Wednesday, May 30, 2018

An LLC Checklist Proposal

Today I will continue my quest seeking to get courts to appreciate the need to pay attention to detail as to LLCs. Sometimes courts misidentify LLCs as "limited liability corporations" (and not the correct "limited liability companies") because they don't know the difference. Other times it is because they copied the language from the pleadings. And other times it's just typing "corporation" when "company" was intended.  All such errors are understandable but should be fixed.  

Today, we get an unpublished court opinion from last week that clearly has the correct information available, yet the opinion goofs anyway. The opinion states:    

Every Limited Liability Corporation (LLC) in Delaware is required to have a registered agent to receive service of process for the corporation. Service directly upon the owners of the LLC is not legally necessary if the registered agent is properly served. 

JERZY WIRTH Pl., v. AVONDALE IQ., LLC, Def., CV N10J-03776, 2018 WL 2383578, at *2 (Del. Super. May 25, 2018). Corporations and LLCs need registered agents, but here we are dealing with an LLC.  The accompanying footnote gets it right, so this is simply an attention to detail problem.  The footnote reads: 

See 18 Del. C. § 10-105 (a) Service of legal process upon any domestic limited liability company or any series thereof established pursuant to § 18-215(b) of this title shall be made by delivering a copy personally to any manager of the limited liability company in the State of Delaware, or the registered agent of the limited liability company in the State of Delaware... (emphasis added/ See also Thompson v. Colonial Court Apartments, LLC, 2006 WL 3174767 (November 1, 2006, Cooch, RJ. (denying a motion to vacate a default judgment when service was properly made upon the registered agent and the defendant failed to file a responsive pleading).

Id. at *2 n.3. Sigh.  There's some punctuation that could be fixed in the footnote, too, but at least the content there is right, citing correctly to the LLC Act.  Getting the content is the most important issue, to be sure, but I think we can reasonably strive to get both right. 

To that end, here's a modest proposal for courts (and lawyers) writing about LLCs: 

  • Do a global search for "limited liability corporations." Unless you're talking about the early days of corporations, you almost certainly need to change do a global change to "limited liability companies." Start here, because this is almost always wrong. 
  • Consider (strongly) doing a global search for "corp" so you catch all versions of "corporation" and "corporate." If you're talking about an LLC, that should probably be replaced with "company" or "entity" or something similar (e.g., piercing the entity veil"). 
  • Similarly, if you're talking about multiple business forms, do your "corp" search and choose "entity" as your modifier (e.g., "entity governance," not "corporate governance").
  • Double check your entity statutes to make sure you're citing the right one. Too often LLC cases cite to the corporations statute because the case they are citing was about corporations.
  • Lastly, I'll also note to check whether corporate law should be applied at all to LLCs in that circumstance, although that goes to substance, not mechanics. 

 

http://lawprofessors.typepad.com/business_law/2018/05/an-llc-checklist-proposal-.html

Joshua P. Fershee, LLCs | Permalink

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