Question 1

An LLC is not obligated to reimburse members and managers for payments made on behalf of the LLC.

Accepted Answer

An LLC may be obligated to reimburse members and managers for payments made on behalf of the LLC if it is specified in the LLC's operating agreement or if the payments were necessary for the LLC's business operations. However, this obligation is not automatic and depends on the specific circumstances and agreements in place.

Question 2

The failure of an LLC to observe the usual company formalities acts as grounds for imposing personal liability on the members of the LLC.

Accepted Answer

One of the key advantages of forming a Limited Liability Company (LLC) is that it provides its members with limited liability protection, meaning members are typically not personally liable for the debts and liabilities of the LLC. This protection exists even if the LLC does not strictly adhere to corporate formalities like holding regular meetings or keeping detailed minutes, which are more critical for corporations to maintain their liability shield.

Question 3

A tortfeasor is personally liable to persons he or she injures and to the heirs of persons who die because of his or her conduct.

Accepted Answer

A tortfeasor is a person who commits a tort, which is a civil wrong that causes harm or injury to another person. As such, they are personally liable for any harm they cause to others and to the heirs of any person who dies because of their conduct. This means that they may be required to pay damages or compensation to the injured parties, or their surviving family members, to make up for the harm that they suffered as a result of the tortfeasor's actions.

Question 4

How does duty of care differ from duty of loyalty in an LLC?

Accepted Answer

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Question 5

An LLC could not amend its operating agreement despite all the members of the LLC orally agreeing to the amendment.Why?

Accepted Answer

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Question 6

One of the partners of an LLP commits legal malpractice.Explain the consequences the LLP and its members would have to face if sued for the malpractice.

Accepted Answer

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Question 7

A member of an LLC is always entitled to remuneration for services performed for the LLC.

Accepted Answer

The entitlement to remuneration for services performed for the LLC is subject to the terms and conditions of the LLC operating agreement. It is possible for an LLC member to provide services to the LLC without receiving compensation.

Question 8

In a manager-managed LLC,both the managers and members have authority to bind the LLC to contracts.

Accepted Answer

In a manager-managed LLC, only the managers have the authority to bind the LLC to contracts, not the members.

Question 9

Distinguish between a member-managed LLC and a manager-managed LLC.

Accepted Answer

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Question 10

The debts,obligations,and liabilities of an LLC,whether arising from contracts,torts,or otherwise,are solely those of the LLC.

Accepted Answer

This is because LLC stands for Limited Liability Company, meaning that the business's debts and liabilities are limited to the assets and investments held by the company, and not the personal assets of the company's owners or members.

Question 11

A unanimous vote of the members of an LLC is required for appointing or removing a manager.

Accepted Answer

A unanimous vote is not always required for appointing or removing a manager in an LLC. The LLC operating agreement can specify the voting requirements, which can be less than unanimous.

Question 12

A member of a manager-managed LLC who is not a manager owes no fiduciary duty of loyalty or care to the LLC or its other members.

Accepted Answer

This is because a non-managing member has no decision-making authority or control over the LLC and its operations, and therefore is not obligated to act in the best interests of the company or the other members. Only the LLC's managers have fiduciary duties of loyalty and care to the company and its members.

Question 13

Naomi and Melanie form an LLC.They contribute equal amounts as capital.However,when the LLC makes $100,000 in profits,Naomi receives $25,000 and Melanie receives $75,000.When the company incurs a loss of $20,000 the next year,they share the losses equally.Under what circumstances can such inequitable distribution of the profits and losses be made?

Accepted Answer

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Question 14

Duty of care by a member to an LLC is a limited duty because it does not include ordinary negligence.

Accepted Answer

The duty of care for LLC members typically involves refraining from grossly negligent or reckless conduct, intentional misconduct, or knowing violations of law, rather than ordinary negligence.

Question 15

Explain wrongful disassociation.How does the payment of distributional interest to a disassociating member in an at-will LLC differ from a term LLC?

Accepted Answer

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Question 16

Samuel and his friends form an LLC.Samuel,through an agreement,promises to contribute a personal property to the LLC within a year of the LLC's operation.Samuel passes away in an accident a few days after signing the agreement.Will the agreement still hold? Give reasons in support of your answer.

Accepted Answer

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Question 17

What is distributional interest? A member of an LLC transfers his distributional interest to his brother.Will his brother be considered a member of the LLC? Give arguments in support of your answer.

Accepted Answer

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Question 18

What are the strengths of operating a business as an LLC?

Accepted Answer

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Question 19

In a member-managed LLC,each member has equal rights in the management of the business of the LLC,regardless of the size of his or her capital contribution.

Accepted Answer

This is true. In a member-managed LLC, each member is considered an equal partner in the management of the business, regardless of their capital contribution. Decisions are typically made by a vote among the members, with each member's vote carrying equal weight.

Question 20

Jeeves,the member of an LLC with three other members,injures a pedestrian while driving to work at a speed above the highway speed limit.Can the pedestrian sue the LLC for his negligence? Give reasons to support your answer.

Accepted Answer

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Quiz 30: Limited Liability Companies and Limited Liability Partnerships