Consider Carefully the Powers Granted to LLC Managers!

By: Tamara B. Pow, Esq.

When starting an LLC, carefully consider the powers granted to an LLC manager. Your operating agreement should have customized provisions regarding what the manager(s) can and cannot do – do not just accept some form language. As an LLC attorney, I encourage my clients to carefully consider the powers that their LLC managers should, and should not, have.

Once you have determined whether your limited liability company will be manager managed and you have procedures in place for how you will elect and remove a manager , you need to carefully consider what powers you will give the manager(s) and what limitations you will set on those powers. The business of the LLC is critical to determining what you need to put in your operating agreement. For example, in a real estate investment LLC, make sure the manager has the specific rights to sign deeds and loan documents without going to a vote of the members.

The list of potential powers (and limitations on powers) of the managers is endless, but here are some items to consider:

  • Day to day operations authority
  • Entering into contracts (up to a certain dollar amount?)
  • Opening bank accounts, designating signing authority
  • Paying debts, signing checks
  • Hiring professionals like lawyers and accountants
  • Obtaining insurance at the expense of the company
  • Borrowing funds, refinancing debt
  • Investing company funds
  • Requesting capital from Members
  • Bringing or defending lawsuits
  • Determining cash available for distributions
  • Selling assets of the Company
  • Purchasing major assets
  • Accepting additional Members
  • Approving transfers of membership interests
  • Creating new classes of membership interests
  • Appointing officers, delegating authority
  • Signing tax returns and dealing with tax audits
  • Transacting business with the company, individually or through affiliates
  • Competing with the company’s business or maintaining other employment

If the managers are supposed to be actively participating in the business, rather than simply managing an investment, the LLC agreement should be careful to not only list the powers the manager has, but also the duties and responsibilities that the manager must perform. Make sure you consider the business of your LLC carefully and consider your expectations for the manager position. And once you know what the expectations are for the manager, you need to consider how they should be paid for fulfilling these expectations and include those provisions in your LLC operating agreement as well.

Tamara B. Pow is a founding partner of Strategy Law, LLP in downtown San Jose, California where she practices business and real estate law including formations, operations, transfers, conversions and dissolutions of LLCs and other business entities. Her personal experience acting as a manager in real estate limited liability companies as well as her MBA and real estate brokers license help her in advising owners of limited liability companies and other business entities.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

Corporation Alert! New Statement of Information Forms

By: Tamara Pow, Esq.

The California Secretary of State has updated business entity forms yet again this year. In July I wrote a blog referencing the changes to certain LLC forms including the Articles of Organization, Certificate of Dissolution, Certificate of Cancellation and the Short Form Certificate of Cancellation. The Secretary of State is at it again and has revised certain forms for foreign and domestic corporations.

Effective immediately, the California Secretary of State has the following new forms:

  1. Statement of Information (Domestic and Foreign Corporations);
  2. Attachment to the Statement of Information;
  3. Statement of Information (No Change); and
  4. Statement of Information (Non-Profit Corporations).

As part of this change there is now one form of Statement of Information to be used for both domestic and foreign corporations, instead of separate forms for each type of entity.

Many companies file their Statement of Information forms on their own. If you are filing your own Statement of Information, you must use the new form or the Secretary of State will reject your filing. Filings that are rejected by the Secretary of State waste time, money and if not corrected can result in late filing fees and ultimately suspension of your entity if not resolved.

Statements of Information for corporations can generally be filed online using E-file on the Secretary of State’s website. This will ensure that the correct form is being completed. However, if you must mail in your Statement of Information, be sure that you have checked the Secretary of State’s website at http://www.sos.ca.gov/business-programs/business-entities/forms#corp to ensure that you are using the current form. Either way, don’t forget to file on time. It is critical to keep your business entities up to date to maintain your liability shield.

Tamara B. Pow is a founding partner of Strategy Law, LLP in downtown San Jose, California where she practices business and real estate law including corporate formations, operations, maintenance (including filing Statement of Information) and dissolutions. Her consistent and extensive work with business entities keeps her up to date when advising business owners of Secretary of State updates and other changes in the legal requirements of maintaining business entity liability protection.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

LLC ALERT: New California LLC Forms!

By: Tamara Pow

The Secretary of State is revising LLC forms again. Back in May, I wrote that the Secretary of State does not revise its forms often, but when it does, it is critical that business owners are aware of the changes so that they file the correct form because the Secretary of State will reject outdated forms. In May I noted that the California Secretary of State had revised the LLC Statement of Information form which had been in use since January of 2014.

Now the California Secretary of State has revised four more LLC forms:

  1. Articles of Organization;
  2. Certificate of Dissolution;
  3. Certificate of Cancellation; and
  4. Short Form Certificate of Cancellation.

The new Articles of Organization include a cover sheet for mail submission. However, this does not mean that the Articles must be filed by mail. The instructions make it clear that you will get faster service if you deliver the document in person, and even faster service if you pay a guaranteed expedite drop off fee. I once got a phone call from a client who was in her car on her way to Sacramento to file her LLC in person because she needed proof of filing a soon as possible. A road trip to our state capital is not necessary if you need your documents in a hurry. We have a relationship with a filing agent in Sacramento who will happily receive our forms for filing by email and walk them into the Secretary of State’s office for a small fee (well worth saving the cost of gas and time in the car).

Filing the correct forms, and getting them back quickly, can make or break a business deal. Be sure you know what you are doing, or use an attorney experienced in entity formations to take care of it for you.

Tamara B. Pow is a founding partner of Strategy Law, LLP in downtown San Jose, California where she practices business and real estate law including limited liability company formations, operations, sales, conversions and dissolutions. Her consistent and extensive work with LLCs keeps her up to date when advising owners of LLCs and other business entities of Secretary of State updates and other changes in the legal requirements of maintaining business entity liability protection.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.