Black-letter propositions
- 01
An LLC forms by public filing and is governed primarily by its operating agreement plus mandatory statutory limits.
- 02
Member-managed LLCs ordinarily give members authority; manager-managed LLCs allocate ordinary management to managers and provide notice of that structure.
- 03
Members and managers can owe care, loyalty, and good-faith duties as defined and limited by statute and agreement.
- 04
Members are ordinarily not personally liable solely by status, subject to personal torts, guarantees, and veil piercing.
- 05
Mergers, sales of substantially all assets outside ordinary course, conversions, and dissolution generally require board or manager action plus owner approval and filings.
- 06
Dissenters may receive appraisal rights for specified transactions subject to procedure.
Use this attack sequence under time
Frame the issue
Identify entity form and management structure.
Resolve the next checkpoint
Read operating agreement and mandatory statute.
Resolve the next checkpoint
Determine actor authority and duties.
Resolve the next checkpoint
For structural change, list approvals, notice, filings, and appraisal.
Finish the conclusion
Address successor liability and dissolution.
Common wrong turns
- An LLC is not merely a partnership with automatic partner authority.
- Operating agreements cannot always eliminate every fiduciary or good-faith obligation.
- A sale of ordinary inventory is not a sale of substantially all assets.
Worked example
A manager-managed LLC member signs an ordinary company contract, and the counterparty knows only managers have authority.
The member lacks status-based authority in the manager-managed structure, and known limitations defeat apparent authority absent another manifestation.
Practice this topic
Governance and formation documents
NCBE's MEE outline lists articles of organization, certificates of formation and operating agreements as the LLC's formation documents, alongside articles of incorporation and bylaws for corporations. It lists members and managers under management and control, covering authority, liability and powers, and fiduciary duties of managers and members.
Amendments include articles of organization, certificates of formation and operating agreements.
Fundamental transactions
NCBE lists mergers and consolidations, sales of substantially all assets, recapitalizations, exchanges of securities and dissolution of the organization as fundamental changes. Cornell describes a merger in corporate law as the absorption of one corporation into another, in which the surviving corporation acquires all assets and liabilities, and notes non-corporate entities may sometimes merge too.
Ultra vires is an act exceeding the scope of authority granted by the company's bylaws, constitution or statute, so check the governing documents before you treat an action as valid.
When a governance action is ultra vires
Cornell's example of an ultra vires act is a company that removes a board member without following the procedures set in its own bylaws. The scope of authority is granted by the company's own bylaws, constitution or the state statutes governing it. Governments can act ultra vires too, measured against a constitution.
Frequently asked questions
What is the controlling rule for llc governance and fundamental transactions?+
LLC problems require management-structure and operating-agreement analysis; structural transactions add entity-specific approvals, filings, and owner remedies.
How should I analyze llc governance and fundamental transactions on the bar exam?+
Identify entity form and management structure. Read operating agreement and mandatory statute. Determine actor authority and duties. Address successor liability and dissolution.
What documents form an LLC under NCBE's outline?+
Articles of organization or certificates of formation, together with operating agreements, according to NCBE's MEE outline.
What does NCBE list for members and managers?+
Authority, liability and powers, plus the fiduciary duties that managers and members owe, according to the outline.
What is a merger?+
The absorption of one corporation into another, in which the surviving corporation acquires all assets and liabilities, according to Cornell.
What are fundamental transactions on NCBE's list?+
Mergers and consolidations, sales of substantially all assets, recapitalizations, exchanges of securities and dissolution of the organization.
What does ultra vires mean?+
An action by a company or its agent that exceeds the legal scope of its authority, which may be set by bylaws, a constitution or statute.