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INFORMATION
CHECKLIST FOR LLC FORMATION
Please complete the
following questionnaire which will
provide the initial information necessary to
assist in drafting the Articles of Organization and
Operating Agreement for the formation of a California LLC.
1. Please provide 3 choices for names of
the LLC listed in the order of preference.
1st
Choice:_________________________________________
2nd Choice:_________________________________________
3rd Choice:_________________________________________
(All California LLCs must contain either LLC, L.L.C., Limited
Liability Company in their name
and the words Limited
and Company may be
abbreviated to Ltd. And Co. The LLC name
may contain the name of one or more of the members
but may not
include the words Bank, Insurance, Insurance Company, Trust, Trustee,
Incorporated, Inc. or Corp.)
2.
Will the LLC be member-managed or
manager-managed?___________________________________
(Under California law an LLC can be managed either by all the members
or by one or more managers. The
managers in a manager-
managed LLC may be either members or nonmembers. California Law also allows for a single member LLC. In a member managed
LLC, each member is an agent of the LLC
and can bind the LLC while in a
manager managed LLC, the manager is the agent of the
LLC and no member is an agent of the LLC
by virtue of being a member. Each
member of a member managed LLC has the
fiduciary duties of a manager
and a manager in a manager-managed LLC has the fiduciary duty of a
manager to the members is like
that of a
partner to a partnership.)
3.
Please provide the name, address and
marital status of each proposed member, manager, or officer of
the
LLC that is being formed.
____________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
__________________________________________
4.
What will
be the street address of the LLCs principal office in California? _________________________
_____________________________________________________________________________________
5.
What will
be the time term of the LLC ?
___________________
6.
What will
be the general type of business of the LLC? _______________________________________
____________________________________________________________________________________
7.
What will
be the members’ respective ownership interests in the LLC?___________________________
_____________________________________________________________________________________
8.
What will
be the initial capital contributions? _______________________________________________
_____________________________________________________________________________________
_____________________________________________
(The initial
capital has ramifications not only for the operations of the LLC but for
tax planning as well and good advice from an
experienced CPA
is always a good idea before making this determination.)
9.
Will
additional capital contributions be allowed or required? Why and how
much? _____________________
_______________________________________________________________________________________
(This can have ramifications not
only due to tax issues but for relative investment and power issues
within the structure.
This decision requires careful
consideration not only of the business questions but of the power
structure within the company.)
10.
Will interest be paid on the Capital
Contributions or on the balance of a Member’s Capital Account?
_______
________________________________________________________________________________________.
11.
What will be the manner and priority of LLC
distributions? _______________________________________
(The operating agreement may
provide for any agreed allocation of profits and losses among the members
as long as the LLC complies
with the IRC regulations regarding
capital account maintenance rules and the rules requiring specified
adjustments when book values
are used. Unless the Operating Agreement provides
otherwise, distributions that are a return of capital will be made in
proportion to the
capital contributions made by
each member, and distributions that are not a return of capital will be
made in proportion to the members
allocated shares of profit.
The choice of allocation provisions should be discussed with your
accountant with special attention to
questions 12 – 15 below)
12.
Will there be priority or unequal division in
the allocation of profits and losses? Describe?
________________________________________________________________________________
________________________________________________________________________________
(Absent
provisions to the contrary, profits are divided up according to ownership
interests but that is not required if the Operating
Agreement
provides otherwise.)
13.
Will there be a disproportionate allocation of profits
and losses based on book values of assets contributed? How?
____________________________________________________________________________________________
14.
Will there be special allocation provisions in
the Operating Agreement for such things as Company Minimum Gain
Chargeback, Member Nonrecourse
Debt Minimum and Qualified Income Offset? ____________________
_________________________________________________________________________________________
(Again,
questions to pose for the accountant of the LLC or its Members.)
15.
What will be the compensation to the manager(s)
if any? _________________________________________
16.
Will there be more than one class of members?
________________________________________________
17.
Will there be a right to reimbursement of
expenses incurred in connection with LLCs business? _____________
18.
Will the agreement provide any obligation of
members or manager to devote all their business time to LLC?
______________________________________________________________________________________
19.
What right, if any, will members or managers
have to engage in any business that competes or conflicts with
LLCs business?
______________
20.
What will be the tax year of the LLC ?___________________________
21.
What will be the method of accounting?
____________________________
22.
What will be the buy-out rights?______________________________________________________
_________________________________________________________________________________
(Remember to
consider what you want to happen if the following events occur: Someone
wants to sell; Someone receives
an offer to buy? Someone moves out of State? Someone dies? Someone becomes disabled?
A couple that owns an interest
file for
divorce? All these things can happen and a good LLC Agreement will
provide details in how those events are to be handled.)
23.
What will be the appointment and removal
provisions if any for managers? ____________________
_________________________________
24.
What will be the terms for admitting additional
members? _________________________________
25.
What will be the events of dissolution?
___________________________
26.
Will the LLC have officers? ___________________
27.
Who is the accountant to be for the LLC and
will it be the same as for the individual members? ______
28.
How are disputes within the LLC to be resolved?
Mediation? Arbitration?_____________________
(See the
articles on our website on American Litigation; Arbitration of Business
Disputes.
www.stimmel-law.com articles
page.)
29.
Will the LLC engage in business outside the
State? Internationally?
____________________________________________________________
____________________________________________________________
30.
Will sales tax be collected for the operations
of the LLC? Will it have to qualify to do business in
another State? _______________________________________________________________
31.
Contact
information for all Members and Managers: ______________________________________
_________________________________________________________________________________
32.
Other
issues: ___________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________.
(Take this fully filled in
form to your attorney and or CPA and it should save significant time in
obtaining the background
information necessary to form your LLC. Most LLCs can be legally
created in less than a week: the delay is usually among
the Members negotiating the answers to the various
questions above. Be sure to also consider the alternative limited
liability entities such as Sub Chapter S corporations; Chapter
C corporations; Limited Partnerships. People from outside
the United States have an alternative group of limited liability
entities to consider as well and legal advice should be
sought if business is to be concentrated outside of the United States.)
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