Agency Outline

Professor Grey

Fall 2004

Limited Liability Partnership

1. 3431. Nature of partner's liability in ordinary partnership and in registered limited liability partnershipA. Notwithstanding any other provisions of law to the contrary contained in Civil Code Article 2817, a. a partner in a registered limited liability partnership shall not be i. individually liable for the liabilities andii. obligations of the partnership arising from

1. errors,2. omissions,3. negligence, 4. incompetence, 5. malfeasance, or 6. willful or intentional misconduct iii. committed in the course of the partnership business by another partner or a representative of the partnership.

B. Nothing in this Section shall be construed as being in derogation of any rights which any person may have by law against a partner in a registered limited liability partnership because of any fraud practiced upon him, or because of any breach of professional duty or other negligent or wrongful act by such partner, or in derogation of any right which the registered limited liability partnership may have against any such partner because of any fraud practiced upon it by him.

C. Subsection A of this Section shall not affect the liability of a partner for his virile share of liabilities and obligations of the partnership arising from any cause other than those specified in said Subsection A.

D. Subsection A of this Section shall not affect the liability of partnership assets for partnership liabilities and obligations.

E. A partner, which by reason of Subsection A of this Section is not subject to liability, is not a proper party to a proceeding by or against a registered limited liability partnership, the object of which is to enforce the liabilities and obligations described in Subsection A of this Section.

1. 3432. Registered limited liability partnershipsA. To become a registered limited liability partnership, a partnership shall file with the secretary of state an application stating the name of the partnership, the address of its principal office, the number of partners, and a brief statement of the business in which the partnership engages.B. The application shall be executed by a majority in interest of the partners or by one or more partners authorized by a majority in interest of the partners.

C. The application shall be accompanied by a fee of one hundred dollars.

D. The secretary of state shall register or renew any partnership that submits a completed application with the required fee.

E. Registration is effective for one year after the date the registration is filed, unless voluntarily withdrawn by filing with the secretary of state a written withdrawal notice executed by a majority in interest of the partners or by one or more partners authorized by a majority in interest of the partners.

F. The secretary of state may provide forms for application for or renewal of registration.

2. 3433. Name of registered limited liability partnershipa. A registered limited liability partnership's name shall contain the words "registered limited liability partnership" or the abbreviation "L.L.P." as the last words or letters of its name.

3. 3434. Restrictions on distributionsa. A partner that is not liable under R.S. 9:3431(A) shall not be individually liable for the return of a distribution from the partnership to satisfy the liabilities and obligations described in said Subsection A except to the extent that the partner is required to return the distribution in a revocatory action brought in accordance with Chapter 12 of Title IV of Book III of the Civil Code.

4. 3435. Provisions applicable to registered limited liability partnerships5. A registered limited liability partnership is a partnership as defined in Article 2801 of the Civil Code, and the provisions of Title XI of Book III of the Civil Code apply to registered limited liability partnerships to the extent that they are consistent with the provisions of this Chapter. Upon lapse or termination of registration, the affected registered limited liability partnership shall continue as a partnership under Title XI of Book III of the Civil Code, but without application of this Chapter.Limited Liability Companies

Formation

A. One or more persons capable of contracting may form a limited liability company by filing the articles of organization and the initial report with the secretary of state. The articles of organization and initial report may be delivered to the secretary of state in advance for filing as of any specified date and, if specified upon such delivery, as of any given time on such date within thirty days after the date of delivery.

B. If the secretary of state finds that the articles of organization and initial report are in compliance with the provisions of this Chapter and after all fees have been paid as required by law, the secretary of state shall record the articles of organization and initial report in his office, endorse on each the date, and if requested, the hour of filing thereof with him, and issue a certificate of organization which shall show the date and, if endorsed on the articles of organization, the hour of filing of the articles of organization with him. The certificate of organization shall be conclusive evidence of the

fact that the limited liability company has been duly organized, except that in any proceeding brought by the state to annul, forfeit, or vacate a limited liability company's articles of organization, the certificate of organization shall be only prima facie evidence of due organization.

C. Upon the issuance of the certificate of organization, the limited liability company shall be duly organized, and its separate existence shall begin as of the time of filing of the articles of organization with the secretary of state. However, if the articles were so filed within five days, exclusive of legal holidays, after acknowledgment thereof or execution thereof as an authentic act, the limited liability company shall be duly organized, and its separate existence shall begin, as of the time of such acknowledgment or execution.

1305. Articles of organization; initial reportA. The articles of organization shall be written in the English language and shall be executed by at least one person, who need not be a member or manager of the limited liability company. The articles of organization shall be acknowledged by the person or one of the persons who signed the articles of organization or may be executed by authentic act.

