Thursday, January 10, 2008

You Want to Start a Limited Liability Company?

Read Limited Liability Company 101 first. A general article that will not lead you astray about Indiana's law on Limited Liability Companies. What formalities does my LLC have to follow? provides an even more condensed outline on starting an LLC.

Some terms you should know for LLC's:

  1. "Operating agreement"
    "Operating agreement" means any written or oral agreement of the members as to the affairs of a limited liability company and the conduct of its business that is binding upon all the members. (IC 23-18-1-16)
  2. "Limited liability company" or "domestic limited liability company"
    "Limited liability company" or "domestic limited liability company" means an entity that is an unincorporated association organized under this article. (IC 23-18-1-15)
  3. "Member"
    Sec. 15. "Member" means a person admitted to membership in a limited liability company under IC 23-18-6-1 and as to whom an event of dissociation has not occurred.
  4. IC 23-18-1-8
    "Event of dissociation"
    "Event of dissociation" means an event that causes a person to cease being a member of a limited liability company as provided by IC 23-18-6-5.
  5. IC 23-18-1-3"Articles of organization"
  6. "Articles of organization" means the articles of organization described by IC 23-18-2-4 and any amended or restated articles of organization.
Indiana does not require an operating agreement for an LLC. However, I think a well founded LLC has an operating agreement. Indiana law provides a default position for several subject by prefacing several statutes with the phrase "[u]nless the limited liability company's articles of organization provide otherwise...." The subjects where Indiana law provides a default position include the following:
  1. IC 23-18-2-2 Powers
  2. IC 23-18-4-2 Acts and omissions liability; trustee for personal benefits derived through company; duties of member in company providing for manager
  3. IC 23-18-5-3 Allocation of profits and losses
  4. IC 23-18-8-1 Persons entitled to bring suit in name of company
  5. IC 23-18-9-4 Entities entitled to wind up company's business or affairs.
If after reading all that you still think your business will survive without a written operating agreement, consider IC 23-18-4-4:
A written operating agreement may do the following:
(1) Eliminate or limit the personal liability of a member or manager for monetary damages for breach of a duty provided for in section 2(a) of this chapter.
(2) Provide for indemnification of a member or manager for judgments, settlements, penalties, fines, or expenses incurred in a proceeding to which a person is a party because the person is or was a member or manager.
The next question needing answered is: to have managers or not. I think an LLC with more than one member needs a manager but I will leave that explanation to another day.

Meanwhile, if you want to learn more about business services then click the link below that reads "start ups". You should especially read my article Starting a LLC (Limited Liability Company), Attorney Fees, and Online Services.