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LIMITED LIABILITY COMPANIES

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MICHAEL LYNN GABRIEL

ATTORNEY AT LAW

B.S., J.D., M.S.M. , DIP.(TAX), LL.M.(TAX)

LIMITED LIABILITY COMPANIES

TABLE OF CONTENTS

INTRODUCTION .........................................1

1.	COMMON QUESTIONS REGARDING LIMITED LIABILITY

COMPANIES (LLC's) ................................... 4

2.	THE LLC ............................................ 33

3.	STEPS IN FORMING AN LLC ............................ 56

4.	TAX CONSIDERATIONS ................................. 65

5.	LIMITED LIABILITY FOR MEMBERS ...................... 96

6.	CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS ............102

7.	DOING BUSINESS IN OTHER STATES .....................109

8.	BULK SALE ..........................................112

9.	SECURITY LAWS AND COMPLIANCES ......................118

10.	ARTICLES OF ORGANIZATION ...........................155

11.	OPERATING AGREEMENT ................................281

12.	AFTERWARDS: POST FORMATION ACTS ....................315

13.	MEMBER AGREEMENTS ..................................324

14.	TERMINATION OF LLC .................................349

15.	SERIES LLC ..... .................................. 358

APPENDIX .........................................369

INDEX ..............................................445

MEMBERSHIP CERTIFICATE .............................456

INTRODUCTION

In the recent past, when two or more people wished to conduct business together there were only two options available in structuring the business, either incorporate and operate as a corporation or operate as a partnership. Much of that has changed, a new form of business entity has been in development in recent years. This is the limited liability company which shares the best characteristics of both corporations and partnerships.

Wyoming was the first state to create a limited liability company. The first liability company was created specifically to assist in the development of oil and gas resources. The expansion into other states and use by other industries was slow until the Internal Revenue Service in 1988 finally ruled that a limited liability company could be taxed as a partnership rather than as a corporation. As a result of this monumental tax decision, there has been an explosion in the number of states which now permit limited liability companies to be formed under their laws. In April 1997, Hawaii, as the last holdout, enacted a Limited Liability Company Act. Now, all fifty states along with the District of Columbia permit limited liability companies to be formed under their laws and foreign limited liability companies to operate within their borders.

It is very important that anyone considering the possibility of forming a limited liability company, possess a good understanding of the rights and obligations that arise from the liability company arrangement. The book strives to explain the various features of limited liability companies along with their drawbacks. This book is very easy to use. It contains both basic Articles of Organization needed to form the company and also a basic operating agreement to cover the company' s daily management and operations.

Limited liability companies permit persons to operate a business in a manner virtually identical to a general partnership yet with the full corporate protection against personal liability for the debts of the company. In addition, it is often cheaper to form a limited liability company than a corporation because most states charge less for the filing of their Articles of Organization than a corporation's Articles of Incorporation.

This book discusses what requirements must be met to have the company taxed as a partnership. This is often the major consideration in forming such a limited liability company. As a rule, if the parties want the company to be taxed as a corporation, then it should be incorporated. Generally, only if the members actually want the company taxed as partnership should a limited liability company be formed. There is no real benefit derived from forming liability company over that of corporation, if it is going to be taxed as if it were a corporation anyway. The discussion of the respective benefits of being treated as a corporation or partnership are discussed in great detail.

This book is one in a series that have been written to help the reader cut through legal jargon and understand his or her rights. Other books of this series are:

1.	A mini-encyclopedia of law, "A COMPLETE GUIDE TO THE
LAW", by Carol Publishing.

2.	A two-volume set of ESTATE PLANNING. Volume one
pertains to Wills, Durable Powers of Attorney and	Living Will Declarations. Volume Two deals with the use	of Revocable Trusts as estate planning tools.

3.	INCORPORATING A SMALL BUSINESS

4.	LIMITED LIABILITY COMPANIES

5.	BANKRUPTCY CHAPTER SEVEN

6.	BANKRUPTCY CHAPTER THIRTEEN

7.	SMALL CLAIMS COURTS

8.	FINANCIAL PLANNING ONE

9.	FINANCIAL PLANNING TWO

10.	POWERS OF ATTORNEY

11.	PARTNERSHIPS

12.	NAFTA (NORTH AMERICAN FREE TRADE AGREEMENT)

These books are different from other legal self-help books. While they explain the pertinent law, they move beyond the basics. This series is written in a very practical mode, explaining to the user how to accomplish the desired results while providing detailed forms, examples and instructions. This series offers the most user- friendly and complete books of their type available.

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CHAPTER ONE

COMMON QUESTIONS REGARDING

LIMITED LIABILITY COMPANIES

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INTRODUCTION

This chapter is written in a question and answer format. It

covers many of the most commonly asked questions regarding limited liability companies. The questions covered are answered throughout the book in greater detail. The main reason for having such a chapter is to give the user of this book a basic understanding of limited liability companies before reading the more substantive chapters.

It has been shown that when legal self-help books are presented in this format, even though it requires more work and effort to do so, the reader is able to understand and assimilate the material in a better and faster manner.

1. WHAT IS A LIMITED LIABILITY COMPANY?

The newest development in business law is the creation of

the limited liability company. In operation, a limited liability company is a cross between a corporation and a partnership, both general and limited, and shares some of the characteristics of all three entities. Unlike a corporation which can have perpetual existence, some states limit the life a limited liability company to a maximum term, usually thirty years. Unlike the general partners of a partnership, the members of a limited liability company are not personally liable for the debts of the company which is the basic treatment for shareholders of a corporation or the limited partners of a limited partnership. Members of a limited liability company may agree in the operating agreement to allocate profit and losses other than in accordance with the percent of their ownership interests which is something a corporation can not do. In addition, a limited liability company may give full management and control to just a few managing members which is the same treatment that is available in a partnership.

In April 1997, Hawaii, as the last holdout, enacted a Limited Liability Company Act. Now, all fifty states along with the District of Columbia permit limited liability companies to be formed under their laws and foreign limited liability companies to operate within their borders.

A limited liability company is considered to be a legal entity which is separate and apart from all of the people who own, control or operate it. A limited liability company holds most of the rights of a legal person. As such, a limited liability company is capable of validly executing contracts, incurring debts, holding title to both real and personal property and also paying taxes. The attractiveness of limited liability companies stems from the very fact that they are held to be separate legal entities apart from their owners, the members, which gives LLCs unique advantages over both corporations and partnerships,

2. HOW IS A LIMITED LIABILITY COMPANY FORMED?

The steps for forming a business as a limited liability company are simple. They can be summed up as follows:

1. Filing the Articles of Organization;

2. Adoption of the Operating Agreement; and

3. Issuing the membership certificates.

Once the above steps have been accomplished, the limited liability company is formed and can commence operations in its home state. If the company wishes to do business in other states, it is usually required to filed a copy of its Articles with the Secretary of State along with a form stating that it is a foreign limited liability company.

3. WHAT MUST BE INCLUDED IN THE COMPANY NAME?

A limited liability companies must have a name that denotes

that it is a limited liability company. The name usually must

contain the words, "Limited Liability Company" or the symbols

"LLC", " L.L.C. " or "L.C.". The name selected for the company must not mislead the public into believing that it is an agent of the Federal or State government. The name of the limited liability company also must not mention or suggest involvement in a regulated or licensed field unless the limited liability company actually has that license.

The main concern is whether the proposed name is so similar to that of an existing business's name so as to mislead the public into believing that it is that other company. No state will permit two businesses to have the names so similar in nature that they are confusing. To avoid the possibility of having the Articles rejected because of similarity to the name of an existing business, the persons forming the limited liability company, the organizers, should conduct a name search with the Secretary of State's Office. If the name has not taken by another company, then it can be reserved, for a fee set by the Secretary of State, for a period of time which is usually sixty (60) days.

4. WHAT IS A REGISTERED OFFICE AND AGENT?

All state LLC acts require that a limited liability company, in its Articles of Organization:

1.	List the address of its principal place of business

in the state; and

2.	List both the name and address of a resident agent for

the company who is located in the state.

These requirements for the listing of a resident agent and registered office are also imposed upon a business which is incorporating. The purpose behind the listing of a registered agent

is so a person is thereby identified and authorized to receive legal process (lawsuits and official notices) against the company. This means that the resident agent is the person who is served any legal notices along with any summons and complaints filed against the company. Under most state laws, a company must have a resident agent in the state or, by default, it is agreed that the Secretary of State will serve as the resident agent. The reasons behind the requirement for listing a registered office are self-evident. The registered office is the location where the company's records are to be kept in the state. Another reason for the listing is to give

notice to the world, at large, where any complaint against the

company can be served.

5. WHAT ARE ARTICLES OF ORGANIZATION?

In the basic sense, the Articles of Organization is an

application by a group of individuals or entities for a license

to do business as a limited liability company in the state. If

the Articles are accepted and filed, in accordance with state law, the limited liability company is thereafter formed. This book contains a detailed chapter for preparing the Articles of Organization. Each state has it own minimum requirements for the contents of the Articles. This book has attempted to provide a general set of Articles that are sufficient for most states and more specific Articles when necessary. The reader should, nevertheless, familiarize himself with the limited liability law of the state where the limited liability company will be formed so as to assure compliance with the latest version of the law.

6. WHAT IS A MEETING OF MEMBERS?

Before the Articles were filed, they had to be approved and adopted. To do that, the person or persons who were to file the

Articles, the organizers, often call a meeting of potential members. At this meeting, the provisions to be contained in the Articles are decided upon. Also decided, at the meeting, is the important detail as to whether all of the members will manage the business or if the management will be through a centralized panel of selected managers. Once the Articles are adopted, they must be signed either by all of the potential members, if no managing members are selected, or by all of the managing members if management is to be by selected managing members. Usually, at this meeting, the operating agreement for the company is also created and adopted.

7. WHEN DOES A LIMITED LIABILITY COMPANY ACTUALLY EXIST?

After filing the Articles, the limited liability company exists on paper but it is not until membership certificates are actually issued will it exist at law, de jure. It is the fact that the company has outstanding membership certificates in the hands of members that is the defining characteristic behind the existence of a limited liability company. Following the filing of the Articles, the potential members of the limited liability company meet to purchase their membership certificates in the company and adopt the operation agreement. After the membership certificates have been issued, the company is then truly and fully formed.

8. WHO ARE MEMBERS?

Members are the owners of the limited liability company. Members own the membership certificates of the limited liability company and thus have the right to vote in the election of managing members or on other company business. Members are not personally liable for the debts of the limited liability company beyond the extent of their investment in the membership certificates. Members may agree to manage the company themselves or to turn the management over to a few elected members who are referred to as managing members.

In addition to electing any managing members, the members are required to vote for the following acts:

1.	any amendment of the Articles of Organization;

2.	any sale, option or lease of substantially all of the
limited liability company's assets,

3.	any merger or consolidation of the limited liability
company with another limited liability company;

4.	any amendment of the operating agreement;

5.	the removing and replacement of any managing member,
and

6.	the dissolution of the limited liability company.

Most operating agreements for limited liability companies require that an annual member's meeting be held each year to review the business affairs and conduct of the company. The members will also, at the meeting, re-elect or replace the managing members for another year. Members are usually given just one vote equal to their percentage of ownership in the company as evidenced by membership certificates. A majority of those membership interests

voting is needed to carry a resolution, the matter be voted upon.	9. WHO ARE MANAGING MEMBERS?

Managing members are those persons elected by the members of a limited liability company to manage the company's affairs within the scope of authority set forth in the operating agreement. The term managing members refers to all of the managing members. Managing members must be elected if the articles or operating agreement does not reserve management to all of the members themselves.

If managing members are elected, then they alone are responsible for running the day to day business affairs of the limited liability company. When the limited liability company is taxed as a corporation, the managing members are permitted reasonable compensation for their services. In small limited liability companies, the managing members often serve for free since they are primarily are there to protect their investments.

The decision to have the limited liability company managed by elected managing members is an element of corporate existence. As such, if the company also has either of the following characteristics: free transferability of its membership interests or continuity of life, then it may be taxed as a corporation and not a partnership under state tax law (See Chapter 4 discussion).

10. WHAT DUTIES ARE OWED BY A MEMBER TO A LIMITED LIABILITY

COMPANY OR TO THE OTHER MEMBERS?

A member owes to a limited liability company a duty of loyalty. A member can not usurp a company benefit, that is take for himself a benefit that could go to the limited liability company. In short, a member owes to the limited liability company the right of first refusal on any business opportunities that the member becomes aware that could affect the limited liability company. For example, if the limited liability company is in the paving business, a member could not form a competing paving business and solicit business from the limited liability company's existing clients. When a member has a personal interest on a matter before the board, the member is only allowed to vote on it if:

1. the member's interest has been fully disclosed to the	board, and

2. the contract is just and reasonable.

