Your Limited Liability Company By Attorney Anthony Mancuso An Operating Manual 5th Edition Nolo’s Legal Updater We’ll send you an email whenever a new edition of this book is published! Sign up at www.nolo.com/legalupdater. Updates @ Nolo.com Check www.nolo.com/update to nd recent changes in the law that affect the current edition of your book. Nolo Customer Service To make sure that this edition of the book is the most recent one, call us at 800-728-3555 and ask one of our friendly customer service representatives. Or nd out at www.nolo.com. The law changes, but Nolo is on top of it! We offer several ways to make sure you and your Nolo products are up to date: always up to date 2 1 3 We believe accurate, plain-English legal information should help you solve many of your own legal problems. But this text is not a substitute for personalized advice from a knowledgeable lawyer. If you want the help of a trained professional—and we’ll always point out situations in which we think that’s a good idea—consult an attorney licensed to practice in your state. please note Your Limited Liability Company By Attorney Anthony Mancuso An Operating Manual 5th Edition FIFTH EDITION JULY 2007 Editor CATHERINE CAPUTO Proofreader PAUL TYLER CD-ROM Preparation ELLEN BITTER Index MEDEA MINNICH Printing DELTA PRINTING SOLUTIONS, INC. Mancuso, Anthony. Your limited liability company : an operating manual / Anthony Mancuso. 5th ed. p. cm. ISBN-13: 978-1-4133-0651-4 (pbk.) ISBN-10: 1-4133-0651-9 (pbk.) 1. Private companies United States Popular works. I. Title. KF1380.Z9M3643 2007 346.73'0668 dc22 2007002245 Copyright © 2000–2007 Anthony Mancuso. ALL RIGHTS RESERVED. PRINTED IN THE USA. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Reproduction prohibitions do not apply to the forms contained in this product when reproduced for personal use. Quantity sales: For information on bulk purchases or corporate premium sales, please contact the Special Sales Department. For academic sales or textbook adoptions, ask for Academic Sales. Call 800-955-4775 or write to Nolo, 950 Parker Street, Berkeley, CA 94710. Acknowledgments Many thanks to Cathy Caputo for her invaluable assistance in organizing and editing this edition of this book. anks also to Jaleh Doane and all of Nolo’s Production Department for their great design and layout work and to André Zivkovich and Ellen Bitter in Nolo’s Applications Development Department for making all the forms accessible on the CD-ROM. About the Author Anthony Mancuso is a corporations and limited liability company expert. He graduated from Hastings College of Law in San Francisco and is an active member of the California State Bar. He performs research, writes books, and programs software in the fields of corporate and LLC law, and studies advanced business taxation at Golden Gate University in San Francisco. He also has been a consultant for Silicon Valley EDA (Electronic Design Automation) companies working on C++ software documentation automation. Tony is also the author of Nolo’s bestselling titles on forming and operating corporations (both profit and nonprofit) and limited liability companies, including Incorporate Your Business, How to Form a Nonprofit Corporation (national and California editions), Form Your Own Limited Liability Company, e Corporate Records Handbook, and LLC or Corporation? He researched, wrote and programmed LLCMaker and Incorporator Pro software programs, published by Nolo, which generate state-by-state articles and other forms for organizing corporations and LLCs. His books and software have shown over a quarter of a million businesses and organizations how to form an LLC or corporation. He also is a licensed helicopter pilot and performs as a guitarist in various musical idioms, including jazz and blues. Table of Contents Your LLC Companion 1 LLC Documents Organize Your LLC Records 6 Basic LLC Documents 6 2 Using Meetings, Minutes, and Written Consents ree Ways to Make and Document Formal LLC Decisions 12 How Your Management Structure Affects Decision-Making Requirements 13 Questions and Answers About LLC Meetings, Minutes, and Written Consents 14 3 Steps to Take Before Holding a Meeting Types of LLC Meetings 22 Steps to Prepare for a Meeting 24 4 How to Hold an LLC Meeting Step 1. Call and Provide Notice of the Meeting 50 Step 2. Prepare an Agenda for the Meeting 50 Step 3. Prepare Meeting Resolutions in Advance 51 Step 4. Get Together to Hold the Meeting 51 Step 5. Hold a Meeting in Cyberspace If You Have the Equipment and Know-How 51 Step 6. Appoint a Chairperson and Secretary 52 Step 7. Chairperson Calls the Meeting to Order 53 Step 8. Secretary Determines Whether a Quorum Is Present 53 Step 9. Secretary Reads Minutes or Summarizes Business of Last Meeting 55 Step 10. Handle Any Unfinished Business 55 Step 11. Officers and Committees Present Reports 55 Step 12. Introduce and Discuss Specific Proposals 57 Step 13. Take the Votes of Managers or Members 58 Step 14. Adjouorn the Meeting 62 5 How to Prepare Written Minutes of LLC Meetings When to Prepare Minutes 65 Preparing the Minutes Form 66 6 How to Hold a Paper LLC Meeting Decide Whether to Hold a Paper Meeting 82 How to Prepare Minutes of Paper LLC Meetings 84 7 How to Take Action by Written Consent Without an LLC Meeting Step 1. Check Your Operating Agreement for Any Written Consent Rules 93 Step 2. Prepare Written Consent Form 93 Step 3. Place Signed Consent Forms in Your LLC Records Binder 95 8 Standard LLC Business Resolutions When to Use Resolutions Included in is Chapter 98 Bank Account Resolutions 99 Assumed or “Fictitious” LLC Name Resolution 104 Resolution to Approve an LLC Contract 106 Real Property Resolutions 107 Delegation of Authority and Approval of Individual Contracts 111 Certification, Affidavit, or Acknowledgment of LLC Decision or Document 115 9 LLC Tax Resolutions LLC Corporate Tax Treatment Election 121 Resolution for Approval of Independent Audit 122 Approval of LLC Tax Year 123 10 Resolutions to Amend the LLC Articles and Operating Agreement Decide Whether You Need to Amend Your Articles or Your Operating Agreement 126 Amending Articles of Organization 127 Amending the LLC Operating Agreement 132 [...]