LexisNexis® Legal Newsroom
How the Federal Government Taxes LLCs

One of the benefits to using a limited liability company is the flexibility of being able to choose how the entity is taxed. After a new LLC is formed, its owners must decide the method by which they would like their business taxed. By default, an LLC is treated as a pass-through entity, which means...

Delaware Court of Chancery Explains Basis for Fiduciary Duty Default Standards Applicable to LLCs

Auriga Capital Corp. v. Gatz Properties LLC , C.A. No. 4390-CS (Del. Ch., Jan. 27, 2012), read opinion here . What this Case is About and Why it is Important This case establishes a high-water mark in terms of providing the most comprehensive explanation, based on legislative history and a...

Do Managers of Delaware LLCs Have the Same Fiduciary Duties as Directors of Delaware Corporations?

Recently, the Delaware Court of Chancery issued a ruling on the question of whether a manager (or managing member) of a Delaware limited liability company owes fiduciary duties to the company and its members. The court ruled that it does. As a legal practitioner, this result is unsurprising. ...

Francis Pileggi and Kevin Brady Discuss the Delaware Court of Chancery’s Recent Rulings in Auriga Capital Corp. v. Gatz Properties

Francis Pileggi and Kevin Brady of Eckert Seamans discuss several aspects of recent rulings by the Delaware Court of Chancery in Auriga Capital Corp. v. Gatz Properties LLC, C.A. No. 4390-CS (Del. Ch., Jan. 27, 2012). On the Delaware Corporate and Commercial Litigation Blog , they write that the case...

Sidney Goldstein on Forming a LLC: Not So Fast!

by Sidney Goldstein In this EIA we will examine various issues that should be fully explained by the professional advisor to her client, before selecting the limited liability company (LLC) as the form of business entity to be adopted. Since each state has adopted its own version of a Limited Liability...

Delaware Supreme Court Upholds Chancery Decision but Rejects Dicta on Default Fiduciary Duties in LLCs

Gatz Properties LLC v. Auriga Capital Corp. , No. 148, 2012 (Del. Supr. Nov. 7, 2012) (Per Curiam). Issue Addressed Delaware's High Court held that the manager of an LLC violated a contracted-for fiduciary duty that adopted the equitable standard of entire fairness in a conflict of interest...

New Jersey Adopts Revised Uniform Limited Liability Company Act: An Overview of Significant Changes

by Jeffrey M. Shapiro and Eileen Overbaugh Excerpt: On March 18, 2013, the Revised Uniform Limited Liability Company Act (the "Revised Act") becomes effective and replaces New Jersey's existing Limited Liability Company Act (the "Current Act") with respect to all limited...

Default Fiduciary Duties Coming for Delaware LLCs

There has been a back and forth between the Chancery Court and the Delaware Supreme Court about whether there are default fiduciary duties for LLCs. The Chancery Court takes the position that there are default fiduciary duties, though you may contract around them. The Supreme Court on the other...

Delaware Court of Chancery Determines Ownership Interest in LLC and Remedy for Breach of Fiduciary Duties

Grove v. Brown , C.A. No. 6793-VCG (Del. Ch. Aug. 8, 2013) [ an enhanced version of this opinion is available to lexis.com subscribers ] Issues Addressed : This post-trial opinion addresses issues involved in a 4-person LLC whose members disputed: (1) what specific ownership interest each had in the...

Why Do Members Need LLC Operating Agreements and What Should Be Included in Them? Part I of III

On October 23 rd , I participated in a panel discussion relating to the LLC operating agreements. This was a webinar on drafting LLC agreements conducted by Financial Poise , a provider of CLEs and informational webinars for accredited investors, executives, and their legal and financial advisors. Preparation...

What Should Be Included in LLC Operating Agreements? Part II

As I said in my recent post about LLCs, the internal governance of LLCs is largely determined by contract among the LLC members. This contract, called an operating agreement, is the centerpiece of each LLC. I strongly recommend every multi-member LLC to have a written operating agreement. The core elements...

Delaware Court Orders Auction of Philadelphia Newspaper Company

In Re Interstate General Media Holdings, LLC, C.A. No. 9221-VCP (Del. Ch. Apr. 25, 2014) [ an enhanced version of this opinion is available to lexis.com subscribers ]. Why This Decision Is Notable : The Delaware Court of Chancery determined that a private auction was the best method to obtain the...