A member is not personally liable for the debts of the limited liability company. A member can not be sued, by members, for losses incurred as a result of the member's actions or decisions provided that they were undertaken in a reasonable and prudent manner. As agents of the limited liability company, members have the authority to bind the limited liability company by their actions. As such, members can execute contracts for the limited liability company and likewise can subject the limited liability company to liability for damages arising from their negligent or intentional acts committed on the limited liability company's behalf.

11. WHAT ARE MEMBERSHIP CERTIFICATES?

Membership certificates can be thought of as the ownership interests in a limited liability company. Every limited liability company is authorized to sell only a certain amount of membership certificates in accordance with the security law of the state where the company is formed. The purchasers of the membership certificates acquire an ownership interest in the company equal to their percentage of membership certificates to the total amount of membership certificates outstanding. Membership interest can be sold as shares in the company such as is done in a corporation or as fixed percentages such as is done in a partnership. The membership certificates used in this book are based upon the partnership format because that is the easiest form for most people to understand and to evaluate. Membership certificates may be sold by a limited liability company for money, labor , services canceled debts or for property contributed to the limited liability company. Membership certificates also be purchased with a promissory notes although, in such cases, the membership certificates is secured by tangible property.

Membership certificates can be voting or non-voting in nature. Non-voting membership certificates are usually issued by a limited liability company to raise money without giving the owner the right to participate in the business. To attract purchasers for its non- voting membership certificates, a limited liability company usually guarantees a fixed dividend payment or the right to later convert the non-voting shares into voting shares on a fixed formula.

12. WHAT IS MEANT BY LIMITED LIABILITY ?

The main advantage of a limited liability company is the limited liability that it provides the owners which are called members. As a limited liability company, the most that its members can lose in a lawsuit against the company is the assets that they contributed to the limited liability company. This limited liability for members is vastly different from that of a partnership or sole proprietorship where the owners are totally liable for all debts of the business. In such an instance, the creditors of the business can seek and attach every dollar and piece of property that a partner or sole proprietor owns in order to settle a judgment against the partnership or sole proprietorship. Such personal attachment to satisfy company debts can not be done against the assets of a member.

It is to cut off this unlimited liability for the debts of the business that people either incorporate or form a limited liability company. Few people would ever invest in a business, if by doing so, they risked losing everything that they have earned or will earn in the future.

13. WHAT IS THE COST OF FORMING A LIMITED LIABILITY COMPANY?

Costs for forming a limited liability company varies somewhat from state to state. The filing fees tend to run from a low of $50.00 to a high of $500.00. As such, the cost of forming a limited liability company is no more expensive, and in many cases, it is much cheaper than forming a corporation . If an attorney is used to prepare the Articles of Organization and Operating Agreement, then the attorney would tend to charge between $500 to $1,000. This amount avoided by using the basic forms in this book which can be augmented with whatever additional clauses the parties want to include.

The cost of forming a limited liability company should be looked upon as a one time insurance premium. Once the business is formed as a limited liability company, the members are protected from individual liability from then forward for the actions of limited liability company or its employees. After forming the limited liability company, its members no longer have everything they own at risk. Peace of mind is an important consideration in addition to cost when deciding whether to form a limited liability company.

14. WHAT IS THE ALTER-EGO THEORY?

As stated above , a member is not usually liable for the debts of a limited liability company. The major exception to a member's non-liability arises in the situation when the member disregards the formal existence of the limited liability company and acts as though the business is really a partnership. The theory behind this is called the alter-ego theory. The factors that a court looks at in determining if a limited liability company really exists are:

1. Is the limited liability company adequately capitalized?;

2. Were membership certificates issued?;

3. Were company funds and assets applied for the personal

use of the members?;

4. Was business conducted in accordance with the terms of

the operating agreement; and

5. Have the members referred to the company as a partnership

when dealing with third parties?

It is very difficult for courts to apply the alter-ego theory because it is easy to comply with the requirements for forming a valid limited liability company. However, if the LLC is not validly formed or operated, then a court may find the members personally liable for the debts of the limited liability company.

15. HOW DOES A LIMITED LIABILITY COMPANY DIFFER FROM A

CORPORATION OR PARTNERSHIP?

In a limited liability company, the members are not personally liable for payment of the company's debts unless they had agreed to be so liable. The liability of its members is the same as that for a corporation wherein the shareholders are not responsible for the payment of the corporation's debts or obligations. In a limited partnership, the limited partners are also not responsible for the payment of the limited partnership's debts. The major differences between a corporation and limited partnership are:

1.	the shareholders are not liable for the corporate debt
whereas the general partners (managers) of the limited	partnership are personally liable for the payment of	the limited partnership debts; and

2.	the limited partners of a limited partnership may not	participate in the management and administration of the

daily affairs of the limited partnership without losing	their protection from liability for the debts of the	limited partnership. In contrast, corporate shareholders	can be employees, officers and directors of their	corporation without incurring personal liability for the	corporate debts.

16. HOW ARE PARTNERSHIPS AND CORPORATIONS TAXED?

A major difference between corporations and partnerships are how they are taxed. In making a decision as to whether to form a limited liability company, a corporation or partnership, the people doing so must understand how that business entity will be taxed. Often the tax structure will determine if the business will be profitable for the investors and thus worthwhile engaging in such business.

Partnerships are not taxed on their income. Instead of paying taxes on its income, a partnership is required to allocate its income to its partners in accordance with their ownership interest in the partnership, The partners are required to claim the partnership income which is allocated to them on their personal income tax return. As such the partnership income is taxed just once, when received by the partners. Each partner pays taxes on the income in accordance with that individual's tax rate. Each partner' s tax rate may differ among themselves in accordance with the amount of money that the person earned during the tax year.

Under the Internal Revenue Code, a regular corporation is called a C corporation. For the C corporation, a tax is placed on all of the corporation's net income. Distributions which are made

to the shareholders are treated as dividends and must be included on the shareholder's tax return. For a C corporation, income is taxed twice: both at the corporate level and again when distributed to the shareholders. The double taxation of income for C corporations had a terrible effect on small businesses. A small business, which operate as a C corporation had its income taxed twice which result in reduced amounts actually being received by the shareholders. To help small business, Congress enacted a special provision in the tax code which created what is referred to a Subchapter S corporation or simply an S corporation. Basically, Congress permits a small corporation having only one class of stock and having 75 or less shareholders to elect to become S corporations. Once the S corporation election is made, the corporation will be treated for tax purposes as a partnership. A S corporation affords its shareholders all of the protection of a corporate form along with the right of the shareholders to participate in the business and yet it will have its income treated as though the company was a partnership.

17. HOW IS A LIMITED LIABILITY COMPANY TAXED?

A limited liability company has elements of both a corporation and partnership. Because of the shared elements, the Internal Revenue Service has struggled over whether to tax it as a partnership or corporation. If the limited liability company is taxed as partnership, then its income will be passed through to its members and a double taxation will be avoided. On the other hand, if the limited liability company will be taxed as a corporation, then its income will be taxed twice-first when earned and secondly as dividends when distributed to its members. IT IS ALMOST ALWAYS BETTER FOR A LIMITED LIABILITY COMPANY TO BE TAXED AS A PARTNERSHIP IN ORDER TO AVOID THE DOUBLE TAXATION. Whether taxed as a corporation or a partnership, the members of a limited liability company will still be protected from liability for the company's debts.

18. HOW HAS THE I.R.S. DECIDE TO TREAT A LIMITED LIABILITY	COMPANY?

How an LLC will be taxed is the second most important concern, the first being the limited liability of members. Because an LLC has elements of both a corporation and partnership, it can, depending on the facts, be treated for tax purposes as either a corporation or a partnership. When the LLC is taxed as a partnership, its income is passed to its members and double taxation is avoided. On the other hand, when an LLC is taxed as a corporation, its income is taxed twice, first upon being earned and second when distributed to its members as dividends. It is almost always better for an LLC to be taxed as a partnership so as to avoid the double taxation.

Regardless of how a LLC is treated for tax purposes, be it as a partnership or as a corporation, the members of the LLC will not have personal liability for the debts of the company.

Federal Tax law changed dramatically in 1997. As of January 1, 1997 all newly formed LLC's with two or more members will be treated as a partnership for tax purposes unless the LLC elects corporate tax treatment either as a C corporation or S corporation. A single member LLC will be treated as a sole-proprietorship for federal tax purposes. This is a complete reversal of prior federal tax law. Prior to 1997, an LLC was taxed as a corporation unless it could prove to the IRS that is should be a partnership. In order to prove that a pre-1997 LLC should be taxed as a partnership it had pass a special four-prong test created by the IRS.

As of January 1997, LLC are automatically given partnership tax treatment unless they specially opt out of it. To opt for corporate tax treatment, the LLC will file a new IRS form 8863 within 75 days of the beginning of a new tax year.

20. WHAT IS THE ACCUMULATED EARNINGS CREDIT?

The accumulated earnings credit is a federal tax advantage available to limited liability companies being taxed as corporations and not enjoyed by a limited liability company being treated as a partnership. Under this credit, a limited liability company, which is taxed as a corporation and not a partnership, is allowed to retain a large amount of after-tax income in its treasury and not distribute it to members in the form of dividends. The accumulations are permitted as long as they are intended to meet the reasonable and anticipated future needs of the limited liability company. In such a case, the members do not have to pay taxes on the retained earnings the limited liability company, which is taxed as a corporation. The limited liability company also had paid a lower tax rate on the first $75,000 of accumulated earnings than if it had been taxed as partnership.

21. IS A NEWLY FORMED LIMITED LIABILITY COMPANY LIABLE FOR	THE DEBTS OF THE PRIOR BUSINESS?

The general rule is that a newly formed limited liability company is not liable for the debts of a prior business whose assets were transferred into it unless all of the members or the managing members, if any, of the limited liability company agreed to have the limited liability company so bound. However, regardless of whether the limited liability company assumed those liabilities, the owners of the prior business still remain personally liable for the debts of the prior business.

If the transfer of assets into the limited liability company is intended to defraud creditors or is in violation of a state's Bulk Transfer Act, which governs when assets of business can be transferred, then creditors can sue the limited liability company to the extent of the value of the property transferred.

22. WHAT IS A BULK TRANSFER ACT?

Every state has a Bulk Transfer Act which requires notice to creditors whenever the majority of a business's assets are transferred. The Bulk Transfer Act also applies to transfers into a newly formed limited liability company. Under the Act, creditors are usually required to be given at least ten days notice before the transfer. In addition, copies of the proposed transfer are usually also required to be given to the local tax assessor (so the state can get a property tax on the transaction). Notice to creditors is usually given by publishing a Notice of Bulk Transfer in the newspaper of general circulation. If no creditor objects, then the transfer goes forward and the creditors lose their right to seek return of the transferred assets into the company.

23. WHAT IS DISSOLUTION OF A LIMITED LIABILITY COMPANY?

Dissolution of a limited liability company is the termination of the limited liability company and is in fact its legal death. Dissolution usually occurs, under the terms of the operating agreement when any of the following occurs:

1. the members holding more than 50% of the voting

rights in the limited liability company vote to do so;

2. the managing members can dissolve the limited

liability company when:

(a)	the limited liability company never issued any
shares and thus was never really a limited liability	company,

(b)	the limited liability company has filed a chapter
seven bankruptcy petition,

©	the limited liability company has disposed of all
of its assets and hasn't conducted business for	several years, usually five years.

3.	creditors may file a legal action seeking involuntary
dissolution of the limited liability company in order	to have their debts paid through the liquidation of the	company assets.

4.	a limited liability terminates automatically on the

termination date listed in the Articles of
Organization.

Once the dissolution has been approved or ordered, the limited liability company must stop doing business except to the extent necessary to wind up the affairs of the limited liability company. When resolution to dissolve is adopted or ordered, the limited liability company is required to file a certificate of dissolution with the secretary of state where it was formed.

24. HOW ARE THE PROCEEDS FROM A DISSOLUTION DISTRIBUTED?

After a limited liability company has been dissolved and its assets liquidated, the distribution is made to the extent of company assets as follows:

1. all federal and state taxes are paid,

2. all employee wages and benefits are paid,

3. all secured liabilities are paid,

4. all unsecured liabilities are paid,

5. the remaining funds, if any, are divided among the	members in accordance with their percentage of ownership interest in the outstanding membership certificates	of the limited liability company.

