SELF-HELP LEGAL KITS

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LIMITED LIABILITY KIT

INTRODUCTION

Since time immemorial, entrepreneurs from every walk of life and every manner of business undertaking have sought to combine the simplicity of a partnership with the liability protection accorded a corporation or even a limited partnership. The issue was seemingly addressed when Sub-chapter S of the Internal Revenue Code was adopted; however, the restrictions so imposed on Subchapter S corporations left many of these entrepreneurs distressed and avowing to seek a better way of doing business which would encompass a combination of both a partnership and corporation. It was not until the year 1988 that the Internal Revenue Service issued "Letter Ruling No 9147017" which granted partnership status, for income tax purposes, to limited liability companies organized under the Wyoming Limited Liability Company Act. This was of course notable since Wyoming had enacted its limited liability company laws in 1977, even though the core advantage of such laws did not have the approval of the Internal Revenue Service. Thus, from 1977 to 1988, the Wyoming Limited Liability Company Laws were not effective to the extent that it allowed a limited liability company to be a non-taxable entity. The Internal Revenue Service had long opposed the concept of a partnership tax treatment for a limited liability company on the grounds that Subchapter S of the Internal Revenue Code addressed the relief advocated under the limited liability company laws, since it allowed a corporation the right to elect to be taxed as a partnership. The inherent problem with Subchapter S is that it imposes some very restrictive requirements on both the number and type of stockholders, the division of profits and the type of corporate income, to name a few. None of these restrictions are present under the limited liability company rules adopted by the Internal Revenue Service. In 1996, nearly all of the states adopted some form of limited liability company laws, many of which have since been revised, especially in light of the most recent (1997) Internal Revenue Service regulations regarding an elective tax treatment for limited liability companies. In response to these new Internal Revenue Service regulations, some states revised their limited liability company, The effect of this revision is that a sole proprietorship can now enjoy the same liability protection as a corporation while being taxed as an individual taxpayer, In other words, the one person limited liability company is not a tax paying entity, but pass-through entity. The great news is that The Divorce Store® Limited Liability Company Kit is the entrepreneurs ultimate working tool, since it provides the documents, forms and instruments necessary to organize and operate a regular limited liability company, including certificates of membership that evidence both each member's interest and their percentage of ownership. A cursory review of the Check List the precedes the Table of Contents shows that this kit includes, generic articles of organization which are similar in many respects to articles of incorporation, The Articles of Organization are generic since most states provide their own organizational articles, which must be used; therefore, the generic set of articles are intended for those states that do not provide such organizational articles, And while the governing instrument that formalizes the limited liability company with the State government is the articles organization, it is the operating agreement that legally binds the members together as a legally viable business organization. The Operating Agreement is the singularly most important document in a limited liability company, since it incorporates every agreement, authority, power, privilege and understanding between the members. The Operating Agreement is a ten-page document that includes twenty-seven separate Articles that provide the complete contractual rights and obligations between the members of the limited liability Company. It will however be mentioned here that if the limited liability Company is a one-person limited liability company, then the operating agreement is not applicable since there are no partnership Characteristics present. All of the authorities, privileges and powers are inclusive in the articles of organization and the state limited liability company statutes. This kit also includes minutes of the organizational meeting of the members where the managers are appointed, the statutory agent is appointed, the chief operating officers are appointed, the term of office and salaries are fixed, and the Operating Agreement is adopted. Additional minutes included in this kit are (1) The monthly meeting of the managers; (2) The monthly meeting of the members; (3) The special meeting of the manager; (4) The special meeting of the members; (5) The annual meeting of the members; and (6) The annual meeting of the managers. Each of these documents and forms are fully described as to their legal and operational purposes in Chapter Five, starting on page 15. Since the capitalization of limited liability company is funded with the capital contributions made, or promised to be made, by its members, this kit also includes a legally binding Capitol Contribution Agreement, which obligates each member to contribute the amount and kind of agreed upon capitol. In each of the chapters that follow this Introduction, important information is provided regarding not only limited liability companies, but also, sole proprietorships, general partnerships, limited partnerships, "C" corporations and "S" corporations. This text includes an Appendix A, Pages 31-34 (Yellow Pages), which is a directory of the addresses and phone numbers of the addresses and phone numbers of the incorporating departments in all 50 states. This information may be helpful if you plan to pursue your business objectives outside of your state of domicile. This text also includes an Appendix B, starting on page 35 (Blue Pages), which includes illustrated examples of each of the documents, forms and instruments in this kit. These examples are real life examples, except for the names and addresses, which closely resemble the operational facts in many business situations. Since this text is briefly written without legal phraseology, every effort should be made to read this material before preparing any of the forms.

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