WA Business Law Blog

Cash-mergers are one way controlling members of LLCs can legally extinguish the interest of minority members.  One of the leading commentators on “business divorce” is New York lawyer Peter Mahler.  This week, Peter outlined an influential New York appellate decision (see here), which dramatically alters the ability of controlling members of LLCs to oust minority… Read More

Individuals regularly hold their real estate in LLCs for many reasons, including asset protection, because an LLC is a “separate legal entity” RCW 25.15.071 (3) and members are not liable for debts of the LLC RCW 25.15.126 (1).  The distinction between an individual member and an LLC was front and center in a recent Washington… Read More

Draft carefully, because ambiguous drafting may leave you at the mercy of default rules of the LLC Act.  A recent Wisconsin Supreme Court decision, Marx v. Morris, 925 N.W.2d 112 (Wisc. 2019), illustrates the need for careful drafting. The Case’s Significance Before delving into the facts and dispute arising out of Marx, it is important… Read More

In last week’s post, I identified some of the key distinctions when one holds an interest in an LLC, but is not a member (see here).  Members and transferees hold different rights. This post seeks to further explore the similarities and differences between members and transferees. Rights of Members and Transferees Members and transferees share… Read More

You may have heard that “membership has its privileges.”  But what if a person has an interest in an LLC but is not a member?  In general, such a person is a “transferee” and holds only a “transferable interest.” Transferable Interest Defined Under RCW 25.15.006(20) a transferable interest “means a member’s or transferee’s right to… Read More

In Washington, partnerships may be formed without a written agreement.  In 2016, Washington amended its LLC Act (RCW 25.15 et seq.) to allow oral LLC agreements. However, just because you can have oral partnership and LLC agreements does not mean you should—this is the lesson learned from the recent Washington Court of Appeals case, Samra… Read More

This post keeps with the theme developed over the past couple weeks of derivative actions, this time in their application to limited liability companies. Interestingly, Washington’s Division Three Court of Appeals threw practitioners a “derivative action curveball” in the 2016 opinion Holman v. Brady, No. 33114-8-III, 2016 WL 4921457 (Wn. App. Sep. 13, 2016). This… Read More

“Until our legislature declares otherwise, Washington is a demand futility state and follows Delaware.” This phrase in the Washington Supreme Court opinion In re F5 Networks, Inc., 166 Wn.2d 229, 240, 207 P.3d 433 (2009) had a significant impact on derivative action litigation throughout the State of Washington. I write this post in an effort… Read More

The derivative action is the source of increasing consternation throughout the legal industry. Today’s post brings a little insight into the fundamentals of a derivative action in Washington. What is it? A derivative action permits a shareholder or member the right to sue third parties on behalf of the entity. The purpose behind the derivative… Read More