B. The articles of organization shall set forth the following:

(1) The name of the limited liability company.

(2) The purposes for which the limited liability company is formed or that its purpose is to engage in any lawful activity for which limited liability companies may be formed under this Chapter.

C. The articles of organization may set forth the following:

(1) A statement of whether and to what extent there are limitations on the authority of members to bind the limited liability company or that such limitations are contained in a written operating agreement.

(2) A statement of whether and to what extent the limited liability company will be managed by managers.

(3) A statement regarding restrictions on the authority of managers or that such restrictions are contained in a written operating agreement.

(4) The latest date, if any, on which the limited liability company is to dissolve.

(5) A statement that persons dealing with the limited liability company may rely upon a certificate of one or more managers, members, or other certifying officials, whose names are included in the statement, to establish the membership of any member, the authenticity of any records of the limited liability company, or the authority of any person to act on behalf of the limited liability company, including but not limited to the authority to take the actions referred to in R.S. 12:1318(B), unless otherwise provided in the articles of organization.

(6) Any other provision, not inconsistent with law, that the members elect to set forth in the articles of organization.

D. It shall not be necessary to set forth in the articles of organization any of the powers enumerated in this Chapter.

E. The initial report shall be signed by each person who signed the articles of organization, or by his agent duly authorized by a document attached to the report, and shall set forth the following:

(1) The location and municipal address, if any, not a post office box only, of the limited liability company's registered office.

(2) The full name and municipal address, if any, not a post office box only, of each of its registered agents.

(3) A notarized affidavit of acknowledgment and acceptance signed by each of its registered agents.

(4) The names and municipal addresses, not a post office box only, of the first managers, if management of the limited liability company is vested in one or more managers, or the members, if management of the limited liability company

is reserved to the members, and if, in either case, they have been selected when the articles of organization are filed with the secretary of state. If the initial managers, if management of the limited liability company is vested in one or more managers, or initial members, if management of the limited liability company is reserved to the members, are not named in the initial report, a supplementary report setting forth their names and addresses and signed by each person who signed the articles of organization shall be filed with the secretary of state as soon as they have been selected.

1306. NameA. The name of each limited liability company as set forth in its articles of organization:

(1) Shall contain the words "limited liability company", the abbreviation "L.L.C.", or the abbreviation "L.C.".

(2) Shall not contain any word or phrase which indicates or implies that it is organized for any purpose not lawful for a limited liability company or contrary to its articles of organization and shall not contain the phrase "doing business as" or the abbreviation "d/b/a".

(3) Shall be distinguishable from the name of any corporation or other limited liability company organized under the laws of this state, any foreign

corporation or limited liability company registered or qualified to do business in this state, any name which is reserved under R.S. 12:1307 or R.S. 12:23(G), or any trade name registered with the secretary of state, unless any of the following Paragraphs apply:

(a) The corporation or other limited liability company is about to change its name, to cease doing business, or is being liquidated, or, if a foreign corporation or limited liability company, is about to withdraw from doing business in this state, and the written consent of the corporation or other limited liability company to the adoption of its name or a nondistinguishable name has been given and is filed with the articles of organization.

(b) The corporation or other limited liability company has theretofore been authorized to do business in this state for more than two years and has never actively engaged in business in this state. The failure of a domestic or foreign corporation to file a Louisiana corporate franchise tax return for two consecutive years shall constitute prima facie evidence that it has not actively engaged in business in this state during such period.

(c) The corporation or other limited liability company has failed to pay the taxes due by it to the state for the preceding five consecutive years.

(d) The corporation, if it is a foreign corporation, has not been authorized to do business in the state and has not filed a Louisiana corporate franchise tax return for two consecutive years.

(e) The charter of the corporation has been revoked by the secretary of state and that corporation has not filed a Louisiana corporate franchise tax return for two consecutive years.

(f) The other corporation or limited liability company filed for dissolution or withdrawal prior to the preceding five years and has not received the tax clearances required for final dissolution or withdrawal.

(4) Shall not imply that the company is an administrative agency of any parish or of this state or of the United States.

B. Nothing in this Section shall abrogate or limit the law as to unfair competition or unfair practice in the use of trade names, nor derogate from principles of law or the statutes of this state, or of the United States, with respect to the right to acquire and protect trade names.

C. The assumption of a name in violation of this Section shall not affect or vitiate the existence of the limited liability company, but any court having jurisdiction may, upon application of the state or of any person interested or affected, enjoin a limited liability company from doing business under a name assumed in violation of this Section, although its articles of organization may have been filed and recorded and a certificate of organization issued.

D. No limited liability company shall include in its name any words which

deceptively or falsely suggest a charitable or nonprofit nature.

