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Agency Outline

Professor Grey
Fall 2004
Limited Liability Partnership
1. 3431. Nature of partner's liability in ordinary
partnership and in registered limited liability partnership
A. 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 and
ii. 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.

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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 partnerships
A. 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 partnership
a. A registered limited liability partnership's name
shall contain the words "registered limited liability
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partnership" or the abbreviation "L.L.P." as the last
words or letters of its name.
3. 3434. Restrictions on distributions
a. 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 partnerships
5. 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

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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 report

A. 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.

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(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.

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(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. Name

A. 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

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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.

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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 members

Except 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. Managers

A. 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.

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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 managers

If 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 managers

A. 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

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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:

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(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 managers

A. 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.

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1316. Voting by managers

Except 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 members

A. 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 members

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A. 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.

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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 information

A. 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.

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(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 managers

A. 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.

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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 capital

The 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 contribution

A. 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

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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 losses

The 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 distributions

A. 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 withdrawal

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A. 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 kind

Except 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 distributions

A. No distribution shall be made if, after giving effect to the distribution:

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(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

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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 distribution

A. 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.

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1329. Nature of membership interest

A membership interest shall be an incorporeal movable. A member shall have no interest


in limited liability company property.

1330. Assignment of membership interest

A. 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 creditor

On 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.

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1332. Right of assignee to become a member

A. 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 member

If 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.

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1334. Dissolution

Except 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 dissolution

On 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 affidavit

A. 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.

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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 up

A. 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 assets

A. 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:

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(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; peremption

A. 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.

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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. Cases
a. 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.
ii.
d. Hamilton
i. Piercing LLC veil (limited exception)
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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. c

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