... your state doesn’t require you to keep these documents, it’s still a very good idea Because your operating agreement and articles of organization dictate how your LLC will be run, you will have to refer to them often for day-to-day issues Records on members and managers—and their contributions and If you have not yet formed your LLC, Nolo publishes Form Your Own Limited Liability Company, also by Anthony... (you can talk to yourself if you wish) Is an LLC Required to Hold Formal Meetings? LLC operating agreements sometimes require annual meetings of members and, in managermanaged LLCs, annual meetings of managers In manager-managed LLCs, the annual mem bers’ meeting is held first, in order to elect the managers for the upcoming year After the members’ meeting (and usually on the same day), the annual managers’... holding an actual meeting of your members and/or managers, (2) preparing minutes for a meeting that doesn’t actually occur (called a “paper meeting”), or 4 | your limited liability company (3) obtaining the written consent of your members and/or managers to the action or decision at hand • If you decide to hold a real meeting of your managers and/or members, follow the steps covered in Chapters 3 and 4... into the mechanics of preparing for your LLC meetings, you’ll need to understand what kinds of meetings an LLC can hold The type of meeting you’re planning will determine how you prepare for it Members’ and Managers’ Meetings If your LLC is member-managed, all of your meetings will be members’ meetings—even if some members don’t play an active role in managing the LLC If your LLC is managermanaged, however,... designated manager of the manager-managed LLC (Saul stays in the background as an investor in the business) At the end of each LLC fiscal year, Saul and Barbara approve minutes of a paper meeting showing that they both vote to reelect Barbara as manager, and that Barbara accepts her manager role for another year (The meeting is a joint managers’/members’ 18 | your limited liability company meeting.) If any... for any annual meetings scheduled in your operating agreement Typically, this means preparing minutes for an annual members’ meeting Manager-managed LLCs should also prepare minutes for the annual managers’ meeting that follows Also prepare formal LLC documentation for all important legal, tax, financial, or business decisions reached by the managers or members during the year This documentation can... form In a managermanaged LLC, the business is managed by just some (not all) of its members, or is managed by one or more managers who is not an LLC member This book refers to “managers’ meetings” and “members’ meetings.” However, if your LLC is member-managed, then you don’t have to hold separate managers’ meetings to approve LLC decisions—a members’ meeting will do If your LLC is manager-managed, then... Special Schedule of Payments of Principal and Interest Release of Promissory Note Self-Interested Business Dealings Between the LLC and Its Members or Managers LLC Approval of Transaction Benefiting a Member or Manager Index Your LLC Companion C ongratulations—you’ve formed a limited liability company (LLC)! Running your business as an LLC gives you limited liability for business debts (like a corporation)... records of important LLC decisions, transactions, and meetings This will protect your LLC status and keep members, managers, and others apprised of the LLC’s activities This book will help you take care of these formalities, quickly and easily It provides all of the forms and advice you’ll need to: • hold and document LLC managers’ and members’ meetings • document actions taken by managers and members without... Members and Managers Make? The management of the LLC (the managing members in a member-managed LLC or the managers of a manager-managed LLC) should approve important legal, tax, and financial matters or those affecting the overall management of the LLC Typical management decisions that are later formally approved by the membership at meetings or by written consent include: • setting officer and key . INC. Mancuso, Anthony. Your limited liability company : an operating manual / Anthony Mancuso. 5th ed. p. cm. ISBN-13: 978-1-4133-0651-4 (pbk.) ISBN-10: 1-4133-0651-9 (pbk.) 1. Private companies. that’s a good idea—consult an attorney licensed to practice in your state. please note Your Limited Liability Company By Attorney Anthony Mancuso An Operating Manual 5th Edition FIFTH EDITION. Your Limited Liability Company By Attorney Anthony Mancuso An Operating Manual 5th Edition Nolo’s Legal Updater We’ll send you an email whenever a new edition