LLCS AS PASS-THROUGH ENTITIES

By , March 28, 2018 12:45 pm

Almost all single-member LLCs and multi-member LLCs are pass-through entities.  Under the link below is an interesting discussion of pass-through entities by the Brookings institution.

Here’s the link:  https://www.brookings.edu/research/9-facts-about-pass-through-businesses/

WHEN TWO OR MORE PERSONS ARE WORKING TOGETHER, ARE THEY PARTNERS IN A PARTNERSHIP EVEN IF THEY DON’T KNOW IT?

By , March 21, 2018 9:42 am

The above question is addressed in a recent New York appellate case discussed by Peter Mahler in a post under this link:

https://www.nybusinessdivorce.com/2017/10/articles/partnerships/calling-organization-partnership-doesnt-make-one-not-calling-partnership-doesnt-make-not-one-got/

WHEN SHOULD LLCS HAVE A CORPORATE MANAGEMENT STRUCTURE?

By , March 19, 2018 9:20 am

Under the link below is an excellent article in the ABA’s Business Law Today about the use of corporate management structures in multi-member LLCs.

Here’s the link:

https://businesslawtoday.org/2017/03/its-a-bird-its-a-plane-no-its-a-board-managed-llc/

LAW JOURNAL ARTICLE ABOUT FREEZE-OUT MERGERS UNDER THE MINNESOTA LLC ACT

By , March 15, 2018 10:00 am

The article cited below will primarily interest Minnesota LLC lawyers, but it’s discussion of freeze-out mergers will also be of value to non-Minnesota lawyers.

74-DEC Bench & B. Minn. 16
Bench and Bar of Minnesota
December, 2017
Patrick J. Rooneya Ernest P. Shrivera
Copyright © 2017 by Minnesota State Bar Association; Patrick J. Rooney, Ernest P. Shriver
FREEZE-OUT MERGERS AND THE NEW MINNESOTA LLC ACT
Has the Legislature Removed a Useful Dispute Resolution Tool for LLCs?

LLCS AS PUBLIC COMPANIES

By , March 14, 2018 9:54 am

From time to time, LLC lawyers may have to address the question whether an LLC client of theirs should consider going public.  The article under the link below provides useful background in answering that question.

Here’s the link:  https://businesslawtoday.org/2017/12/secs-challenge-public-company-model-is-unattractive-for-many-businesses/?utm_source=email&utm_campaign=december17-mib

NON-PROFITS AND SINGLE-MEMBER LLCS

By , March 7, 2018 3:43 pm

Below in italics are the citation, title and author’s synopsis of a new law journal article about the use of single-member LLCs by non-profits.

 

52 Real Prop. Tr. & Est. L.J. 153

Real Property, Trust and Estate Law Journal

Fall, 2017

Ellen P. Aprill

Copyright © 2017 by American Bar Association; Ellen P. Aprill

SECTION 501(C)(3) ORGANIZATIONS, SINGLE MEMBER LIMITEDLIABILITYCOMPANIES, AND FIDUCIARY DUTIES

Author’s Synopsis: Tax-exempt organizations, including section 501(c)(3) organizations and their donors, use single member limited liability companies (SMLLCs) for a variety of purposes. Exempt section 501(c)(3) nonprofit organizations–to be referred to as charities–that have a number of facilities, such as schools, hospitals, or real estate investments, may form a separate SMLLC for each of them, primarily to protect other assets from liability. Charities may wish to place an activity with a high risk of environmental or tort liability, such as an overnight summer camp, in its own SMLLC. SMLLCs may be used to isolate unrelated business activities from related activities or risky investments from more traditional ones. They may also be used to isolate risky investments from more conservative ones.

An SMLLC leads a schizophrenic existence. Although an entity under state law, it is disregarded for most purposes under federal tax law. Furthermore, the leading theoretical approaches to LLCs and to nonprofit organizations stand in sharp contrast to each other, particularly regarding the ability to rely on contract. These very different sets of applicable law and theory allow for regulatory arbitrage, which involves taking advantage of inconsistencies between the applicable rules.

LLCs, including SMLLCs, have the choice of being member-managed or manager-managed. To ensure the greatest liability protection, the member of an SMLCC may choose for it to be manager-managed. Some LLC statutes, most importantly Delaware’s statute, permit the SMLCC to waive fiduciary duties. Charities, however, cannot waive fiduciary duties. This divergence in applicable rules regarding fiduciary duties could lead to conflict between the member charity and its SMLCC, such as pursuing activities inconsistent with the charity’s exempt purpose or engaging in campaign intervention. To avoid such conflict, this Article recommends that the IRS issue *154 guidance requiring control of the SMLCC by the charity, as it has done in the context of charitable contributions to a charity’s SMLCC.

RECENT LLC BUSINESS DIVORCE CASES

By , March 5, 2018 10:05 am

Peter Mahler’s post, under the link below, discusses five recent business divorce cases, four of which involve LLCs and all of which contain useful lessons both with respect to the litigation of LLC internal disputes and with respect to the drafting of operating agreements to avoid these disputes.

Here’s the link:

https://www.nybusinessdivorce.com/2018/01/articles/uncategorized/winter-case-notes-llc-deadlock-recent-decisions-interest/

CHANGES IN US FOREIGN TAX RULES UNDER THE TCAJ ACT

By , February 28, 2018 11:31 am

For those of you for whom changes in the above rules are relevant or at least interesting, these changes have been skillfully summarized by Lou Vlahos of the FarrellFritz firm in the post under the following link:  https://www.taxlawforchb.com/2018/01/u-s-taxation-of-foreign-income-after-tax-reform/

POST BY LOU VLAHOS ABOUT IMPACT OF TAX CUTS AND JOBS ACT ON ESTATE TAX

By , February 22, 2018 9:11 am

Here is a link to an excellent post by Lou Vlahos about the impact of the Tax Cuts and Jobs Act on the federal estate tax:

https://www.taxlawforchb.com/2018/01/the-federal-estate-tax-lives-on-but-where-o-death-is-your-sting/

LLC BANKRUPTCIES

By , February 20, 2018 11:25 am

Below are the title and first paragraph of a new law journal article about operating agreement restrictions on LLC bankruptcy filings.

36-DEC Am. Bankr. Inst. J. 26
American Bankruptcy Institute Journal
December, 2017
Feature
Cecily A. Dumas
Pillsbury Winthrop Shaw Pittman LLP
San Francisco
David S. Forsh
Pillsbury Winthrop Shaw Pittman LLP
New York
Copyright © 2017 by American Bankruptcy Institute; Cecily A. Dumas, David S. Forsh

CONSIDERATIONS IN EVALUATING LLC OPERATING AGREEMENT CONSTRAINTS ON VOLUNTARY FILINGS

Corporate entities may voluntarily commence bankruptcy only with valid authorization as determined by applicable state law. Bankruptcy-remote entities (special-purpose entities (SPEs) or special-purpose vehicles) are specifically structured to isolate credit risk to the SPE assets and minimize bankruptcy risk. The limited liability company (LLC) is a form of organization that is often used to deter bankruptcy filings through provisions in the operating agreement such as the requirement for unanimous votes. While recent decisions have invalidated certain such constraints on federal public policy grounds when implemented at a creditor’s request, future decisions could view the various policy considerations differently and reach other conclusions, particularly with other transaction structures.