The proceeds received by a member in the dissolution of a limited liability company is a return of the members' investment. Any gain or loss realized by a member as a result of the dissolution is treated as a capital gain or loss. For example, if the member had paid $4,000 for the membership certificates and got back $3,000, then the member had a $1,000 capital loss. Likewise, if the member received back $6,000, then the member would have to recognize a $2,000 capital gain.

25. IS A LIMITED LIABILITY COMPANY REQUIRED TO REGISTER ITS	MEMBERSHIP CERTIFICATES WITH THE SECURITIES AND EXCHANGE	COMMISSION BEFORE IT CAN SELL THE MEMBERSHIP CERTIFICATES?

Before any membership certificates of a newly formed limited liability company can be sold, the offering must either be registered with the Securities and Exchange Commission or be exempt from registration. Several specific exemptions exist which a qualified limited liability company can use to avoid the registration requirement. Almost all small limited liability companies have at least one exemption open to them to avoid registration. The exemptions are:

1. an intra-state exemption under section 3(a)(l) of the	Security and Exchange Act. This is the most popular	exemption for small companies. It is available where all	the members reside in the same state where the limited
liability company is organized and doing business.

2. the sale of the membership certificates is exempt as a non-	public offering under section 4(2) to sophisticated

investors and there was no public advertisement or	solicitation for the membership certificates sale.

3. the sale complied with the Regulation D requirements of	the SEC which requires adherence to very strict	disclosure requirements by the limited liability company

to the investors.

Once the requirements for claiming an exemption are met, the limited liability company can issue its membership certificates without interference by the SEC,

26. DOES A LIMITED LIABILITY COMPANY NEED A STATE PERMIT TO

ISSUE MEMBERSHIP CERTIFICATES?

All states require that limited liability companies selling membership certificates in their state either have a state permit to sell the membership certificates or that the sale of membership certificates fall into one of its statutory exemptions. Just as with the SEC, all states have some type of exemption from registration for small limited liability companies. Usually, a limited liability company of less than 15 members, can simply sell membership certificates and notify the Secretary of State that such membership certificates has been sold. A limited liability company, utilizing the small number of members exemption , is usually not required to identify members to whom it sold the membership certificates.

27. WHAT ARE OPERATING AGREEMENTS?

Operating agreements are the rules for the general day to day management and operation of the limited liability company. The operating agreement is adopted by the members and thereafter can be amended by a majority vote of the members. An operating agreement is an attempt to cover the many areas of potential conflict within a limited liability company and the delegation of duties and responsibilities. A proposed form for a basic operating agreement for use the jurisdictions which permit limited liability companies follows in the Operating Agreement chapter. Operating agreements can be general in nature or more closely tailored to the needs and desires of the members. Most operating agreements will contain or mention most of the issues covered in the Operating Agreements Chapter.

Operating agreements are not set in concrete. Members can alter or amend the operating agreements by simply having a properly conducted meeting to do so. The purpose of operating agreements is to set up the procedure for the daily administration and management of the limited liability company. As such, it is understood that as the limited liability company grows and develops the operating agreement may have to be amended to keep pace with the new requirements of the limited liability company.

28. ARE MEMBERS PERSONALLY LIABLE FOR THE PAYMENT OF TAXES?

There is a bizarre provision in the Internal Revenue Code that make the person who writes the checks for a limited liability company personally responsible for payment of the limited liability company's payroll taxes. Extending liability to mere check writers can have terrible consequences. Many unsuspecting secretaries and other employees, who were not even members, have found themselves sued by the IRS because their employer failed to pay its taxes or make proper withholding payments . Since the employee or member had a degree of responsibility for writing checks, even though under the careful scrutiny of the employer or other members, the person could find himself sued by the IRS for the unpaid payroll taxes.

One very bad case was reported in a television documentary involving I.R.S. abuses. The employee after discovering that the employer was not making required tax withholding payments, reported the employer to the IRS and quit the job. The IRS failed to seek collection of the back withholding taxes from the employer who several years later went out of business. When the IRS realized because of its delay it could not recover the unpaid withholding taxes from the employer, it then sued the employee who reported the matter to the IRS. The conduct of the I.R.S. in this matter was outrageous but interviews with the I.R.S. showed no remorse or consideration for the innocent employee.

29. MUST A LIMITED LIABILITY COMPANY GET STATE LICENSES?

A limited liability company is treated the same as any other business entity. As such a state will require the company to obtain the same license that any other business entity must have to conduct a particular type of business. State permits are not transferable. If a partnership, which had the necessary permits and licenses to do business, should change its business form into that of a new limited liability company, then the new entity would have to apply for new state licenses and permits in its own name. The reason for this is that limited liability company is a legal entity in its own right and it treated separate and apart from the members and any business that they might have previously been engaged.

30. MUST A LIMITED LIABILITY COMPANY GET LOCAL BUSINESS LICENSES?

Many states permit its counties, parishes, cities and other governmental entities to raise revenue by taxing limited liability companies doing business in their jurisdictional area. The taxing usually takes one of two forms. The first is a straight license fee for a permit to do business. The second, and more insidious, is a corporate income tax that city and/or county may charge in order to grant a business license. The limited liability company should always consider whether there is a city or county business license required in order to operate. Such licenses would be required regardless of whether the business is a limited liability company or not.

31. MUST A LIMITED LIABILITY COMPANY PAY ESTIMATED FEDERAL

INCOME TAX ON ITS INCOME?

Under the Internal Revenue Code Section 6655, limited liability companies which are being treated taxwise as though they were corporations are required to pay to the Internal Revenue Service installments on its estimated income tax. Such limited liability companies are required to make their estimated payments to an authorized commercial bank depository or a Federal Reserve Bank by the statutory payment dates. Accompanying the payment will be the Federal Deposit Form 8109. Instructions for the estimated tax are provided in IRS Form 1120W (Worksheet), "Corporation Estimated Tax." A limited liability company being treated as a partnership is not required to pay estimated taxes on its income because the income is allocated to its members.

32. MUST A LIMITED LIABILITY COMPANY PAY STATE ESTIMATED TAX?

A limited liability company must comply with the tax law of any state in which it does business. This is especially true when the LLC is being treated for tax purposes as though it were a corporation. Therefore, if the LLC does business in a state which

which taxes limited liability companies as corporations then the LLC is subject to the payment of estimated taxes on its income. For example, Florida taxes all LLCs as though they were corporations. While Florida permits the formation of LLCs under its laws, it nevertheless taxes them as though they were corporations and not partnerships.

It is important to understand the tax law of any state in which the LLC will engage in business. If the LLC does business in a state which treats LLCs as corporations for tax purposes, then the company will probably be required to pay estimated taxes on its incomes even though it may be treated as a partnership for federal tax purposes.

33. MUST A LIMITED LIABILITY COMPANY PAY PERSONAL PROPERTY	TAXES?

Many states, such as California, impose a tax on the personal business tax on a company for all personal property owned in the state. This tax is imposed on a business regardless of whether it does business in a partnership, corporation or limited liability company form. In doing business in any state, the LLC should be aware of any personal property taxes which may be assessed on business assets located in the state. Generally, the same tax rate are applied to an LLC as for a corporation and partnership.

34. MUST A LIMITED LIABILITY COMPANY PAY SALES AND USE TAXES?

When a limited liability company expects to engage in the business of selling tangible personal property, then it should determine if it needs to obtain a sales and use tax permit under applicable state law. Generally, states, which have sales taxes, presume that all gross receipts of personal property sales are subject to the sales tax. As with personal property taxes, it makes no difference as to the form of the business. As long as goods subject to the tax are sold, sales tax must be charged.

35. MUST THE COMPANY FILE AN ANNUAL STATEMENT?

A few states, such as Louisiana, require limited liability companies formed in the state file an annual statement of its managing members with the Secretary of State. Contained in the annual statement are the names and addresses of the managing members, the address of the company's registered office in the state, and the name and address of the registered agent in the state. If the annual statement is not filed, the company may be subject to fines and penalties. The purpose is simply for the state to be able to keep track of the limited liability company.

36. CAN A LIMITED LIABILITY COMPANY USE A FICTITIOUS NAME?

A limited liability company is usually permitted to do business using a fictitious name if it complies with the state's fictitious name law. If the limited liability company is going to do business in a name other than its own, then it absolutely must look into the state's requirements for filing a fictitious name statement. Most states require anyone, even a limited liability company, that does business in a name, other than its own, to file a fictitious name statement with the county clerk. The purpose of such a filing is to provide the public a means to identify the owner of the business in the event of litigation or any other need to contact the owner.

37. CAN THE ARTICLES OF ORGANIZATION BE AMENDED?

The provisions contained in the Articles of Organization for a limited liability company can only be altered or changed by the filing of an amendment of the Articles. Because it is so difficult procedurally to amend the Articles, sometimes members place the really important management provisions in the Articles for just that reason. The Articles contained in this book are all that are needed to meet the minimum requirements under state law. In practice, the entire operating agreement or any of its provisions can be included in the Articles. The only thing to remember is that once something is listed in the Articles, it can only be changed by filing an amendment to the Articles. The procedure for filing an amendment is the same as for the original Articles: the amendment is filed with the Secretary of State.

CHAPTER 2

THE LIMITED LIABILITY COMPANY

I. DEFINITION

The most recent development in business law is the creation of the Limited Liability Company (LLC). The first LLC was created in the 1970's. For many years LLC's were not popular because the tax laws subjected them to more taxation than either a corporation or a limited partnership. In 1977, the first LLC was created in Wyoming for an oil company. The company was granted a private tax ruling stating that it would be treated as a partnership. In 1980, the U. S. Treasury issued proposed regulations that stated an LLC would be taxed as a corporation because its members did not have a partner's liability for the company's debts. In 1988, the Internal Revenue Service finally issued Revenue Ruling 88-76, 19882 CB 360, stating that an LLC could be taxed as a partnership. This revenue ruling calmed concerns about forming LLC's. As a result, the number of states permitting LLC's has increased dramatically. As of April 1997, Hawaii and Vermont, as the last holdouts, enacted a Limited Liability Company Act. Now, all fifty states along with the District of Columbia permit limited liability companies to be formed under their laws and also permit foreign limited liability companies to operate within their borders.

An LLC is a cross between a corporation and a partnership. The characteristics that are shared with a corporation or a partnership are:

1.	It bestows limited liability on its members just as a corporation does on its shareholders and a limited partnership does on its limited partners.

2.	It can provide for the free transferability of its membership interests the same as a corporation or partnership.

3.	It can provide for continuity of life after the death, resignation, expulsion or bankruptcy of a member the same as a corporation or a partnership.

In addition, an LLC may give full management and control to just a few managing members, which is the same treatment that is available in a partnership and similar the board of directors of a corporation.

The following, however, are the major differences between LLC's and corporations or partnerships:

1.	Unlike a corporation, which can have perpetual existence, some states limit the life of an LLC to a maximum number of years, usually 30, after which it is terminated.

2.	Unlike the partners of a general partnership, the members of the LLC are not personally liable for the debts of the company, which is the same basic treatment as that of shareholders of a corporation or limited partners of a limited partnership.

3.	Unlike a corporation, the company does not have the corporate restrictions on financing. Example: The company does not need to create a special surplus account for distributions.

4.	Unlike a corporation, in the majority of states, absent an agreement among the members to the contrary, profits and losses of an LLC are allocated in accordance with each member's percentage of capital contributions. A few states have adopted the per capita partnership rule: if there is no agreement or decision, profits and losses will be allocated equally among members. Either method is different from that of a corporation. Division of corporate profits and losses must be based upon the number of shares that a shareholder owns in the corporation.

These characteristics are important.

The main advantage of an LLC is the limited liability protection that it provides its owners, who are called members. In an LLC, the most that its members can lose in a lawsuit against the company are the assets which they contributed to the LLC. The limitation of liability would naturally not extend to any personal guarantees of company debts by a member. If a member personally guarantees a company loan of $100,000, the member is personally liable for the repayment. The member's liability arises not because the person is a member of the company but because the member guaranteed that he personally would repay the loan. It is immaterial that the creditor may have gone directly against the company. The limited liability for members is quite different from that of a general partnership where the partners are totally liable for all debts of the business. The creditors of a general partnership can seek and attach every dollar and piece of property each partner owns in order to settle a judgment against the partnership. Such personal attachment to satisfy company debts cannot be taken against the assets of a member. People should either incorporate or form an LLC to eliminate this unlimited business liability exposure. Few people will invest in a business that risks everything they have or will earn.

An LLC is considered to be separate and apart from all of the people who own, control and operate it. An LLC holds most of the rights of a legal person. An LLC is able to validly execute contracts, incur debts, hold title to both real and personal property and pay taxes. The attractiveness of LLC's is that they are held to be separate legal entities from their owners, the members, which gives them unique advantages over both corporations and partnerships.

