Business Startup

Series LLCs: Exploring the Rise (and Risks) of a New Limited Liability Entity

A new type of limited liability company is beginning to gain popularity. The Series LLC provides a way to segregate liability, control, and profit-sharing within a single entity. Today’s post will provide some background behind the rise of the Series LLC. Next week’s post will highlight some of the risks and possible options for disposing of those risks.

Delaware Taking Lead As is the case with much business-related legislation, Delaware took the lead in creating this unique limited liability entity. In 1996, Delaware passed legislation under the Delaware Limited Liability Company Act that enabled the formation of Series LLCs. Delaware’s legislation has served as a model for other states, including Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, and Utah. Under Delaware law, a...

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Business Startup

The Business Judgment Rule

What is the Business Judgment Rule? Corporations are managed under the direction of a board of directors. The board has a fiduciary duty to protect the interests of the corporation, and to act in the best interests of its shareholders. If directors take actions that are not in the best interest of the corporation, shareholders may bring a lawsuit against them. In order for a shareholder to succeed in a case against a director, the shareholder must overcome the business judgment rule which creates a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interest of the company.

How Does...

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Business Startup

Personal Liability for corporate transactions after dissolution

In a recent Court of Appeals decision*, the honorable judge Laurel Siddoway reiterated the Supreme Court’s stance on applying the theory of promoter liability to post-dissolution corporate acts. This means, for purposes of individual liability, any acts occurring on behalf of the corporation after dissolution, whether voluntary or involuntary, must be made solely for the purposes of winding up the corporate affairs and business. A corporation’s key personnel may be held personally liable if they carry on any business that is not necessary to wind up and liquidate its business.

In Equipto Division Aurora Equipment Co. v. Yarmouth, the Supreme Court determined that RCW 23B.02.040 of the Washington Business Corporation Act applies to both prior corporation acts and post-dissolution transactions that...

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