WA Business Law Blog

On May 11, 2021, Division II of the Washington Court of Appeals issued an opinion arising out of a corporation owned by the Rees family.  The case is interesting for a host of reasons, but the focus of this article is minority oppression. The Family v. Don Rees Don Rees owned 51% and his wife,… Read More

Investors regularly make the mistake of assuming they do not need a written LLC agreement when they form a single-member entity. In the absence of a written LLC agreement, statutory default rules apply, which often come with surprising consequences. A Hypothetical Let us consider, for example, you purchase a fourplex in your own name then transfer… Read More

In last week’s blog, I discussed restrictions on the transfer of shares in a shareholder agreement. This week, taking it a step further, I will discuss certain transfer restrictions discussed in a recent Washington Court of Appeals Case: Hammond v. Everett Clinic, PLLC, No. 80772-2-I, 2021 WL 961130 (Wn. App. Mar. 15, 2021). Case Dispute… Read More

Corporations are creatures of statute, contrary to LLCs, which are creatures of a contract.  I have written extensively about the need for a carefully crafted LLC agreement, but have not written much about the need for shareholders in a closely held corporation to have a carefully crafted shareholder agreement. Shares of stock are generally freely… Read More

Inevitably, every business will end. Successful businesses plan for the end, and, as a result, maximize the value of their efforts. A proper advance plan can help maximize value when the time comes. Just as every business is different, a plan for succession varies for every business. There are a few fundamentals for an ‘advance… Read More

In prior postings, I have discussed how membership has its privileges, but how does a person know if they are in fact a member?   Washington’s LLC Act provides two different standards for membership depending on the time period a member is admitted.  For the admission of “the initial member” a person becomes a member upon… Read More

When drafting LLC agreements, practitioners ought to remember that LLC interests may be securities subject to both state and federal securities laws. When an LLC interest becomes a security, additional disclosures of  “material facts” are required.  Without such disclosures, personal liability for securities fraud looms. The recent Washington Court of Appeals case of Freeman v.… Read More

Lawyers advising LLCs and their members must understand capital accounts from a tax perspective. When LLCs are taxed as a partnership, a member’s capital account reflects a portion of a member’s economic interest in the LLC. The tax regulations surrounding capital accounts are lengthy and complex, but understanding the basics allows practitioners to fully counsel… Read More

As I have noted previously (along with numerous other commentators), LLCs are not corporations. Both the basic structure of, and the laws applicable to, each respective entity are significantly different.  However, there may be similarities as to the tax structure of LLCs and corporations if the LLC members so elect. A corporation can choose only… Read More