E. If the limited liability company seeking the issuance of a certificate of organization in this state includes in its name the word "engineer", "engineering", "surveyor", or "surveying", the secretary of state shall require, prior to the issuance of the certificate of organization, evidence satisfactory to him that written notice of such application for a certificate of organization has been delivered to the Louisiana Professional Engineering and Land Surveying Board in writing not less than ten days prior to the date of issuance of the certificate of organization. If the applicant limited liability company files with its application to the secretary of state a written waiver signed by the executive secretary or any officer of the Louisiana Professional Engineering and Land Surveying Board waiving the requirement of ten days written notice to said board, as set forth in the preceding sentence, the secretary of state shall be authorized to proceed immediately with the processing of such application.

F. If a limited liability company seeking issuance of a certificate of

organization in Louisiana includes in its name the words "bank", "banker", "banking", "savings", "safe deposit", "trust", "trustee", "building and loan", "homestead", or "credit union", the secretary of state shall require written approval from the commissioner of the office of financial institutions dated not less than ten days prior to the issuance of the certificate of organization.

1311. Management by membersExcept as otherwise provided in the articles of organization, the business of the limited liability company shall be managed by the members, subject to any provision in a written operating agreement restricting or enlarging the management rights and duties of any member or group or class of members.

1312. ManagersA. The articles of organization may provide that the business of the limited liability company shall be managed by or under the authority of one or more managers who may, but need not, be members.

B. The articles of organization or an operating agreement may prescribe qualifications for managers.

C. The number of managers shall be specified in or fixed in accordance with the articles of organization or an operating agreement.

D. If a manager is listed in the articles of organization, an amendment thereto, or a supplemental report, a municipal address, which shall not be a post office box only, shall be indicated for each such manager.

1313. Election and removal of managersIf management is vested in one or more managers pursuant to R.S. 12:1312, then, unless otherwise provided in the articles of organization or an operating agreement:

(1) Election of managers to fill initial positions or vacancies shall be by plurality vote of the members.

(2) Any or all managers may be removed by a vote of a majority of the members, with or without cause, at a meeting called expressly for that purpose.

1314. Duties of members and managersA. Subject to the provisions of R.S. 12:1315, a member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to R.S. 12:1312:

(1) Shall be deemed to stand in a fiduciary relationship to the limited liability company and its members and shall discharge his duties in good faith, with the diligence, care, judgment, and skill which an ordinary prudent person in a like position would exercise under similar circumstances. Nothing contained in this Section shall derogate from any indemnification authorized by R.S. 12:1315.

(2) In discharging his duties, shall be fully protected in relying in good faith upon the records of the limited liability company and upon such information, opinions, reports, or statements presented to the limited

liability company, the members, managers, or any committee thereof by any of the limited liability company's members, managers, employees, or by any committee of the members or managers, or by any legal counsel, appraiser, engineer, including a petroleum reservoir engineer, or independent or certified public accountant selected with reasonable care by the members, managers, any committee thereof, any agent having the authority to make such selection, or by any other person as to matters the member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to R.S. 12:1312, reasonably believes are within such other person's professional or expert competence and which person is selected with reasonable care by the members, managers, any committee thereof, or any agent having the authority to make such selection.

(3) Is not protected by Paragraph (2) of this Subsection if he has knowledge concerning the matter in question that makes reliance otherwise permitted by Paragraph (2) of this Subsection unwarranted.

(4) Shall not be liable for any action taken on behalf of the limited liability

company or any failure to take any action if he performed the duties of his office in compliance with this Section.

(5) Shall account to the limited liability company and hold as trustee for it any profit or benefit derived by him, without the informed consent of a majority of the uninterested members in accordance with R.S. 12:1318(C), from any transaction connected with the conduct or winding up of the limited liability company or from any personal use by him of its property unless he proves under strict judicial scrutiny the fairness of the transaction to the limited liability company.

B. Notwithstanding the provisions of Subsection A of this Section, a member or manager shall not be personally liable to the limited liability company or the members thereof for monetary damages unless the member or manager acted in a grossly negligent manner as defined in Subsection C of this Section, or engaged in conduct which demonstrates a greater disregard of the duty of care than gross negligence, including but not limited to intentional tortious conduct or intentional breach of his duty of loyalty.

C. As used in this Section, "gross negligence" shall be defined as a reckless disregard of or a carelessness amounting to indifference to the best interests of the limited liability company or the members thereof.

D. A member or manager who makes a business judgment in good faith fulfills the duty of diligence, care, judgment, and skill under Subsection A of this Section if the member or manager:

(1) Does not have a conflict of interest with respect to the subject of the business judgment.

