llc formation and operation; how to draft the llc operating agreement
TRANSCRIPT
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LLC Formation and Operation:How to Build an Unsinkable Company
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BRADLEY MILLERMiller Law LLC ∙ @bradleymiller#WatchForIcebergs
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ALL businesses can fail.
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Part 1: Formation & Operations
- INTERMISSION - Part 2:
Operating Agreements
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PREPARING TO LAUNCH
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Articles of Organization1. Name of the LLC2. Duration of existence3. Statutory agent4. Optional provisions
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WHO IS STEERING THE SHIP?
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ManagementMember-managed
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ManagementMember-managed
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ManagementMember-managedManager-managed
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Why member-managed?Simpler.Active owners.Have a voice.
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Why manager-managed?Limit power.Passive investors.Non-member managers.Employee equity.Future control.
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RIGHTS & DUTIES OF THE CREW
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MEMBERSMembers owe a duty of loyalty and a duty of care
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MANAGERSManagers must perform in good faith with the care of an ordinary prudent person
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OFFICERSIf a member, has the duties of a memberIf not a member, has the duties of a manager
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INDENTURED
SERVITUDE
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A membership interest is personal property, assignable in whole or in part
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- TELEVISION TIMEOUT -
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BANKROLLING THE
OPERATION
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Capital Contributions
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Member Loans
In writingNo ownershipReturnReturn of cash
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Third PartyLoans
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InvestorsIntra-state OfferingPrivate PlacementCrowdfunding
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IT’S NOT MY FAULT!
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Unremitted Sales Tax and Employee Withholding
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Personal Acts of Members and Managers
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Wrongful Distributions
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Personal Guarantee
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Pledge of Property
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Piercing the LLC Veil
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SAILING IN FOREIGN WATERS
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What constitutes
“transacting business” in
Ohio?
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- INTERMISSION -
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Drafting the Operating Agreement:How to Build an Unsinkable Company
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Operating Agreement1. Formation provisions2. Management & voting3. Transfer, impasse, capital call, & dissolution4. Distribution & allocations
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Formation provisions
1.
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Management & voting
2.
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Why member-managed?Simpler.Active owners.Have a voice.
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Why manager-managed?Limit power.Passive investors.Non-member managers.Employee equity.Future control.
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Management & voting
2.
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Transfer, impasse, capital call, & dissolution
3.
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Transfer restrictions
3a.
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Transfer prohibition.
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Right of first refusal.
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Push-pull provision.
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Redemption and interest purchase rights.
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Anti-dilution rights.
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Tag-along and drag-along rights.
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Mandatory sale triggering events.
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Involuntary transfers.
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Impasse3b.
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Capital calls
3c.
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Dissolution
3d.
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Distribution & allocation
4.
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Operating Agreement1. Formation provisions2. Management & voting3. Transfer, impasse, capital call, & dissolution4. Distribution & allocations
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Operating Agreement Mistakes
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COMMON MISTAKESUsing a non-customized or DIY operating agreement
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COMMON MISTAKESMissing essential provisions
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COMMON MISTAKESFailure to finalize and execute the operating agreement
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COMMON MISTAKESFailure to periodically review and update the agreement
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COMMON MISTAKESFailure to have new members execute the operating agreement
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Thank you.
www.bradleymillerlaw.comwww.newmodernlawyer.com