II. FORMATION

A. General

An LLC is a statutory creation. It can only be formed by strict compliance with the state law under which it is being created. An LLC just as with a corporation or a limited partnership requires a public filing of its formation documents. The filing of the Articles of Organization is required:

1.	To give public notice that the company is formed in a way that bestows limited liability on the members for the debts of the company, and

2.	To give the public notice where the company is located and who can act in its behalf.

Some states require a LLC to have more than one owner. This is a different requirement than imposed on corporations which are permitted to have only one shareholder. Several states which include Arizona, Colorado, Delaware, Illinois, Iowa, Kansas, Louisiana, Maryland, Minnesota and Virginia permit only one person to form an LLC, but the company is not given legal effect until it has more than one member. States that require a company to have two or more members usually also require two or more persons to sign the Articles of Organization or a subscription agreement prior to filing the Articles. If a company falls below the minimum number of members for an LLC, it will not only be dissolved but it will lose the limited liability shield for its members except to the extent necessary to dissolve the company. A company will be treated harshly if it continues to do business for an undue period after ceasing to have the minimum number of members. Those states which have the two member requirement use it to insure the availability of the partnership classification for tax purposes. A partnership, by definition, is two or more persons engaged in business. In addition, under Rev. Proc. 95-10, the IRS stated that it will deny partnership tax status to a LLC with only one member.

B. ARTICLES OF ORGANIZATION

Articles of Organization is an application by a group of individuals or entities for a license to do business as an LLC. Once the Articles are accepted and filed, the LLC is thereafter formed. Each state sets its own requirements for the contents of the Articles, however, they all require:

1.	A name for the company which does not mislead the public but does disclose that it is an LLC.

2.	The address of the company's principal place of business.

3.	The name and address of the company's registered agent in the state.

The requirement for listing both the resident agent and the registered office is also imposed upon a company which is incorporating. Listing of registered agent ensures that someone is authorized to receive legal process against the company. The resident agent is the person who is served any legal notices or summons and complaint on behalf of the company. A company maintains a resident agent in the state, or by default agrees to let the secretary of state serve as the resident agent. The registered office is the location where the company's authority is kept in the state. The registered office listed address gives notice to the world where any complaint against the company can be served.

Several states also require additional provisions to be included in the Articles, such as:

1.	How capital contributions will be made to the company.

2.	Whether the company will be treated as a corporation or partnership for tax purposes.

3.	Name and address of each organizer.

4.	Whether all the members or a centralized management will manage the company.

Some states such as Colorado, Florida, Minnesota, Nevada, West Virginia and Wyoming require the Articles to state if the company will continue in effect upon the death, bankruptcy or withdrawal of a member. This is a good provision, recommended to be in every operating agreement, especially if partnership taxation is sought

because continuity of life is a determining factor in some states.

This book attempts to provide a general set of Articles sufficient for most states and has provided specific Articles when necessary. The reader should, nonetheless, familiarize himself with the particular LLC law of the state where the LLC will be formed. There are possibly current changes not reflected in this text. The provisions contained in the Articles of Organization for an LLC can only be altered or changed by the filing of an amendment to the Articles. Members frequently place important management provisions in the Articles because it is difficult to amend them. The Articles contained in this book are all that are needed to meet minimum requirements under state law. In practice, the entire operating agreement or any of its provisions can be included in the Articles. Remember, once something is listed in the Articles, it can only be changed by filing an amendment.

Before the Articles are filed they must be approved and adopted. The person who will file the Articles calls a meeting of potential members where they decide what provisions will be contained in the Articles. They also decide another important detail: whether all the members or a centralized panel of selected managers will manage the business. Once the Articles are adopted, they must be signed either by all the selected managing members, or by all of the members (if no managing members are selected. Usually, the operating agreement for the company is also created and adopted at this meeting.

C. OPERATING AGREEMENTS

After the LLC files its Articles, it exists on paper; it does not exist at law (de jure) until membership certificates are actually issued. It is the fact that the company has outstanding membership certificates in the hands of members that is the defining characteristic behind the existence of an LLC. Similarly, a corporation is not deemed to be in effect until it has sold and issued stock. Following the filing of the Articles, the potential members of the LLC meet to purchase their membership certificates and adopt the operating agreement for the business. After the membership certificates have been issued, the company is fully formed.

Operating agreements are the rules for the general day-to-day management and operation of the LLC. Contained in the operating agreement are the terms of the company concerning:

1.	Capitalization of the business,

2.	Distributions made from the business,

3.	Admission and withdrawal of members,

4.	Management of the business,

5.	Fiduciary duties owed to and by the members, and

6.	Dissolution of the company.

The operating agreement is adopted by the members and thereafter can be amended only by a majority vote of the members. An operating agreement is an attempt to resolve the many areas of potential conflict within an LLC and to delegate duties and assign responsibilities. A proposed form for a basic operating agreement follows in the Operating Agreement chapter.

Operating agreements can be general in nature or tailored to the needs and desires of the members. Most operating agreements contain or mention most of the issues covered in the Operating Agreements chapter. A few states do not require the operating agreement to be in writing. Only if the agreement is in writing can the actual intent of the members be ascertained with confidence.

Operating agreements are not set in concrete and, in fact, quite flexible. Members can change the operating agreements by simple amendments. The purpose of operating agreements is to establish procedures for daily administration and management of the company. As the company develops the operating agreement must be amended to meet new requirements.

As can be seen from the foregoing discussions, the steps for forming a business as an LLC are simple:

1.	File the Articles of Organization,

2.	Adopt the operating agreement, and

3.	Issue the membership certificates.

Once these steps have been accomplished the LLC is formed and can commence operations. An LLC is easier and less expensive to create than a corporation or a limited partnership provided ordinary caution and care are undertaken.

D. MEMBERS

Members are the owners of the LLC. Usually a LLC only needs one member, but some states require that the LLC have two or more members. Members own the membership certificates of the LLC and have the right to vote in the election of managing members. The extent of ownership interest a member has in the company is usually based either:

1.	Upon a member's percentage of contribution to the total contribution of all the members,

2.	Upon an equal division among all the members irrespective of contribution (per capita), or

3.	Upon some other agreement between the members.

Members are not personally liable for the debts of the LLC beyond the extent of their investment in the LLC. Exception: A member is personally liable for a company debt or obligation if he personally guarantees repayment.

Members may agree for all members to manage the company or agree to elect a few members to manage, who will be called "managing members." In addition to electing any managing members, the members are required to vote on the following:

1.	Amendment of the Articles of Organization,

2.	Sale, option or lease of substantially all of the LLC's
assets,

3.	Merger or consolidation of the LLC with another LLC,

4.	Amendment of the operating agreement,

5.	Removal and replacement of managing members, and

6.	Dissolution of the LLC.

The term "managing member" refers to all of the managing members. Managing members must be elected if the operating agreement does not reserve the management to all of the members. If managing members are elected, they alone are responsible for running the day-to-day business of the LLC. When the LLC is taxed as a corporation, the managing members are permitted reasonable compensation for their services. In small LLC's, the managing members usually serve for free to protect their investments. Caveat: The decision to have the LLC managed by elected managing members is an element of corporate existence. If the company also has free transferability of its shares or continuity of life, it will be taxed as a corporation and not as a partnership in those states still using the Old IRS Four Prong Test.

Most operating agreements for an LLC require an annual members' meeting to review business affairs. The members also will elect or re-elect the managing members for another year. Members are usually given votes proportional to their percentage of ownership in the company. A majority of those membership interests voting is needed to carry a resolution or any other matter brought to the floor.

A member has a duty of loyalty to the LLC. A member cannot usurp a company benefit that could go to the LLC. A member owes the LLC the right of first refusal on any business opportunity he discovers that could affect the company. For example, if the LLC is in the paving business, a member could not form a competing paving business and solicit business from the LLC's existing clients. When a member has a personal interest on a matter before the board, the member is only allowed to vote on it when:

1.	The member's interests has been fully disclosed to the board, and

2.	The contract is just and reasonable.

A member cannot be sued by other members for losses incurred as a result of the member's actions or decisions provided they were reasonable and prudent. As agents of the LLC, members have the authority to bind the company by their actions. Members can execute contracts for the company and can subject the company to liability for damages arising from negligent or intentional acts they may commit on behalf of the company.

All of the states which permit LLC's hold that an assignment of a member's interest only passes financial right unless the operating agreement states otherwise. The assignee (person who acquired a member's interest in the company) only acquires the right to participate in the management of the company through a majority vote of the other members. Usually, a consensus is required.

This is important enough to repeat. The non-assigning members must agree to let the new member participate in the management unless the operating agreement states otherwise. This lack of full transferability of interest means interests do not have "free transferability." As a result, the value of the company is lessened and the company is assisted in obtaining tax treatment as a partnership.

E. MEMBERSHIP CERTIFICATES

Membership certificates should be thought of as the ownership interests in an LLC. The membership certificate is little more than a record that a person is a member of the company. The degree of interest that the member has in the company is determined by the terms of the operating agreement. Every LLC is authorized to sell only a certain amount of membership certificates in accordance with the laws of the state where the company is formed. The purchasers of the membership certificates acquire an ownership interest in the common equal to their percentage of membership certificates to the total number of membership certificates outstanding. Membership certificates may be sold by an LLC for money, labor, services, canceled debts or property contributed to the LLC. Membership certificates can also be purchased with promissory notes. Although not required, membership certificates acquired with notes are usually secured by tangible property.

Membership certificates can be voting or non-voting. Non- voting membership certificates are usually issued by an LLC to raise money without giving the certificate owner the right to participate in the business. To attract purchasers for non-voting membership certificates, an LLC may guarantee a fixed distribution payment or the right to convert the non-voting interests into voting interest based upon a fixed formula at a later date.

F. SECURITY LAWS

A membership interest in an LLC is a security just like stock in a corporation or interest in a limited partnership. Thus a membership certificate cannot be sold unless it is either registered or exempt from registration under both federal and state law. Registration for sale of a security under federal law costs thousands of dollars and takes months. Fortunately, there are several specific exemptions that a qualified LLC can use to avoid the federal registration requirement. Most small LLC's have at least one exemption available to avoid registration. The exemptions are:

1.	The company is exempt under section 3(a)(1) of the Securities and Exchange Act. This is the most popular exemption for small companies. It is available where all the members reside in the same state where the LLC incorporated and doing business.

2.	The sale of the membership certificates is a non-public offering under section 4(2) to sophisticated investors and there was no public advertisement or solicitation for the membership certificates sale.

3.	The sale complied with SEC Regulation D requirements by adhering to strict SEC disclosure regulations.

Once the requirements for claiming an exemption have been satisfied, then the LLC can issue its membership certificates without fear of violating federal security laws.

In addition to the federal registration requirement, all states have registration requirements for securities sold in their jurisdictions. Just as there are exemptions from the federal registration requirement, the states and District of Columbia also have their own exemptions. Usually, an LLC of less than 15 members can simply sell membership certificates and notify the secretary of state of the sale. An LLC using this exemption is generally not required to identify the members who purchased.

If a membership certificate is sold without complying with both federal and state exemption procedure, the sale is voidable at any time by the purchaser. If the company fails, the members could use the fact that no exemption was ever obtained to sue the organizer for their money. A California case provides an actual example of how security laws are applied. A limited partnership was sold to fund the drilling of an oil and gas well. At the time the legal exemption was for a maximum of five persons (it has since been increased to 35). The interests were sold to nine members. The well was drilled and was dry. Two of the investors sued to get their money claiming the sale was not exempt because more than five persons bought interests. The general partner faced criminal charges for selling an unregistered security and had to refund the full investment money to all of the investors. If the sale had been to only five persons, there would not have been a problem. The lesson to borne in mind is that it is not only necessary but critical to open both the state and federal security laws.

G. TAXATION

How an LLC will be taxed is the second most important concern, the first being the limited liability of members. Because an LLC has elements of both a corporation and partnership, it can, depending on the facts, be treated for tax purposes as either a corporation or a partnership. When the LLC is taxed as a partnership, its income is passed to its members and double taxation is avoided. On the other hand, when an LLC is taxed as a corporation, its income is taxed twice, first upon being earned and second when distributed to its members as dividends. It is almost always better for an LLC to be taxed as a partnership so as to avoid the double taxation.

Regardless of how a LLC is treated for tax purposes, be it as a partnership or as a corporation, the members of the LLC will not have personal liability for the debts of the company.