(2) Is informed with respect to the subject of the business judgment to the extent the member or manager reasonably believes to be appropriate under the circumstances.

(3) Rationally believes that the business judgment is in the best interests of the limited liability company and its members.

E. A person alleging a breach of the duty of diligence, care, judgment, and skill owed by a member or manager under Subsection A has the burden of proving the alleged breach of duty, including the inapplicability of the provisions as to the fulfillment of the duty under Paragraph A(2) and Subsection D, and, in a damage action, the burden of proving that the breach was the legal cause of damage suffered by the limited liability company.

1315. Limitation of liability and indemnification of members and managersA. Subject to Subsection B of this Section, the articles of organization or a written operating agreement may:

(1) Eliminate or limit the personal liability of a member or members, if management is reserved to the members, or a manager or managers, if management is vested in one or more managers pursuant to R.S. 12:1312, for monetary damages for breach of any duty provided for in R.S. 12:1314.

(2) Provide for indemnification of a member or members, or a manager or managers, for judgments, settlements, penalties, fines, or expenses incurred because he is or was a member or manager.

B. No provision permitted under Subsection A shall limit or eliminate the

liability of a member or manager for the amount of a financial benefit received by a member or manager to which he is not entitled or for an intentional violation of a criminal law.

1316. Voting by managersExcept as otherwise provided in the articles of organization or an operating agreement, if the limited liability company has more than one manager, each manager shall be entitled to a single vote on all matters properly brought before the managers, and all decisions of the managers shall be made by majority vote of the managers.

1317. Agency power of managers or membersA. Each member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to R.S. 12:1312, is a mandatary of the limited liability company for all matters in the ordinary course of its business other than the alienation, lease, or encumbrance of its immovables, unless such mandate is restricted or enlarged in the articles of organization or unless such member or manager lacks the authority to act for the limited liability company and the person with whom he is dealing has knowledge of the fact that he lacks such authority.

B. Persons dealing with a member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to R.S. 12:1312, of the limited liability company shall be deemed to have knowledge of restrictions on the authority of such a member or manager contained in a written operating agreement if the articles of organization of the limited liability company contain a statement that such restrictions exist.

C. Persons dealing with a limited liability company may rely upon a certificate of any person named in the statement provided for in R.S. 12:1305(C)(5), or, if no such person or persons are so named, upon a certificate of one or more managers or members, to establish the membership of any member, the authenticity of any records of the limited liability company, or the authority of any person to act on behalf of the limited liability company, including but not limited to the authority to take actions referred to in R.S. 12:1318(B).

1318. Voting rights of membersA. Unless otherwise provided in the articles of organization or a written operating agreement, each member of a limited liability company shall be entitled to cast a single vote on all matters properly brought before the members, and all decisions of the members shall be made by majority vote of the members.

B. Unless otherwise provided in the articles of organization or a written operating agreement, a majority vote of the members shall be required to approve the following matters, whether or not management is vested in one or more managers pursuant to R.S. 12:1312:

(1) The dissolution and winding up of the limited liability company.

(2) The sale, exchange, lease, mortgage, pledge, or other transfer of all or substantially all of the assets of the limited liability company.

(3) The merger or consolidation of the limited liability company.

(4) The incurrence of indebtedness by the limited liability company other than in the ordinary course of its business.

(5) The alienation, lease, or encumbrance of any immovables of the limited liability company.

(6) An amendment to the articles of organization or an operating agreement.

C. No contract or transaction between a limited liability company and one or more of its members, if management is reserved to the members, or managers, if

management is vested in one or more managers pursuant to R.S. 12:1312, or a person in which such a member or manager has a financial interest, shall be void or voidable solely for this reason, solely because the interested member or manager was present at or participated in the meeting which authorized the contract or transaction, or solely because his or their votes were counted for such purpose, if the material facts as to his interest and to the contract or transaction was disclosed or known to the members and the contract or transaction was approved by a majority vote of the members without counting the vote of the interested member, or if the contract or transaction was fair to the limited liability company as of the time it was authorized, approved, or ratified by the members. Interested members may be counted in determining the presence of a quorum at a meeting which authorized the contract or transaction.

D. The articles of organization or a written operating agreement may provide for any other voting rights of members not inconsistent with Subsection C of this Section.

1319. Records and informationA. Each limited liability company shall keep at its registered office the following:

(1) A current list of the full name and last known business address of each member and manager, if management is vested in one or more managers pursuant to R.S. 12:1312.

(2) Copies of records which would enable a member to determine the relative voting rights of the members.

(3) A copy of the articles of organization, together with any amendments thereto.

(4) Copies of the limited liability company's federal and state income tax returns and reports, if any, for the three most recent years.

(5) A copy of any operating agreement which is in writing.

