reference guide to several of the major Business Profits Tax (BPT) and Business Enterprise Tax (BET) (collectively “Business Tax”) law changes that were made during the 2017 Legislative Session by the New Hampshire General Court. This TIR is for informational purposes only and is intended to provide a summary or synopsis of enacted legislation. It is not intended to be relied upon as full and complete text or as a substitute for the actual state law. Please refer to the applicable statute and rules to determine how this information applies to specific persons or situations.


House Bill 517 (Chapter 156, Sections 213-217, Laws of 2017) reduces the rate of the RSA 77-A BPT and the RSA 77-E BET.

For taxable periods ending on or after December 31, 2019, HB 517 reduces the BPT rate to 7.7% and the BET rate to .6%.

For taxable periods ending on or after December 31, 2021, HB 517 reduces the BPT rate to 7.5% and the BET rate to .5%.

Pursuant to existing law, for taxable periods ending on or after December 31, 2018, the BPT rate is reduced to 7.9% and the BET rate is reduced to .675%, contingent upon combined unrestricted general and education trust fund revenues of $4.64 billion being collected during the biennium ending June 30, 2017 as reported in the audited comprehensive annual financial report performed pursuant to RSA 21-I:8, II(a). On or about December 31, 2017, the Legislative Budget Assistant will report on whether revenue collections have met the threshold. The Department will issue an additional Technical Information Release at that time advising taxpayers of the applicable BPT and BET rate for taxable periods ending on or after December 31, 2018. However, based upon preliminary unaudited revenue figures, the $4.64 billion dollar threshold set forth in RSA 77-A:2, IV and RSA 77-E:2, IV appears likely to have been met.

For taxable periods ending on or after December 31, 2016, the BPT rate is 8.2% and the BET rate is .72%.


House Bill 517 (Chapter 156, Section 218, Laws of 2017) amends RSA 77-A:3-a to provide that a taxpayer may calculate expense deductions pursuant to Internal Revenue Code (IRC) § 179 not to exceed $500,000 for property placed in service on or after January 1, 2018. For property placed in service from January 1, 2017 through December 31, 2017, the maximum IRC § 179 deduction is $100,000. For property placed in service prior to January 1, 2017, the maximum IRC § 179 deduction is $25,000.


House Bill 517 (Chapter 156, Section 229, Laws of 2017) amends RSA 77-A:1, XX to conform the BPT to the IRC of 1986 in effect on December 31, 2016 for taxable periods beginning on or after January 1, 2018, subject to the adjustments required pursuant to RSA 77-A:3-b. To determine the IRC applicable to taxable periods beginning prior to January 1, 2018, please reference RSA 77-A:1, XX.

Additional information about the BPT can be obtained by referencing RSA 77-A and N.H. Code of Admin. Rules, Rev 300 and additional information about the BET can be obtained by referencing RSA 77-E and N.H. Code of Admin. Rules, Rev 2400, which can both be accessed on the Department’s website.

Individuals who need auxiliary aids for effective communication in programs and services of the Department of Revenue Administration are invited to make their needs and preferences known to the N.H. Department of Revenue Administration, 109 Pleasant Street, Concord, NH 03301 or by contacting them at (603) 230-5000.


By , August 28, 2017 11:36 am

An important new movement in corporation law has involved “benefit corporations,” which, by statute, may balance shareholder needs with the public good without breaching management fiduciary duties to shareholders.  The movement is also taking hold in the LLC world.   Below are the citation and first paragraph of a new law journal article about benefit LLCs:

University of Cincinnati Law Review
June, 2017
Twenty-Ninth Annual Corporate Law Center Symposium: Corporate Social Responsibility and the Modern Enterprise
Haskell Murray
Copyright © 2017 by the University of Cincinnati; J. Haskell Murray

Over the past decade, states have passed a plethora of social enterprise statutes, allowing for the creation of for-profit businesses with express and mandatory social purposes. These social enterprise forms include low-profit limited liability companies (L3Cs), benefit corporations, public benefit corporations, social purpose corporations, and benefit LLCs. Among these forms, the benefit LLC may have received the least attention in the legal academic literature, with research uncovering no full academic articles focused on the entity form. While benefit LLC laws have only been passed in two states– Maryland and Oregon–the form has experienced the highest per state formations of any of the social enterprise forms.1 The benefit LLC form has been relatively popular compared to other social enterprise forms, but that relative popularity does not mean that the legal entity form is wise.


By , August 15, 2017 12:05 pm

Under the link below is an excellent discussion by Dan Kleinberger, a leading LLC scholar, about the pros and cons of forming Delaware LLCs.  Here’s the link: