Also known as: limited liability companies · LLC · LLCs
Written by attorneys · grounded in primary & secondary sources — see below
A business entity formed under state law that shields its members from personal liability for the entity's debts while permitting pass-through taxation and flexible management. Members' ownership interests are transferable subject to any charging orders or operating-agreement restrictions. For diversity jurisdiction an LLC takes the citizenship of each of its members rather than possessing a state of incorporation or principal place of business.
Lucia Lopez and Lorenzo Lugo formed Landmark Realty LLC with two members each domiciled in different states. When a supplier sued the LLC in federal court the defendant moved to dismiss for lack of diversity. The court looked only to the citizenship of Lopez and Lugo and dismissed the action because complete diversity was absent.
Legacy Motors LLC dissolved after paying all outside creditors. Its operating agreement was silent on distribution order. The liquidator first returned unreturned capital contributions to each member in proportion to those contributions and then divided the remaining surplus according to the members' pre-dissolution profit-sharing ratios.
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Lattice Systems Inc. a Delaware corporation owned a California LLC that sold products in that state. Plaintiffs injured by a product sued the parent in California federal court. The court held that the LLC's California sales could not be attributed to the parent for general jurisdiction purposes.
Loyal Insurance LLC entered a service contract with a public company knowing the company would later misstate revenue. Investors sued the LLC for aiding the fraud. The court dismissed the claim because the LLC had not made any public statement on which investors relied.
Members of Liam Larson LLC voted to merge after receiving full disclosure of the terms and an independent fairness opinion. A dissenting member later challenged the merger as unfair. The court applied the business judgment rule because the informed vote cleansed the transaction.
Lena Lawson purchased interests in a private LLC after the manager made material misstatements in offering documents. When the fraud surfaced she sued. The court held that she could rely on the fraud-on-the-market presumption even though the interests were not traded on an exchange.
An LLC is treated as an unincorporated association. Its citizenship is determined by the citizenship of each of its members rather than by a state of formation or principal place of business.
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After paying creditors any surplus is first returned to members for unreturned capital contributions and then distributed among members in proportion to their pre-dissolution rights to share in distributions.
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Yes. Members are not personally liable for the LLC's debts beyond the amount of their capital contributions unless they personally guarantee an obligation or commit a tort.
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Yes. Under the check-the-box regulations an LLC may elect to be taxed as a corporation or as a disregarded entity or partnership without regard to the old Morrisey factors.
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…the United States, where its subsidiary, Mercedes-Benz USA, LLC (MBUSA), distributes Daimler vehicles. MBUSA is a Delaware limited liability company and has its principal place of business in New Jersey. MBUSA’s marketing and sales efforts in California are undertaken by a regional office in Costa Mesa and a network of independent…