(6) Copies of any financial statements of the limited liability company for the three most recent years.

B. Unless otherwise provided in the articles of organization or an operating agreement, a member may do any of the following:

(1) At the member's own expense, inspect and copy any limited liability company record upon reasonable request during ordinary business hours.

(2) Obtain from time to time upon reasonable demand the following:

(a) True and complete information regarding the state of the business and financial condition of the limited liability company.

(b) Promptly after becoming available, a copy of the limited liability company's federal and state income tax returns for each year.

(c) Other information regarding the affairs of the limited liability company as is just and reasonable.

(3) Demand a formal accounting of the limited liability company's affairs whenever circumstances render it just and reasonable.

C. Failure of the limited liability company to keep or maintain any of the

records or information required pursuant to this Section shall not be grounds for imposing liability on any person for the debts and obligations of the limited liability company.

D. Except as otherwise provided in the articles of organization or an operating agreement, a limited liability company and its members, managers, and agents may recognize and treat a person registered on its records as a member, as such for all purposes, and as the person exclusively entitled to have and to exercise all rights and privileges incident to the ownership of such membership interests. Rights under this Section shall not be affected by any actual or constructive notice which the limited liability company or any of its managers, members, or agents may have to the contrary.

1320. Liability to third parties of members and managersA. The liability of members, managers, employees, or agents, as such, of a limited liability company organized and existing under this Chapter shall at all times be determined solely and exclusively by the provisions of this Chapter.

B. Except as otherwise specifically set forth in this Chapter, no member, manager, employee, or agent of a limited liability company is liable in such capacity for a debt, obligation, or liability of the limited liability company.

C. A member, manager, employee, or agent of a limited liability company is not a proper party to a proceeding by or against a limited liability company, except when the object is to enforce such a person's rights against or liability to the limited liability company.

D. Nothing in this Chapter shall be construed as being in derogation of any rights which any person may by law have against a member, manager, employee, or agent of a limited liability company because of any fraud practiced upon him, because of any breach of professional duty or other negligent or wrongful act by such person, or in derogation of any right which the limited liability company may have against any such person because of any fraud practiced upon it by him.

1321. Contributions to capitalThe contribution of a member to a limited liability company may take the form of cash, property, services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services.

1322. Liability for contributionA. A promise by a member to contribute to the limited liability company shall not be enforceable unless set forth in a writing signed by the member.

B. Except as provided in a written operating agreement, a member's obligation to the limited liability company to perform any enforceable promise to contribute cash or property or to perform services shall not be discharged if he is unable to perform because of death, disability, or other reason. If a member does not make the required contribution of property or services, he or his personal representative is obligated, at his or his personal representative's option, to either contribute cash equal to that portion of value of the stated contribution which has not been made or forfeit his entire membership interest, or, in the case of a personal representative, forfeit all rights in such membership interest to which he may otherwise be entitled. However, a creditor of a limited liability company who extends credit after a member signs a writing which reflects the obligation and before any such

election to forfeit the membership interests is made may enforce the original obligation to the extent that the limited liability company refuses or is unable to honor the extension of credit.

C. Unless otherwise provided in a written operating agreement, the obligation of a member to make a contribution or return money or other property paid or distributed in violation of this Chapter may be compromised only with the unanimous consent of the members. Notwithstanding such a compromise, a creditor of a limited liability company who extends credit or otherwise acts in reliance on that obligation, after a member signs a writing which reflects the obligation and before the amendment or compromise, may enforce the original obligation to the extent that the limited liability company refuses or is unable to honor the extension of credit.

1323. Sharing of profits and lossesThe profits and losses of a limited liability company shall be allocated among the members and among classes of members in the manner provided in a written operating agreement. To the extent the operating agreement does not so provide in writing, profits and losses shall be allocated equally among the members. The provisions of this Section regarding the allocation of losses shall not affect the limitations on the liability of members and managers set forth in R.S. 12:1320.

1324. Interim distributionsA. Except as provided in this Chapter, a member is entitled to receive distributions from a limited liability company before the withdrawal of the member from the limited liability company and before the dissolution and winding up of the limited liability company to the extent and at the times or upon the occurrence of the events provided in an operating agreement or as authorized by the members.

B. Interim distribution of cash or other assets of a limited liability company shall be allocated among the members and among classes of members in the manner provided in a written operating agreement. To the extent such operating agreement does not so provide in writing, distributions shall be made equally to the members.

1325. Distributions upon withdrawalA. If a limited liability company has been constituted for a term, a member may withdraw without the consent of the other members prior to the expiration of the term, provided he has just cause arising out of the failure of another member to perform an obligation.