Federal Tax law changed dramatically in 1997. As of January 1, 1997 all newly formed LLC's with two or more members will be treated as a partnership for tax purposes unless the LLC elects corporate tax treatment either as a C corporation or S corporation. A single member LLC will be treated as a sole-proprietorship for federal tax purposes. This is a complete reversal of prior federal tax law. Prior to 1997, an LLC was taxed as a corporation unless it could prove to the IRS that is should be a partnership. In order to prove that a pre-1997 LLC should be taxed as a partnership it had pass a special four-prong test created by the IRS.

As of January 1997, LLC are automatically given partnership tax treatment unless they specially opt out of it. To opt for corporate tax treatment, the LLC will file a new IRS Form 8832, a form provided in this book. The election is effective on the date specified in Form 8832 or the date filed if no date is specified. An effective date can even be chosen that precedes the filing date by up to 75 days. See IRS. Regulation sec. 301.7701-3(c)(1)(I).

While LLC's no longer have to pass the IRS's four prong test for federal tax purposes, many states still apply that test in order to determine if the LLC will get state partnership tax treatment. These states had patterned their tax laws after the federal tax law and have not, as yet, changed their tax law to coincide with the new federal laws. In addition, some states have written the four-prong test into their LLC Acts so that the Articles of Organization filed in those states must address the issues raised in the four prong test.

Because some states still use the IRS four-prong test to determine if an LLC will be treated as a partnership for state tax purposes, this chapter will discuss the four-prong test. The IRS Revenue Rulings on the four-prong test are still persuasive authority for determining whether an LLC will get partnership taxation in a state which still employs the test. If it is not known whether a particular state uses the IRS four prong test in deciding whether to give an LLC partnership treatment, the organizer can go ahead and assume that it does and meet the test, thereby assuring partnership tax treatment for both federal and state purposes. Later if it is determined that the state does not use the four prong test or if state law is changed to do away with it, the company can change the articles or operating agreement any way that it wishes without fear of losing the state partnership tax treatment.

THE FORMER IRS FOUR-PRONG TEST IS STILL USED IN MANY STATES

The IRS utilized until January 1, 1997, a four-prong test for determining whether an LLC will be taxed as a corporation or a partnership. If an LLC possesses any three of the four following corporate characteristics, it will be taxed as a corporation and not as a partnership:

1.	Limited Liability For Its Members. All LLC's will have this characteristic. It is to obtain limited liability for the members and the members elected to conduct business as an LLC.

2.	Centralized Management. The states which permit LLC's allow the members to vest the management of the business in certain managing members. When this is done, the management of an LLC assumes the corporate characteristic of a board of directors.

3.	Free Transferability of Interests. The right to sell, transfer or convey an interest in a business freely and without restrictions is a corporate characteristic. Such a right is similar to a person being able to sell his stock in a company. If the non-selling members must consent before the new member can participate in the management, then there is no free transferability, and this corporate characteristic would not be present.

4.	Continuity of Life. The most important aspect of a corporation is its continuance after the death or withdrawal of one of its shareholders. A corporation, unlike a partnership, does not terminate upon the death of its shareholders. If an LLC is required under the terms of the operating agreement to remain in full effect until its termination date, and even after the death of a member, it will be considered to have the continuity- of-life characteristic of a corporation. If the remaining members must vote to continue the company life, this corporate characteristic does not exist.

When three of the four characteristics listed above were present, the LLC was taxed as though it is a corporation. It does not make good sense to do business as an LLC unless the company will be treated as a partnership for federal tax purposes. In states which still utilize the IRS test for determining whether the LLC will be treated as a partnership for state tax purposes, if an LLC has any three of the above characteristics, it will be taxed as a corporation. Such taxation would be detrimental to members so care must be taken in deciding which common characteristics the company should share with a corporation.

Another tax concern of an LLC is how its property will be treated for tax purposes. Property which is titled in the LLC name is owned by the LLC, not the individual members. The same is true for property contributed to a corporation or a partnership. A member who contributes property to an LLC relinquishes ownership in the property, and property purchased with LLC funds is owned by the LLC. This company ownership of the property means that creditors of members cannot attach the property. They are limited to attaching the member's interest in the LLC. The property held by an LLC can be legally sold, transferred or conveyed only by the company. The LLC's basis in the contributed property is the basis that the member had before it was contributed.

H. DEBTS OF THE PRIOR BUSINESS

Many new businesses are really reformations of existing businesses. Frequently general or limited partnerships are changed to LLC's. At times a sole proprietor will contribute assets of an existing business into the LLC being formed. Question: How are debts from an existing business treated when the business assets are transferred to a new LLC? The general rule is that a newly formed LLC is not liable for the debts of a prior business whose assets were transferred into it unless all of the members (or all of the managing members) agreed to have the LLC so bound. Still, assured by the new LLC or not, the owners of the prior business still remain personally liable for the debts of the prior business.

If the transfer of assets into the LLC is intended to defraud creditors or is in violation of a state's Bulk Transfer Act (which governs the transfer of assets of a business), creditors can sue the company to the extent of the value of the property transferred.

Every state has adopted the Uniform Commercial Code, which contains the Bulk Transfer Act. Under the Bulk Transfer Act, notice must be given to creditors of a business whenever the majority of a business's assets are transferred. The Bulk Transfer Act also applies to transfers into a new LLC. The transfer is usually required to give at least 10 days notice to creditors and the local tax assessor before the transfer. The tax assessor will impose a property tax on the transaction. Notice to creditors is usually given by publishing a Notice of Bulk Transfer in the newspapers of general circulation. If no creditor objects, the transfer occurs and the creditors lose their right to seek return of the transferred assets from the LLC.

III. DISSOLUTION OF AN LLC

Dissolution of an LLC is the termination of the company and is, in fact, its legal death. Dissolution usually occurs under the terms of the operating agreement when and of the following acts occur:

1.	Members holding more than 50% of the voting rights in the LLC vote to dissolve.

2.	Managing members dissolve the LLC because:

(a)	The LLC did not issue any shares and thus was never really an LLC, or

(b)	The LLC has filed a chapter 7 bankruptcy petition,

or

©	The LLC has disposed of all of its assets and hasn't	conducted business for several years (usually

years).

3.	Creditors file a legal action and win involuntary dissolution of the LLC to liquidate company assets and pay the creditors.

4.	The termination date listed in the Articles of Organization arrives.

The most common reason for the early termination of a company is the death, bankruptcy or expulsion of a member. Unless the operating agreement states otherwise, a company will automatically terminate upon the death, bankruptcy or expulsion of a member.

In the absence of a contrary provision in the operating agreement, the voluntary withdrawal of a member will automatically dissolve the company in most states. A few states, such as Delaware, Iowa, Maryland, Texas, Virginia and West Virginia for example, for instance, permit members to withdraw without dissolving the company unless the operating agreement states otherwise. The states of Arizona, Colorado, Illinois and Minnesota, for instance, permit a member to withdraw even though forbidden in the operating agreement. In a situation where a member withdraws and the company is not dissolved, the member is entitled to the return of his capital. Specifically, Florida, Kansas, Nevada, Utah, and Wyoming, for example, each require the return of a withdrawing member's capital within six months unless an earlier date is specified in the operating agreement.

Several states, Arizona, Colorado, Illinois and Minnesota, for instance, provide for a reduction of the capital returned to a withdrawing member when the withdrawal was in violation of the operating agreement and caused the company to incur damages. In the absence of contrary intent expressed in the operating agreement, some states, such as Arizona, Colorado, Delaware, Illinois, Iowa, Louisiana, Minnesota, Nevada, Oklahoma, Rhode Island, Texas and Virginia for example, require that a withdrawing member is to receive the fair market value of his interest in the company minus any damages caused by a wrongful withdrawal from the company.

After dissolution has been approved or ordered, the LLC must stop doing business except to the extent necessary to discharge the affairs of the company. When a resolution to dissolve is adopted or ordered, the LLC must file a certificate of dissolution with the secretary of state where it was formed.

The distribution of company assets, following dissolution, will be made as follows:

1.	All federal and state taxes are paid.

2.	All employee wages and benefits are paid.

3.	All secured liabilities are paid.

4.	All unsecured liabilities are paid.

5.	Any remaining funds are distributed pro rata among the members in accordance with their percentage of ownership interest in the company.

The proceeds received by a member in the dissolution of an LLC are a return of the member's investment. Any gain or loss realized by a member as a result of the dissolution is treated as a capital gain or loss. For example, assume that a member paid $4,000 for the membership certificates. He received $3,000 at dissolution. He has a $1,000 capital loss. Likewise, if the member received $6,000, he would have a $2,000 capital gain.

All states require that LLC's formed under their laws file a statement of dissolution either before or after the dissolution is completed. Arizona, Florida, Kansas, Louisiana, Maryland, Minnesota, Nevada, Oklahoma, Utah and Wyoming, for example, require filing a statement of intent when the dissolution begins and a statement of conclusion when the dissolution is finished. Other states such as Delaware, Illinois, Iowa, Rhode Island, Texas, Utah, Virginia and West Virginia do not require the first filing stating the intent to dissolve. All states require the final filing when the dissolution is completed.

Some states require the creditors of a company to be given specific notice of an intent to dissolve the company. For instance, Kansas requires the company to mail each creditor a notice of the dissolution within 20 days after filing the intent to dissolve.

IV. LAWSUITS

An LLC is a legal entity, but because it is an artificial entity, it needs an individual to file any lawsuit on its behalf. When the company is managed by all the members, a suit can be brought by a member only after a majority vote of approval by the members. An exception to the majority vote approval requirement for filing a suit may exist where there is a conflict of interest among the members or members are breaching their fiduciary duties. The non-agreeing members would be excluded from the voting, and only the votes of the disinterested members would be considered. If the suit is commenced, and it is later found that the members whose votes were ignored were not in violation of their fiduciary duties and had no conflict of interest, the persons bringing the suit might be held personally responsible for any damages caused by virtue of the suit.

When a suit is brought by virtue of a majority vote of approval by all members, no member will be personally liable for any damages that might result to the company. When the company is being managed by managing members, it is the managing members who have the authority to file suit on behalf of the company. A manager is bound by the fiduciary standard of care of a reasonable and prudent manager in making a decision about commencement of a lawsuit.

Liability attaches to a member who brings unauthorized or improvident suit that violates the fiduciary standard of care. Should a member act without the approval of the other members to file suit, the company would nonetheless be bound by the decision or settlement. The company may sue a member for any damages which the company suffered by virtue of the member bringing an unauthorized suit or settling one improperly.

CHAPTER 3

STEPS IN FORMING AN LLC

I. INTRODUCTION

There is no mystery or difficulty in forming an LLC. Simply speaking, an LLC is merely a license to do business in a particular manner. The articles of organization is the application for a license, and is turned into a license when accepted for filing by the secretary of state. In fact, in legal parlance an LLC is said to be "licensed to do business" once the articles are filed.

The act of forming an LLC to engage in a business is quite simple in that all that it entails is the filing of the articles of organization and issuance of membership certificates. The actual act of forming an LLC is no more than standing before a clerk in the secretary of state's office and having the articles stamped (it can also be accomplished by mail). The articles contained in this book are a starting point for formation of any LLC. Before filing any articles, the reader should decide any additional provisions he may want in the articles. In addition, the reader should read those provisions in the state's LLC code (available in most public libraries and state law libraries) to ensure the content of the state law has not changed.

This book provides the user with a detailed analysis of the problems, issues and procedures to be faced in the formation of an LLC. The choices required during formation of an LLC are not difficult, but they can be complex because of the myriad of options available and the particular concerns attendant to each business. A major initial decision is whether all members agree (consensus) to have the business managed by a central committee of selected members or by all the members collectively. Equally important is whether or not the company will continue in existence after the death or resignation of a member, and will an interest in the company be transferable. The answers to these three questions may determine if the LLC will be treated as a partnership or a corporation for state tax purposes.

This book is intended for use by small businesses which ideally have ten or less members. The reason for this is that a membership certificate in an LLC is a security under both state and federal law. It cannot be issued or sold before registration with both federal and state security agencies unless it is exempt. The main exemption from registration available to most LLC's is the one involving sales to 35 persons or less who all live in the same state. All states permit LLC's an exemption from registration if its membership certificates are sold only in that state and only to less than a fixed number of persons. Example: In Delaware, membership certificates can be sold to no more than 30 persons, while in Ohio they can be sold to no more than 10. This book deals with LLC's that will not be required to register with the SEC (Securities and Exchange Commission) and have never had a public offering of securities. The requirements for security registration or security exemptions are discussed in great detail in the Security Laws chapter.

