Summary
Since the issuance of Rev.
Rule 88-76, the limited liability company (LLC) has become the predominant form
for organizing closely held businesses.
New LLC formations now far
outnumber new corporate formations in almost every state.
The development of the first
generation of LLC statutes was both rapid and artificially constrained by
now-defunct tax regulations.
The statutory changes after
the 1996 “check the box” regulations were rapid and in many instances
jerry-rigged onto existing structures.
The first Uniform Limited
Liability Company Act was promulgated in 1996 and essentially represented a
first generation statute.
ULLCA (1996) was adopted in 12
jurisdictions. ULLCA was extensively revised in 2006, also known as the Revised
Uniform Limited Liability Company Act.
ULLCA (2006) is a
comprehensive, state-of-the-art, second generation LLC statute that
incorporates the best of existing state LLC statutes and case law development
from the past 25 years.
The 2011 and 2013 amendments,
enacted as part of the Harmonization of Business Entity Acts project, conformed
the language in ULLCA (2006) with language of similar provisions in the other
uniform unincorporated entity acts and made additional updates and changes.
The following is an outline of
ULLCA (2006), as amended:
• Article 1 contains general
provisions, including: definitions; sections on a LLC’s duration, purposes,
powers, name, and agent for service of process; and three key provisions
concerning the role and effect of the operating agreement and the flexibility
to structure the management and other inter se rights and obligations of the
members and managers in a manner that fits the needs of the specific LLC.
• Article 2 provides for the
formation of limited liability companies and for the public filing of records
pertaining to an LLC.
• Article 3 governs the
relations of members and managers to third parties – i.e. with nonmembers
dealing with or affected by the limited liability company.
• Article 4 states the default
rules for the members’ relationship inter se and with the limited liability
company and provides templates for member-management and managermanagement.
• Article 5 implements the
“pick your partner” principle, which is at the core of the law of
unincorporated business organizations, and delimits the rights of transferees
of members’ distribution of interests and creditors of members seeking to
enforce or foreclosure on a charging order.
• Article 6 states the causes
and consequences of a person’s dissociation as a member of a limited liability
company.
• Article 7 delineates the
causes and consequences of the dissolution of a limited liability company.
• Article 8 provides for
direct and derivative claims by members and for the establishment, conduct, and
judicial review of special litigation committees.
• Article 9 governs foreign
limited liability companies.
• Article 10 governs organic
reorganizations – mergers, interest exchanges, conversions, and domestications.
• Article 11 contains
miscellaneous provisions, including a section providing transition rules for
pre-existing limited liability companies.
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