B. A member of a limited liability company not entered into for a term may withdraw or resign from a limited liability company at the time or upon the happening of an event specified in a written operating agreement and in accordance with the written operating agreement. If a written operating agreement does not specify the time or the events upon the happening of which a member may withdraw or resign, a member of a limited liability company not entered into for a term may resign or withdraw upon not less than thirty days prior written notice to the limited liability company at its registered office as filed of record with the secretary of state and to each member and manager at each member's and manager's address as set forth on the records of the

limited liability company.

C. Except as otherwise provided in this Chapter, on withdrawal or resignation, a withdrawing or resigning member is entitled to receive such distribution, if any, to which the member is entitled under a written operating agreement and, if not otherwise provided in a written operating agreement, within a reasonable time after withdrawal or resignation, the fair market value of the member's interest as of the date of the member's withdrawal or resignation.

1326. Distribution in kindExcept as provided in a written operating agreement, a member, regardless of the nature of the member's contribution, shall have no right to demand and receive any distribution from a limited liability company in any form other than cash. No member shall be compelled to accept from a limited liability company a distribution of any asset in kind to the extent that the percentage of the asset distributed to the member exceeds the percentage in which the member shares in distributions from the limited liability company.

1327. Restrictions on making distributionsA. No distribution shall be made if, after giving effect to the distribution:

(1) The limited liability company would not be able to pay its debts as they become due in the usual course of business.

(2) The limited liability company's total assets would be less than the sum of its total liabilities plus, unless the articles of organization or a written operating agreement provides otherwise, the amount that would be needed if the limited liability company were to be dissolved at the time of the distribution to satisfy the preferential rights of other members upon dissolution which are superior to the rights of the member receiving the distribution.

(3) The authorization or payment thereof would be contrary to any restrictions

contained in the articles of organization or a written operating agreement.

B. (1) The limited liability company may base a determination that a distribution is not prohibited under Subsection A of this Section either on financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances or a fair valuation or other method that is reasonable under the circumstances. For purposes of this Section, generally accepted accounting principles are deemed to be reasonable.

(2) Unless the articles of organization provide otherwise, a limited liability company, including a limited liability company engaged in extractive or oil and gas activities, which owns wasting assets, including oil and gas properties, intended for sale in the ordinary or usual course of business or which owns property having a limited life, such as a lease for a term of years or patents, need make no allowance for depletion or amortization of the cost of such assets in computing total assets.

(3) In computing amounts available for distribution, proper allowance shall, except as provided in Paragraph (2) of this Subsection, be made for depreciation and depletion sustained, and ascertained or known losses of every character. Deferred assets and prepaid expenses shall be considered as assets only to the extent of amounts thereof not used or amortized.

(4) Without limitation of other items that may be properly included therein, limited liability companies engaged in the business of extraction and sale of oil and gas may include in the calculation of depletion for such purposes their aggregate intangible drilling costs of drilling oil and gas wells. Such costs may include any item of expense or cost not recoverable from a well after it becomes uneconomical other than casing, such as seismic costs, drilling costs, stimulation costs, secondary and tertiary recovery costs, completion costs, work over costs, well site preparation expenses, and other similar expenses or costs, aggregate leasehold costs, and any item of expense or cost relating to the acquisition of a lease other than rental, such as title verification, other title review expenses, and lease bonuses.

(5) If terms of indebtedness provide that payment of principal and interest is to be made only if and to the extent that payment of a distribution to members could then be made under this Section, indebtedness of a limited liability company, including indebtedness issued as a distribution, shall not be a liability for purposes of determinations made under this Subsection.

C. The effect of a distribution under Subsection A of this Section shall be measured as of the date upon which the distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization, or the date upon which payment is made if it occurs more than one hundred twenty days after the date of authorization.

1328. Liability upon wrongful distributionA. Each member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to R.S. 12:1312, who knowingly, or without the exercise of reasonable care and inquiry, votes for or assents to a distribution in violation of the articles of organization, an operating agreement, or R.S. 12:1327 shall be jointly and severally liable to the limited liability company for the amount of the distribution that exceeds the amount that could have been distributed without violating R.S. 12:1327, the articles of organization, or an operating agreement. Each member shall be liable to the limited liability company for the amount which the member received in violation of this Section.

B. Each member or manager liable under Subsection A of this Section for an unlawful distribution shall be entitled to a contribution from each other member or manager who could be held liable under such Subsection.

C. An action to enforce liability under this Section must be brought within two years from the date of which the effect of the distribution is measured under R.S. 12:1327, except that a member or manager held liable under Subsection A of this Section solely because of having voted for or assented to an unlawful distribution may bring an action to enforce his right of contribution under this Section within two years from the date of payment by the member or manager on account of such liability. These time limits shall not be subject to suspension on any ground, nor to interruption except by timely suit.

