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In the beginning, members of an LLC will need to decide between the two primary choices of management structures: member managed, or manager managed.

Over the next few months we’ll be discussing some of the common terms of an Limited Liability Company operating agreement in a series of posts. The operating agreement provides the framework for operating and managing the business. The operating agreement provides the rights and obligations of the members, including members’ management abilities and economic interests. Without an operating agreement, Washington LLCs are governed by the default provisions provided in RCW 25.15 . In this first post, we’ll discuss the management structures and choices available for an LLC.

Key Feature: Flexibility

In Washington, the LLC statutes are incredibly flexible. LLCs are easily adaptable to the changing needs or circumstances of the members and the business. There’s also flexibility when choosing the management structure of the company. The primary constraint…

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The Law at Issue

To demonstrate a claim in a securities fraud case under section 10(b)(5) of the Securities Exchange Act of 1934, a plaintiff must  demonstrate (1) deceptive practices (2) in connection with the purchase or sale of securities, (3) materiality, (4) scienter, (5) loss causation, (6) damages, (7) reliance, and (8) standing.

Case Background

In Matrixx Initiatives, Inc. v Siracusano, the Plaintiffs alleged that the Defendants’ committed fraud when they failed to disclose reports that their pharmaceutical product (Zicam) had been linked to the loss of smell. Matrixx, the manufacturer of Zicam had been made aware of a number of reports that patients using their product had suffered from asomnia (the loss of smell). Multiple lawsuits had been filed against Matrixx…

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This NY Times article focuses on Seattle’s economic growth. The 2010 Census data is being released, and while some are focused on the growth of Texas and Florida, this Article focuses on Seattle. In an effort to understand why Seattle is growing while most other cities are shrinking in population, the article traces Seattle’s economy from 1880 to today. Edward Glaeser, the author, hypothesizes that key to Seattle’s growth is having highly educated workers. He also suggests that Seattle helped itself when it allowed taller buildings to be built in the downtown area.

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The economic structure of a limited liability company determines the amount and timing of the distributions of cash and property to the members (remember that in an LLC owners are called “members”). Distributions may occur periodically during the operation of the organization and at the time when the organization either redeems the member’s interest or liquidates.

Washington law provides a default rule that members will receive distributions and allocations of profits and losses in proportion to the amount of capital each member contributed to the company (RCW 25.15.205). (A distribution is something a member actually receives from the LLC. An allocation of profit or loss is a tax and accounting concept that relates to the division of profits and losses for…

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This blog series explores the things every business owner should know about LLC operating agreements and the provisions to include in the agreement.

One of the most appealing attributes of the limited liability company and why it has been so widely adopted is the flexibility it affords the owners with respect to management. LLC operating agreements are for an LLC what bylaws are to a corporation. The operating agreement can be thought of as providing the “laws” of the business, laying out how the company will be managed. The operating agreement provides the rights and obligations of the members, including members’ management abilities and economic interests. Without an operating agreement, limited liability companies are governed by the default provisions (in Washington, they are provided in Chapter 25.15 of the Revised Code of Washington). This inVigor Law Group blog series includes insight into some…

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King County resident Gina Kim posted for sale on Ebay a handbag she had purchased at a Coach store. She then received a cease and desist letter from Gibney Anthony, Coach’s legal representatives. The letter directed her to sign a statement indicating she took wrongful action in seeking to sell a counterfeit product, threatened up to $2 million in penalties, and demanded she pay $300 immediately. Now Ms. Kim, a 31-year-old Seattle Central Community College student, is filing suit.

She hired a Seattle law firm to represent her, and has now filed a complaint in federal court. The complaint, which can be read here, is seeking class action against Coach for (1) violation of the Washington Consumer Protection Act, (2) misrepresentation…

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