Tuesday, September 15, 2009

Dissolving A Maryland LLC

Question: I co-own a Maryland LLC with three other people. We are looking to dissolve and do not know where to begin. Where can we find the best information, and where is the best place to start? Are the Articles of Cancellation the same as the Articles of Dissolution? Stephalauren, Maryland
Response: In responding, I'll assume all members wish to dissolve the LLC. Basically, here are the steps to a voluntary dissolution of an LLC in Maryland--(a) members unanimously vote to dissolve the LLC, (b) file articles of dissolution with the Maryland Department of Assessments & Taxation, (c) wind-up the business, sell all assets not to be distributed to owners or creditors, pay the credit and, if any assets are leftover, distribute remaining assets to the members and (d) file articles of LLC cancellation with the Maryland Department of Assessments & Taxation. This information was gleaned from reading Subtitle 9. Dissolution, Forfeiture, and Reinstatement. of the Maryland LLC Act. In many states, those wishing to dissolve an LLC must also get a tax clearance letter from the state certified that they have paid all of the business entity's state tax obligations before the state officially dissolves the LLC. I would contact the Maryland Corporate Charter Division to ask whether I've left anything off the list: charterhelp@dat.state.md.us.

Here is a link to the official form for articles of LLC cancellation. There does not appear to be a recommended form for LLC articles of dissolution on the state website but that should pose no large hurdle. The contents of the articles of dissolution are rather straight forward as set out in Maryland LLC Act §4A–907.

(2) Articles of dissolution shall contain:
      (i) The name of the limited liability company;
      (ii) The date of filing of the articles of organization and each amendment thereto;
      (iii) The date of the dissolution; and
      (iv) Any other information the members determine.

As to the order of priority in distribution of the LLC's assets during the windup process, this is specified in Maryland LLC Act §4A–906.

Friday, September 4, 2009

Pro Se Representation of LLCs

Question: We have come across some judges classifying an LLC as a type of corporation or an association which requires the use of an attorney for representation in court. Can an LLC represent itself through one of it's members (partnership) or through it's sole member (single member LLC) pro se without a lawyer in a court of law or other civil proceeding? Herman, New York.
Response: "The general rule for corporate representation is that corporations, as 'artificial entities, may only appear in court through an attorney.' Thus, any non-lawyer representing the corporation engages in 'the unauthorized practice of law.'" Link. LLCs with more than one member are clearly artificial legal entities that the law will treat no different than partnership, which must be represented by a lawyer in court. However, what about single-member LLCs? The IRS allows a single-member LLC to be disregarded for tax purposes (and treated as a sole proprietorship). It would seem to make sense that single member LLCs should be excepted from the general rule such that the sole member is allowed to represent the LLC in court. That argument was expressly rejected by the federal Court of Appeals in Lattanzio v. COMTA, 481 F.3d 137 (2nd Cir. 2007); see also Collier v. Cobalt LLC, 2002 WL 726640 (E.D. La. 2002). I'm not aware of a reported case where a court has allowed a single member LLC to proceed pro se (without a lawyer).

Thursday, September 3, 2009

Who can be an LLC manager?

Question: Can the managing member of an LLC be another unrelated LLC? Michael, California.
Answer: The nice thing about LLCs is their flexibility. The answer to your question is found in the definitions section of the California Limited Liability Company Act (Section 17001 of the California Corporations Code). Section 17001(w) defined "Manager" as "a person elected by the members of a limited liability company to manage the limited liability company", emphasis added. The legal definition of "person" is not the same as the everyday usage. Section 17001(ae) defines "Person" as "an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, whether domestic or foreign", emphasis added. Thus, under my reading of the above statutes, an LLC (whether foreign or domestic) may be the manager of a second LLC formed in California.