This book was written for use primarily by those individuals who seek to form an LLC to conduct an existing business or a new business involving a few close friends or family This book must not be used if the LLC intends to raise money by selling its stock to more shareholders than permitted by state law for exemption status.

II. PROCEDURE

The steps for forming a business as an LLC are simple. They can be summed up as simply filing the Articles of Organization and issuing the membership certificates. In arriving at this result, the LLC will go through the following steps:

A. CHOOSE A COMPANY NAME

Every LLC must have a name that denotes it is an LLC and not a corporation, partnership or sole-proprietorship. As such, the name usually must contain the words "limited liability company" or the initials "LLC" or "LC." The name selected must not mislead the public into believing it is an agent of the federal or state government. The name must not mention nor suggest involvement in a regulated or licensed field unless the LLC has that license. Example: Dr. Peter Jones Medical Limited Liability Company would not be valid unless Peter Jones actually has a medical license.

In practice, the main concern is to ensure the proposed name is dissimilar to that of an existing business's name and does not mislead the public. No state will permit two businesses to have the same name or names so similar that they are confusing. To avoid the possibility of having the articles rejected because of similarity of name, conduct a name search with the secretary of state's office. If the name is available, it can be reserved for a fee for 60 days or longer. The search can be done by mail by sending a request with the name and a check for the search to the Secretary of State. The amount of fee and the mailing address can be obtained from the secretary of state's office. A name search through the secretary of state's office can require 30 days for reply. There are attorney service firms in the phone book for the state capitol that will conduct name searches and reserve names within two days for a price of $30 to $50.

If the LLC expects to be doing business in other states, it must be aware that it may have to operate under a fictitious name in those states if its name is substantially similar to an existing business.

B. REGISTER AN OFFICE AND AGENT

As with a corporation, all states that permit LLC's require the company's Articles of Organization to:

1.	List the address of its principal place of business in the state, and

2.	Register the name and address of a resident agent located in the state.

These requirements to list the resident agent and the registered office is also imposed upon each corporation. The registered agent is authorized to receive legal process against the company and is served any legal notices or summons or complaints on behalf of the company. Like a corporation, a company maintains a resident agent in the state, or by default the secretary of state serves as the resident agent. Defaulting to the secretary of state to serve as resident agent is a poor idea because service on the secretary of state usually is not relayed to the company before the time to answer has run. A judgement can be taken against the LLC before any of the members have knowledge of the suit.

The reasons for listing the registered office are self- evident. The registered office is the location of the company's books, records and key personnel. In addition, the registered office gives notice to the world at large where any complaint against the company can be served.

C. PREPARE AND FILE ARTICLES

After the proposed LLC name has been reserved, the prospective members meet to prepare and file the articles of organization. This book contains a detailed chapter for preparing the articles. Each state has its own requirements for articles content. The articles herein are a general set acceptable in most states. There are specific articles and also articles for use when necessary. The reader should, nonetheless, familiarize himself with the particular LLC law of the state where the LLC will be formed in order to assure that the law has not recently changed. The articles contained in this book are the basic ones required. They may be retyped with additional provisions. Moreover, a particular state may require additional provisions in the articles to conform to recent changes in its law.

Once prepared, the Articles are filed with the secretary of state's office. Most states require articles to be filed in duplicate and signed by all the managing members (or all the members if managing members are not selected). Therefore, three or more copies should be filed, and the LLC should receive a conformed, file-stamped copy. The filing can be made in person or by mail. Mail filing will require 30 to 60 days for return. The alternative is to use an attorney service firm. Such firms usually take about a week to get the articles returned and will charge about $50.00 for the service. If there are problems, the attorney service firm can correct them quickly.

D. PAY FILING FEES

When the articles are filed, the members must pay the state fee. Fees vary from state to state but tend to be between $50 and $500. For example, in January 1994, the fees for the following states that permit LLC's were:

Arizona	$50 .00

Delaware	$50 .00

Florida	$50 .00	for the first $100,000 of capital which increases up to $250 for capital over $1,000,000

Illinois	$500 .00

Iowa	$50 .00

Kansas	$150 .00

Louisiana	$60 .00

Minnesota	$135 .00

Oklahoma	$100 .00

Rhode Island	$150 .00

Texas	$200 .00

Virginia	$100 .00

Wyoming	$50 .00	for the first $50,000 of capital, $1010 for capital up to $100,000 and $0.50 for each $1,000 over $100,000

The fees for states not listed can be obtained by calling the secretary of state's office. Some states list the filing fee in their LLC Act, if so, the amount is listed in the chapter for state laws. States not listed do not publish a schedule of fees, but should be within the limits mentioned. If articles are filed by mail, a blank check made payable to the secretary of state can be sent. The secretary of state will fill in the appropriate amount.

E. ISSUE MEMBERSHIP CERTIFICATES

Before the articles are filed they have to be approved and adopted. The person who will file the articles calls a meeting of potential members who decide on the provisions to be contained in the articles. They also vote whether or not to manage as a collective group of all members or to select a centralized panel of managers. Once adopted, the articles are signed by all the managing members (or by all members if management is to be by all collectively).

Once adopted and signed, the articles can be filed. Once filed, the LLC exists on paper only (de facto). Until membership certificates are actually issued, it does not exist at law (de jure). Outstanding membership certificates in the hands of members is the defining characteristic behind the existence of an LLC.

After filing the articles, the next step is for the potential members of the LLC to meet and purchase their membership certificates and the adoption of the operating agreement for the business. The adoption of the operating agreement could have occurred at the first meeting. The membership certificates, however, should be issued only after the articles are filed when it has become a de facto LLC. Until the business actually exists (has its articles filed), it does not have the legal right to sell its membership certificates. If a business's articles are denied at filing, the business must return any money that it received from the premature sale of membership certificates. If the money cannot be returned, the person who received the money for the business can face serious criminal charges. Again, no money should be taken for membership certificates until after the articles are filed.

The members must adopt an operating agreement which governs the day-to-day management of the business and the rights and obligations of the members. It is similar to the by-laws of a corporation or the partnership agreement of a general or limited partnership. The law regarding operating agreements is specifically discussed in the Operating Agreements chapter.

III. AFTER ADOPTION OF THE OPERATING AGREEMENT

Once the operating agreement is adopted and the membership certificates are issued, the LLC is fully formed. The matters undertaken thereafter are general housekeeping chores:

1.	Filing the state notice of exemption (if required) for the issuance of membership certificates.

2.	Filing a copy of the articles with the local county clerk if required by state law (most states don't require this).

3.	Publishing the articles if required by state law (most states don't require this).

4.	Filing a fictitious name statement if necessary.

5.	Establishing the proper accounting procedures.

These matters are separately discussed in the other chapters.

From this point forward, the company is governed by the terms of the operating agreement as limited by any conflicting or explanatory provisions in the articles of organization. In points of conflict between the articles of organization and the operating agreement, the articles control. Because the articles are supreme in managing the company, members often place provisions in the articles governing the management of the company. Once in the articles, a provision can only be changed by amendment.

Amendment requires some effort. An analogy could be the Constitution. An individual law can be modified, changed or repealed by a majority vote of a legislature or Congress. In contrast, once a law is written into the Constitution, it is a possible but difficult process. Amending the articles of organization is discussed in the Afterwards: Post Formation Acts chapter.

CHAPTER 4

TAX CONSIDERATIONS

This chapter is intended to help explain the tax consequences that will be faced in creating a limited liability company. These consequences are, in themselves, neither good nor bad, they merely exist. This chapter is definitely not intended to replace a tax professional. An entire book can be written on limited liability tax law. Given these limitations, this chapter gives the reader a basic overview of the most important aspects of the limited liability company tax law. THE IMPORTANT POINT TO BEAR IN MIND IS THAT A LLC WILL BE TREATED FOR FEDERAL TAX PURPOSES AS EITHER A CORPORATION OR A PARTNERSHIP DEPENDING ON THE OPERATING SELECTIONS MADE BY THE MEMBERS IN THE OPERATING AGREEMENT.

Armed with this knowledge, a member will be better able to effectively participate in planning the LLC's operations. The recommendation that a limited liability company consult a tax professional is both rational and reasonable. Limited Liability Company tax law, when treated as a partnership, is, in many instances, the same as individual and partnership tax law. There are, however, areas of particular concern for which members should be aware. It is towards those areas, that this chapter is addressed.

I. TAX TREATMENT AS EITHER A CORPORATION OR A PARTNERSHIP

A . INTRODUCTION

The main reason that people form an LLC is to avoid personal liability for the debts the business may incur. In a general partnership or joint venture, all of the partners and joint venturers are jointly and severally liable for the debts if the partnership. Each of the partners is totally liable and responsible for paying all the debts of the partnership or joint venture even though the partner may own only a fraction of the entity.

By contrast, in a corporation, shareholders are not responsible for the payment of a corporation's debts. Limited partners are not responsible for the payment of the limited partnership's debts. The major differences between a corporation and a limited partnership are:

1.	Shareholders are not liable for corporate debt whereas general partners (managers) of the limited partnership are personally liable for the payment of the limited partnership debts, and

2.	Limited partners may not participate in the management and administration of the daily affairs of the limited partnership without losing their protection from liability for limited partnership debts. On the other hand, shareholders can be employees, officers or directors of their corporation without incurring personal liability for corporate debt.

A third difference between partnerships, both general and limited, and a corporation is how they are taxed. Partnerships are not taxed on their income. Partnership income is divided among partners according to their ownership interest in the partnership. Partnership income is allocated to each partner, and each partner reports this income on his personal income tax return. The tax arrangement is different for a regular corporation (called a C corporation). A tax is placed on all of the C corporation's net income. Distributions which are made to the shareholders are treated as dividends and are included on the shareholder's tax return. The income of a C corporation is taxed twice: once at corporate level and again when distributed to the shareholders.

The double taxation of the income of a C corporation is imposing on small businesses. A small business that operates as a C corporation has its income taxed twice, resulting in shareholders receiving reduced amounts of net income. The corporation does, however, protect shareholders from liability. On the other hand, if the business is a general partnership, income is passed to the partners where it is taxed only once, as personal income. There is no limited liability for the general partners for business debts.

In contrast, if the business is operated as a limited partnership, partnership income to partners is still taxed only once, and limited partners have limited liability for business debts. They are, however, precluded from working in the business.

To help small business, Congress enacted a special provision (subchapter S) in the tax code, creating a subchapter S corporation or simply, an S corporation. Congress permits a small corporation having only one class of stock and having 75 or less shareholders who are Americans or legal residents (corporations, partnerships and non-resident aliens can not be shareholders) to elect to become an S corporation. The S corporation is treated for tax purposes as a partnership. The S corporation has the protection of a corporate form plus the right of the shareholders to participate in the business and have its income taxed as a partnership.

The favorable tax treatment of an S corporation when combined with the right of the shareholders to participate in the business's management without losing their protection for corporate liability are cogent reasons for choosing an S corporation entity over a partnership or a C corporation.

B. LIMITED LIABILITY TAX TREATMENT

A LLC is a cross between a corporation and a partnership because it has operative elements of both. An LLC offers protection from liability of the business's debts to all of its members like a corporation does for it shareholders. The management and operations of the LLC are governed by the terms of the operating agreement, which is similar to a partnership agreement.

For federal tax purposes, an LLC poses unique concerns. Because it has elements of both a C corporation and a partnership, the IRS has struggled over how to tax it: partnership or corporation. If the LLC is taxed as a partnership, its income is passed to its members and double taxation is avoided. On the other hand, if the LLC is taxed as a corporation, its income is taxed twice: first when earned and second when received by members. Clearly, it is better for an LLC to be taxed as a partnership.

Whether taxed as a corporation or a partnership, the members of a limited liability company will still be protected from liability for the company's debts.

C. THE INTERNAL REVENUE SERVICE'S DETERMINATION TEST

A LLC offers some distinct advantages over an S corporation. Like an S corporation, an LLC may, under appropriate circumstances, be treated as a partnership for tax purposes. In addition, an LLC, unlike an S corporation, may have:

1.	More than 75 members.

2.	Members who are non-resident aliens, corporations, partnerships and all types of trusts, and

3.	More than one class of membership.

The above advantages that are available to LLC's are some of the reasons for the growing demand for LLC's in the United States and abroad (even Mexico recognizes them as well as ordinary corporations).

1. AS OF JANUARY 1, 1997, LLC'S ARE TREATED AS PARTNERSHIPS IF THEY HAVE TWO OR MORE MEMBERS

How an LLC will be taxed is the second most important concern, the first being the limited liability of members. Because an LLC has elements of both a corporation and partnership, it can, depending on the facts, be treated for tax purposes as either a corporation or a partnership. When the LLC is taxed as a partnership, its income is passed to its members and double taxation is avoided. On the other hand, when an LLC is taxed as a corporation, its income is taxed twice, first upon being earned and second when distributed to its members as dividends. It is almost always better for an LLC to be taxed as a partnership so as to avoid the double taxation.