1329. Nature of membership interestA membership interest shall be an incorporeal movable. A member shall have no interest in limited liability company property.

1330. Assignment of membership interestA. Unless otherwise provided in the articles of organization or an operating agreement, a membership interest shall be assignable in whole or in part. An assignment of a membership interest shall not entitle the assignee to become or to exercise any rights or powers of a member until such time as he is admitted in accordance with the provisions of this Chapter. An assignment shall entitle the assignee only to receive such distribution or distributions, to share in such profits and losses, and to receive such allocation of income, gain, loss, deduction, credit, or similar item to which the assignor was entitled to the extent assigned.

B. Unless otherwise provided in the articles of organization or an operating agreement, the pledge of or granting of a security interest, lien, or other encumbrance in or against any or all of the membership interest of a member shall not cause the member to cease to be a member or to have the power to exercise any rights or powers of a member.

C. Unless otherwise provided in a written operating agreement and except to the extent assigned by agreement, until an assignee of a membership interest becomes a member, the assignee shall have no liability as a member solely as a result of such assignment.

1331. Rights of judgment creditorOn application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the membership interest of the member with payment of the unsatisfied amount of judgment with interest. To the extent so charged, the judgment creditor shall have only the rights of an assignee of the membership interest. This Chapter shall not deprive any member of the benefit of any exemption laws applicable to his membership interest.

1332. Right of assignee to become a memberA. Except as otherwise provided in the articles of organization or a written operating agreement:

(1) An assignee of an interest in a limited liability company shall not become a member or participate in the management of the limited liability company unless the other members unanimously consent in writing.

(2) Until the assignee of an interest in a limited liability company becomes a member, the assignor shall continue to be a member.

B. An assignee who becomes a member has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of a member under the articles of organization, any operating agreement, and this Chapter.

Except as otherwise provided in the articles of organization or a written operating agreement, an assignee who becomes a member also shall be liable for any obligations of his assignor to make contributions under R.S. 12:1322 and to return under R.S. 12:1328(A) distributions received in violation of R.S. 12:1327. However, the assignee shall not be obligated for liabilities unknown to the assignee at the time that he became a member.

C. Whether or not an assignee of a membership interest becomes a member, the assignor shall not be released from his liability to the limited liability company under R.S. 12:1322 and 1328.

1333. Powers of estate of a deceased or incompetent memberIf a member who is an individual dies or a court of competent jurisdiction adjudges him to be incompetent to manage his person or his property, the member's membership ceases and the member's executor, administrator, guardian, conservator, or other legal representative shall be treated as an assignee of such member's interest in the limited liability company. If a member is a corporation, trust, or other entity and is dissolved or terminated, the member's membership ceases and the member's legal representative or successor shall be treated as an assignee of such member's interest in the limited liability company.

1334. DissolutionExcept as provided in the articles of organization or a written operating agreement, a limited liability company is dissolved and its affairs shall be wound up upon the first to occur of the following:

(1) The occurrence of events specified in writing in the articles of organization or operating agreement.

(2) The consent of its members in accordance with R.S. 12:1318.

(3) Repealed by Acts 1997, No. 717, 2, eff. July 8, 1997.

(4) Entry of a decree of judicial dissolution under R.S. 12:1335.

1335. Judicial dissolutionOn application by or for a member, any court of competent jurisdiction may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.

1335.1. Dissolution by affidavitA. In addition to all other methods of dissolution, if a limited liability company is no longer doing business and owes no debts, it may be dissolved by filing an affidavit with the secretary of state executed by the members or by the organizer, if no membership interests have been issued, attesting to such facts and requesting that the limited liability company be dissolved. Thereafter, the members, or the organizer if no membership interests have been issued, shall be personally liable for any debts or other claims against the limited liability company in proportion to their ownership interest in the company.

B. The secretary of state shall reinstate a limited liability company that has been dissolved pursuant to this Section only upon receipt of an order issued by a court of competent jurisdiction directing him to do so.

1336. Winding upA. Except as otherwise provided in the articles of organization or a written operating agreement, upon dissolution the members shall wind up the limited liability company's affairs. The windup of the limited liability company's affairs may be conducted by appointment of one or more liquidators to conduct the windup and liquidation. However, such appointment shall not be operative until both of the following occur:

(1) Notice of authorization of the dissolution, stating that the limited liability company is to be liquidated out of court and giving the name and post office address of each liquidator, has been published at least once in a newspaper of general circulation in the parish in which the limited liability company's registered office is located, and a copy of such notice, with the affidavit of the publisher of the newspaper to the fact of such publication attached, has been filed with the secretary of state.

