WA Business Law Blog

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

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