Regardless of how a LLC is treated for tax purposes, be it as a partnership or as a corporation, the members of the LLC will not have personal liability for the debts of the company.

Federal Tax law changed dramatically in 1997. As of January 1, 1997 all newly formed LLC's with two or more members will be treated as a partnership for tax purposes unless the LLC elects corporate tax treatment either as a C corporation or S corporation. A single member LLC will be treated as a sole-proprietorship for federal tax purposes. This is a complete reversal of prior federal tax law. Prior to 1997, an LLC was taxed as a corporation unless it could prove to the IRS that is should be a partnership. In order to prove that a pre-1997 LLC should be taxed as a partnership it had pass a special four-prong test created by the IRS.

As of January 1997, LLCs are automatically given partnership tax treatment unless they specially opt out of it. To opt for corporate tax treatment, the LLC will file a new IRS Form 8832, a form included in this book. The election is effective on the date specified in Form 8832 or the date filed if no date is specified. An effective date can even be chosen that precedes the filing by up to 75 days. See IRS. Regulation sec. 301.7701-3(c)(1)(I).

While LLC's no longer have to pass the IRS's four prong test for federal tax purposes, many states still apply that test in order to determine if the LLC will get state partnership tax treatment. These states had patterned their tax laws after the federal tax law and have not, as yet, changed their tax law to coincide with the new federal laws. In addition, some states have written the four-prong test into their LLC Acts so that the Articles of Organization filed in those states must address the issues raised in the four prong test.

Because some states still use the IRS four-prong test to determine if an LLC will be treated as a partnership for state tax purposes, this chapter will discuss the four-prong test. The IRS Revenue Rulings on the four-prong test are still persuasive authority for determining whether an LLC will get partnership taxation in a state which still employs the test. If it is not known whether a particular state uses the IRS four prong test in deciding whether to give an LLC partnership treatment, the organizer can go ahead and assume that it does and meet the test, thereby assuring partnership tax treatment for both federal and state purposes. Later if it is determined that the state does not use the four prong test or if state law is changed to do away with it, the company can change the articles or operating agreement any way that it wishes without fear of losing the state partnership tax treatment.

2. THE FORMER IRS FOUR-PRONG TEST STILL USED IN MANY STATES

The IRS utilized until January 1, 1997, a four-prong test for determining whether an LLC will be taxed as a corporation or a partnership. If, prior to 1997, an LLC possessed any three of the four following corporate characteristics, it was taxed as a corporation and not as a partnership:

1.	Limited Liability For Its Members. All LLC's will have this characteristic. It is to obtain limited liability for the members and the members elected to conduct business as an LLC.

2.	Centralized Management. Some states permit LLC's allow the members to vest the management of the business in certain managing members. When this is done, the management of an LLC assumes the corporate characteristic of a board of directors.

3.	Free Transferability of Interests. The right to sell, transfer or convey an interest in a business freely and without restrictions is a corporate characteristic. Such a right is similar to a person being able to sell his stock in a company. If the non-selling members must consent before the new member can participate in the management, then there is no free transferability, and this corporate characteristic would not be present.

4.	Continuity of Life. The most important aspect of a corporation is its continuance after the death or withdrawal of one of its shareholders. A corporation, unlike a partnership, does not terminate upon the death of its shareholders. If an LLC is required under the terms of the operating agreement to remain in full effect until its termination date, and even after the death of a member, it will be considered to have the continuity- of-life characteristic of a corporation. If the remaining members must vote to continue the company life, this corporate characteristic does not exist.

When three of the four characteristics listed above were present, the LLC was taxed, for federal tax purposes, as though it is a corporation. Generally, it does not make good sense to do business as an LLC unless the company will be treated as a partnership for federal tax purposes. In states which still utilize the IRS test for determining whether an LLC will be treated as a corporation for state tax purposes, if an LLC has any three of the above characteristics. Such taxation would usually be detrimental to members so care must be taken in deciding which common characteristics the company should share with a corporation in those states which still use the old four-prong test in determining whether state partnership tax treatment will be given.

3. IRS REVENUE RULINGS WHICH ARE STILL PERSUASIVE AUTHORITY IN STATES WHICH STILL EMPLOY THE FORMER IRS FOUR-PRONG TEST IN DETERMINING WHETHER AN LLC SHOULD BE GIVEN STATE PARTNERSHIP TAX TREATMENT.

As of January 1, 1997, the IRS changed the way it views Limited Liability Companies. After January 1, 1997, all new LLC's with two or more members are treated by default as a partnership for federal tax treatment. If the LLC has only one member it is treated as a sole-proprietorship. If the LLC wants to have corporate tax treatment, as either a C corporation or a Sub-chapter S it must file form 8863 wherein it specifically elects out of the partnership tax treatment in favor of the selected form of corporate tax treatment. The election to change opt out of partnership tax treatment can only be filed within the first 75 days of a LLC's tax year. If that period is missed, the LLC will be treatment as a partnership for federal tax purposes for the rest of the tax year.

Now even though the IRS no longer uses the four-prong test, many states still use it for determining whether the LLC will be given state partnership tax treatment. For that reason, a summary of the former federal case law and IRS Revenue Rulings regarding the four-prong test is discussed below. This case law and Revenue Rulings remain persuasive authority for determining how those states, which still use the four-prong test, will view an LLC seeking state partnership tax treatment.

In determining whether an LLC is treated as a corporation or partnership for tax purposes, the United States Tax Court in Larson vs. Commissioner 66 T.C. 159, required the IRS to give equal weight to each of the above characteristics. The IRS acquiesced (agreed to comply with the Tax Court's directive). This is the test to be applied to determine if an LLC will be treated as a partnership or as a corporation for tax purposes.

Under the former regulations promulgated by the IRS, if the operating agreement states that the business will dissolve upon the death, insanity, bankruptcy, retirement, resignation or expulsion of a member, the continuity-of-life characteristic will not exist. If the operating agreement provides for the continuation of the business after the occurrence of any of the foregoing events, the continuity-of-life characteristic will be met. Where all of the members must consent to the continuation of the business upon the happening of any of the foregoing events, the continuity-of-life characteristic is not met because of the uncertainty of remaining members approving the continuation.

The former IRS regulations stated there is no centralized management of an LLC unless the managing members are vested with sole authority to make decisions. When the managing members are elected by the members, the corporate characteristic of centralized management exists. The corporate characteristic of limited liability exists if, under state law, the members are not liable for the debts of the company. Twenty-four states recognize that members of LLC's are not liable for the company debts. A limited liability company formed in these states will have the corporate characteristic of limited liability for its members.

The corporate characteristic of free transferability of interest is the characteristic most likely to cause concern in states still employing the four-prong test. The IRS regulation holds the test is whether or not a member can substitute another person into the company for himself without the consent of the other members. For free transferability to exist the person acquiring the interest in the business must be able to assume all of the rights, powers and duties of a member. The characteristic of free transferability will not exist if a member is limited to assigning only the right to participate in the business' profits but cannot automatically participate in the business' management.

In a series of Revenue Rulings to determine whether an LLC should be treated as a corporation or as a partnership for tax purposes, the IRS applied the following tests:

1.	Revenue Ruling 93-5 (December 28, 1992). The IRS treated a Virginia LLC as a partnership. The company had only the corporate characteristics of a limited liability and centralized management. The company did not have continuity of existence because consent of all remaining members was needed to continue after the withdrawal of a member. The company did not have free transferability of its interests because an assignee (person who acquires an interest from a member) does not have the right to participate in the business' management without the consent of all members.

2.	Revenue Ruling 93-30 (April 1993). The IRS treated a Nevada LLC as a partnership. The company had only the corporate characteristics of a limited liability and centralized management because the operating agreement permitted the members to elect managing members. The company did not have continuity of existence because consent of all remaining members was needed to continue after the withdrawal of a member. The company did not have free transferability of its interests because an assignee (person who acquires an interest from a member) did not have the right to participate in the business' management without the consent of all members.

3.	Revenue Ruling 93-38. The IRS treated a Delaware LLC as a corporation. The company had the corporate characteristics of a limited liability, centralized management, free transfer-ability and continuity of life. The operating agreement permitted the company to be managed by elected members. The operating agreement also permitted the company to continue its existence after the death of a member without a vote of the members. Therefore, it had the characteristic of continuity of life. In addition, the company permitted a member to sell his interest and the purchaser to participate in the business management without the consent of the other members. Thus it satisfied the requirements for free transferability. Since it takes only three of the four characteristics for the company to be treated as corporation and this company has all four characteristics, it was treated as a corporation for tax purposes.

4.	Revenue Ruling 93-53 (August 1993). The IRS treated a Florida LLC as a partnership. The company had only the corporate characteristics of limited liability and centralized management because the operating agreement permitted the members to elect managing members. The company did not have continuity of existence because consent of all remaining members was needed to continue after the withdrawal of a member. The company did not have free transferability of its interests because an assignee (person who acquires interest from a member) did not have the right to participate in the business' management without the consent of all members. Important Note: Even though Florida recognizes LLC's, they are taxed under it state law as corporations and not as partnerships.

IMPORTANT NOTE: EVEN THOUGH SOME STATES PERMIT A LIMITED LIABILITY COMPANY TO HAVE ONLY ONE MEMBER, THE INTERNAL REVENUE SERVICE HAS STATED THAT IN REV. PROC. 95-10, THAT IN ORDER FOR A LIMITED LIABILITY COMPANY TO BE TREATED AS A PARTNERSHIP FOR TAX PURPOSES IT MUST HAVE AT LEAST TWO MEMBERS. AS A RESULT OF THE IRS'S REV. PROC. 95010, IF A SOLE INDIVIDUAL WISHES TO FORM A SOLELY-OWNED BUSINESS ENTITY AND HAVE IT TREATED AS A PARTNERSHIP, THE INDIVIDUAL SHOULD CONSIDER FORMING A SUBCHAPTER S CORPORATION BECAUSE ANY LIMITED LIABILITY COMPANY THAT A LONE INDIVIDUAL FORMS WOULD BE TREATED TAXWISE AS IF IT WERE A SOLE-PROPRIETORSHIP. IF, HOWEVER, SUCH A LIMITED LIABILITY COMPANY SUBSEQUENTLY WERE TO ADD ANOTHER MEMBER THEN UNDER REV. PROC. 95-10, IT COULD QUALIFY FOR FEDERAL PARTNERSHIP TAX TREATMENT. REV. PROC 95-10 SHOULD BE REVIEWED BEFORE FORMING AN LLC WITH JUST ONE MEMBER.

Generally, it just does not make good sense to do business as an LLC unless the company will be treated as a partnership for tax purposes. If the company is going to be taxed as though it were a corporation, it should be a corporation in fact. As a corporation, a subchapter S election can be made to have the corporation treated as a partnership anyway. The items that must be relinquished to ensure an LLC is not a corporation for tax purposes under those states which still employ the IRS four-prong test are important; the members must agree that:

1.	The purchaser or assignee of a membership interest cannot participate in the company business without the consent of all the members, or

2.	The company will terminate on the death of resignation of a member, or

3.	The company will be managed by elected members.

These requirements all have an impact on the value of the company. A corporation that will terminate on the death or resignation of a member has very little cash value beyond its assets. Moreover, if a purchaser cannot participate in the company's management, there will be no way that the assignee can protect his interest. The market for the membership interest in an LLC that is treated as a corporation for tax purposes is severely limited.

The operating agreement in this book contains provisions for the members to elect to have the company treated as either a corporation or a partnership for those states which still utilize the former IRS four-prong test for determining if state partnership tax treatment will be given.

4. SAFE ELECTION TO ASSURE STATE TAX TREATMENT

A situation may exist where an organizer of an LLC wants state partnership tax treatment but is unsure if the state utilizes the former IRS four-prong test in making that determination. The organizer may also be impatient to get the LLC started.

As such, the organizer could go ahead an assume that the state employs the former IRS four-prong test and make the necessary elections in the Articles and Operating Agreement to assure partnership tax treatment under the state law. If later it is found that the state does not use the test, the Articles and Operating Agreement can be changed to eliminate those elections without loss of the state partnership tax treatment. As a practical matter, many states still use the four-prong test. In addition, a few states have gone even so far as to incorporate the provisions of the four- prong test into their Limited Liability Company Act. As such, these states will not soon be eliminating the test.