(2) Articles of dissolution have been filed with the secretary of state in accordance with R.S. 12:1339.

B. However, any court of competent jurisdiction may wind up the limited liability company's affairs on application of any member or his legal representative or assignee or of any liquidator.

1337. Distribution of assetsA. Upon the winding up of a limited liability company, any assets remaining after paying or adequately providing for the payment of all debts and liabilities of the limited liability company, including all costs and expenses of the liquidation and any and all contingent liabilities of which the members or liquidator has knowledge, shall be distributed as follows:

(1) Except as provided in the articles of organization or a written operating agreement, to members or former members in satisfaction of liabilities for distributions under R.S. 12:1324 or 1325.

(2) Except as provided in the articles of organization or a written operating agreement, to members and former members, first, for the return of their capital contributions, and secondly, respecting their membership interests, in the proportions in which the members share in distributions.

B. In the event that there are contingent liabilities for which provision has been made as above, the members conducting the dissolution or liquidator shall not be dismissed until the contingent liabilities and debts have been paid or settled in full.

1338. Claims against limited liability company in liquidation; peremptionA. A limited liability company may have the benefit of Subsections C, D, and E of this Section by following the procedure set forth in Subsection B of this Section.

B. (1) After the proceeding for dissolution has taken effect, notice thereof shall be:

(a) Given by registered or certified mail to all known creditors of, to all persons believed to have valid and subsisting claims, excluding prescribed and time-barred claims, against, and to all persons having unfulfilled contracts with, the limited liability company.

(b) Published once a week for two successive weeks in a newspaper of general

circulation in the parish in which the limited liability company's registered office is located.

(2) Such notice shall call on the addressees to present their claims in writing and in detail, at a specified place and by a specified date not less than six months after the notice was mailed. The giving and publication of such notice shall not be deemed an acknowledgment of the validity of any claim against the limited liability company, waiver of any defense or setoff to any such claim, interruption of prescription on or tolling of any statute of limitation applicable to any such claim, or revival of any claim which has been barred by any prescription, peremption, or statute of limitations.

C. If any addressee of such notice shall not present his claim or claims as prescribed in the notice, such of his claims as would be enforceable against the limited liability company except for the provisions of this Subsection shall, unless suit has been entered thereon in a court of competent jurisdiction before the final date prescribed in the notice for presentation thereof, be perpetually and peremptorily barred, except to the extent, if any,

that the court may allow them against any remaining undistributed assets of the limited liability company on a finding that the claimant had some valid excuse for his failure so to present his claim.

D. All claims which would be enforceable by suit against the limited liability company except for the provisions of this Subsection, on which suit has not been filed in a court of competent jurisdiction before the expiration of three years after the proceeding for dissolution takes effect, or, if the notice prescribed in Subsection B of this Section was not given and publication thereof commenced within one month after the proceeding takes effect, before the expiration of three years after the giving or completion of publication of the notice, whichever is later, shall be barred perpetually and peremptorily.

E. The time limits provided in Subsections C and D of this Section shall not be subject to suspension on any ground or to interruption except by timely presentation of the claim as to Subsection C or timely suit as to Subsection D.

A. Casesa. Advance

i. The certificate of organization shall be conclusive evidence of the fact that the limited liability company has been duly organized

ii. A capital contribution does not have to be in the form of cash, and that he made capital contributions to advanced via his past experience, good will, services rendered and equipment he contributed, which assisted this business in its infancy.

b. F&G Invmts

i. A member of an LLC is not personally liable (same protection as corporation)

c. Rossi Article

i. The individual is tax and not the LLC.

d. Hamilton

i. Piercing LLC veil (limited exception)

1. Where the shareholders acting through the corporation commit fraud or deceit on a third party

2. Where the shareholders have failed to conduct the business on a corporate footing.

a. The shareholder disregard the corporate formalities to such an extent that the shareholder and the corporation became indistinguishable or

b. Such unity existed that separate individualities cease and the corporation was operated as the alter ego of the shareholder

ii. The determination of whether to allow piercing of the corporate veil is made by considering the totality of the circumstance

1. failing to follow statutory formalities for incorporating and transacting corporate affairs,

2. undercapitalization

3. failing to maintain separate bank accounts and bookkeeping records

4. failing to hold regular shareholder and director meetings

iii. Have allowed a piercing of the c operate veil, there exists one majority stockholder, either an individual or a corporation, which is found to be operating the corporation as its alter ego or as an instrumentality of the shareholder

e. Sage

i. Laws that are classified as interpretative or procedural, however, can not be applied retroactively if so do so would run afoul foul constitution prohibitions against, laws that impair the obligation of contracts. cAlford, Sumbler, Varnado

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