II . TAXATION OF A PARTNERSHIP

A LLC is subject to its own peculiar tax treatment under federal tax law. Most unincorporated associations and trusts that conduct business are taxed as corporations. LLC's, however, are treated differently in that they may be taxed as a corporation or as a partnership, depending on the intentions of the members in forming the business.

When treated as a partnership, the LLC company income is distributed pro rata to the members based on their percentage interest in the company. The LLC, in such a case, pays no income tax itself on the federal level. For example, assume that an LLC is treated as a partnership earns $1,000,000. It will pay no taxes. Each member includes his pro rata share of the $1,000,000 on his individual tax return. Assuming a 28% federal tax rate, the members will pay $280,000, not the total $519,000 that a C corporation and its shareholders must pay. The LLC does not pay and taxes on the income of the LLC. Profits and losses of an LLC are treated as a partnership "pass through" from the company to the members. The LLC files Form 1165 LLC return and its K-1 to inform the IRS how profits and losses are allocated to each member. Each member is treated as a self-employed individual for tax purposes. Each member is required to estimate his share of the LLC income and make estimated quarterly payments to the IRS.

Partnerships are treated for federal tax purposes as pass- through vehicles. All profits and losses of the LLC that is treated as a partnership pass through the LLC and are attributed to the members. The effect of this pass through of profits and losses is that the LLC itself is not taxed. The income from an LLC treated as a partnership is not subject to double taxation like the income of a regular C corporation. To achieve this same tax benefit for small corporations, Congress created the S corporation.

Under the 1986 Tax Reform Act, profits and losses of an LLC treated as a partnership pass through to members, retaining the same character they had in the company. A passive profit or loss of the LLC remains a passive profit of loss of the member. The same treatment exists for an active profit of loss. The attributed profits and losses of a member who materially participates in the LLC business will be considered as "active" for tax purposes. The attributed profits and losses of a member who does not actively participate in the LLC business will all be classified as "passive" for federal tax purposes.

The most important issue in an LLC treated as a partnership is how the profits and losses are divided. After all, the members formed the LLC to conduct a business and make money. Therefore, accounting for the profits and losses is of interest to each member.

Unless the LLC operating agreement calls for a different distribution, all profits and losses of an LLC are treated as a partnership for tax purposes and are divided equally among the members. The equal division of profits and losses occurs even if the members own unequal interests in the company or have contributed unequal amounts of work or property to it. The members can agree to an unequal division of profits and losses. They may prefer and agree on a division based on LLC ownership interest or contributions. Any agreement for an unequal division of profits and losses should be spelled out with clarity in the operating agreement, thereby making clear the intentions of the members and their agreement.

III. TAX TREATMENT FOR LIMITED LIABILITY PROPERTY

Property titled in the LLC name is owned by the LLC, not the individual members. The same is true for property contributed to a corporation or a partnership. A member who contributes property to an LLC relinquishes ownership in the property, and property purchased with LLC funds is owned by the LLC. The company ownership of the property means that creditors of members cannot attach the property; they are limited to attaching the member's interest in the LLC. This is similar to a person purchasing stock in a corporation. A creditor of the shareholder cannot go to the corporation and demand the money or property paid for the stock. The creditor is limited to taking the shareholder's certificate, selling it and applying the proceeds from the sale of the stock certificate to the shareholder's debt.

The property held by an LLC can be legally sold, transferred or conveyed only by the LLC. Since LLC property is owned by the LLC, it cannot be directly attached to satisfy any court judgement taken against a member. A member's ownership interest in an LLC can be attached and sold by a creditor, but the creditor cannot take the underlying property in the LLC.

The LLC's basis in the contributed property is the same as that of the member before it was contributed. Example: George contributed a piece of real property in which he had a basis of $50,000 and that had a fair market value of $200,000. The LLC's basis in the property is $50,000. If the LLC sells the property of $200,000, there will be $150,000 of capital gain to divide among the members according to their LLC interests.

Some states permit an LLC to have only one member. The IRS, however, states (Rev. Proc. 95-10) that an LLC must have at least two members to be treated as a partnership for tax purposes. Consequently, an individual wishing to form a solely-owned business entity, having limited liability and have it treated taxwise as a partnership should consider forming a subchapter S corporation. Any LLC he forms individually will be treated taxwise as a corporation. If such an LLC subsequently adds another member, Rev. Proc. 95-10 allows it to qualify for partnership tax treatment if all of the other required elements are met.

Rev. Proc. 95-10 should be reviewed before forming an LLC to assure that the company meets the tests for partnership taxation if that is what the reader intends.

IV . THE MEMBERSHIP INTEREST

A consideration that all persons forming an LLC should bear in mind is the tax consequence of contributing services for the equity interest in the LLC. Under federal tax law a person purchasing an LLC interest for services rendered or to be rendered has to recognize the value of the LLC interest received as income. He cannot acquire an LLC interest free by bartering services. Example: George agrees to become a member by working for it, and the LLC interest acquired is worth $10,000. George must report the $10,000 as income on his tax return.

A member contributing property to an LLC does not recognize gain or loss on the transfer to the LLC. For example, assume that a member contributes real estate to the LLC that has a basis (cost) of $200,000. The property has a fair market value of $1,000,000. If the member had sold the property, he would have paid capital gains tax on the $800,000 profit. By contributing the property to the LLC, he does not realize any capital gain.

The LLC that received the property will have the member's basis $200,000 in the property, not its fair market value at the time of transfer. When the LLC sells the property for $1,000,000, there will be a capital gain to the LLC of $800,000 that will pass to the members.

V . LLC RENTAL INCOME

A common reason for forming an LLC is to invest in rental property. Currently there are many real estate general partnerships with interests sold nationwide. It is the non-security status of these large general partnerships that is being challenged before the Supreme Court. Real estate remains the most common investment for small groups. Some LLC's engage in the business of equipment rental. The tax law for both real estate and equipment rental is similar.

Rental income is any payment received for the use or occupation of property. A lessor must include in gross income all amounts received as rent. Advance rent is included in rental income in the year the received by the LLC, regardless of the period covered or the accounting method used. A security deposit is not included in rental income if the LLC plans to return it to the tenant at the end of the lease. If the lessor keeps all or any part of the security deposit, he must report that amount as rental income. If the lessor receives property or services in lieu of rent, the fair market value of the property or services is rental income and must be reported.

Rental is passive income, and an LLC cannot deduct losses from rental real estate activities unless the LLC has income from other passive activities. At risk rules limit the amount of deductible losses from holding real property placed in service after 1986. A member is allowed to deduct a maximum of $25,000 ($12,500 if married filing separately and living separate from the member's spouse the entire year) of the losses from rental real estate in which the taxpayer participated during the tax year. The member is allowed this offset for otherwise unallowable losses from real estate activities from other nonpassive income. The $25,000 ($12,500) figure is reduced if the member's adjusted gross income is more than $100,000.

VI. PASSIVE ACTIVITY LOSSES

Congress has seen fit to limit the deduction of certain business losses. These special losses, called "passive activity" losses, can only be deducted under certain circumstances. Passive activity losses may not be deducted from nonpassive income (wages, interest, dividends). Similarly, tax credits for passive activities are limited to the tax allowable to such activities only. Passive activity rules apply to individuals, estates, trusts and personal service corporations.

A passive activity is a trade or business in which the taxpayer does not materially participate. Any rental activity is a passive activity regardless of whether the taxpayer materially participates or not. An individual will be considered as materially participating in an activity of any one of the following tests are met:

1.	The taxpayer participates more than 500 hours.

2.	The taxpayer's participation constitutes substantially all of the activity.

3.	The taxpayer participates more than 100 hours, and no one else participates more.

4.	A fact-and-circumstances test shows the taxpayer participated in the business on a regular, continuous and substantial basis.

Portfolio income (such as interest, dividends, annuities and royalties) is not passive income, and the activities generating the income are not passive activities. As a practical matter, participation in the day-to-day operations of the LLC classifies the member as an active participant, and the active- versus passive-activity rules are not applicable. Losses from the LLC will be active losses and not subject to the passive-activity loss rules.

VII. DEPRECIATION

Depreciation is the annual deduction from income of a taxpayer to recover the cost of personal property that is used in business for more than one year. The factors that determine the amount of depreciation to be deducted are:

1.	The basis of the property, and

2.	The recovery period of the property.

There are three systems involved in computing depreciation. These systems depend on when the property was placed into service. These systems are:

1.	MACRS for property placed in service after 1986,

2.	ACRS for property placed in service after 1980 but before 1987, and

3.	Straight-line depreciation or accelerated depreciation for property placed in service before 1981.

The predominant system is MACRS (Modified Accelerated Cost Recovery System). All MACRS property is categorized and classified and is characterized by a recovery life for each classification. The property is placed in one of the following classes:

1. 3-year property,

2. 5-year property,

3. 7-year property

4. 10-year property,

5. 15-year property,

6. 20-year property,

7. Non-residential real property and

8. Residential rental property.

The IRS has published tables for each class that gives the percentage of depreciation for each year of property contained in the class. The taxpayer multiplies his percentage by the cost of the item and gets the deduction for the year.

If property that has been depreciated through the use of an accelerated method is sold, a percentage of the depreciation must be recaptured. The depreciation recapture will be the difference between straight-line depreciation and the accelerated depreciation. Example: An LLC has a piece of equipment that would have depreciated $40,000 using a straight line method (yearly amount found by dividing cost by the number of years of useful life). The LLC had used an accelerated method that had depreciated the property $60,000 at the time of sale. Therefore the LLC must recapture $20,000. The recaptured depreciation is treated as additional ordinary income to the LLC.

VIII. TAXABILITY OF AN ACTIVITY NOT INTENDED FOR PROFIT

A LLC is formed to make a profit; otherwise it is an association. Occasionally, an LLC engages in some type of activity which was not intended to generate a profit but to the surprise of the members actually does. It is no surprise that the profit must be reported even though an activity was not intended to make a profit. The profit must be reported and deductions for activities not intended for profit are restricted. Such deductions cannot exceed the income derived from the LLC activity and can only be taken by a member if he itemizes his deductions.

The activity will be presumed to be for profit if it produces a profit three of five consecutive years. However, when the activity in question involves breeding of horses, the period for profitability is two years out of seven. Prior to the activity reaching the third year not for profit limit, the taxpayer may postpone the determination that the activity is not for profit by filing Form 5213 "Election to Postpone Determination."

IX . CANCELING A DEBT

A canceled debt or a debt paid by another person is reportable income to the debtor on line 22 of Form 1040. This discharge of indebtedness is taxable income to the debtor. A discount paid by a financial institution upon prepayment of a mortgage loan is income form the cancellation of the debt. However, there is no income in the cancellation of a debt if the cancellation was intended as a gift. If the debt is canceled in a bankruptcy (Title 11) or when the debtor is insolvent, the discharge of the debt is not income.

It is common for members to borrow money at low interest rates from their partnerships. These loans occur because the member does not have a large enough capital account to make a distribution. Often the debts are forgiven. The member has to declare the value of the forgiven loan as income on his tax return. Another situation is where an LLC owes a business debt which is either discharged or canceled. The LLC has reportable income to the extent of the canceled debt. For example assume that ABC Limited Liability Company owes Hallton Construction $50,000. Hallton Construction agrees to take $30,000 as settlement. The LLC has $20,000 income as a result of the canceled or forgiven debt.

X . CAPITAL GAINS OR LOSSES

The gain or loss from the sale or exchange of a capital asset is characterized as long-term or short-term capital gain or loss. An asset held more than one year is a long-term capital asset. An asset held less than one year is a short-term capital asset. The net long-term capital gain or loss is added to the net short-term gain or loss to determine the net overall capital gain or loss. If capital gains exceed capital losses, the overall gain is included on the taxpayer's return and taxed at regular tax rates. If capital losses exceed capital gains, the overall losses are subject to deduction limitations. An LLC that is treated as a partnership for tax purposes will allocate its capital gains and losses to its members in proportion to their interest. Example: ABC Limited Liability Company has four equal members and $40,000 in capital gain. The LLC allocates each member $10,000 of capital gain. If the LLC is treated as a corporation for tax purposes, the capital gain or loss is computed on the corporate tax return that is filed for the company. Any payments made to members are treated like corporate dividends and federal rules for taxation of corporate dividends and distributions are applied.

A capital asset is any property not used in a trade or business. It is property held by a taxpayer for personal purposes, pleasure or investment. A capital asset is not, for federal tax purposes, any of the following:

1.	Property or inventory held mainly for sale to customers.

2.	Depreciable property used in the taxpayer's trade or business.

3.	Real property used in the taxpayer's trade or business.

4.	A copyright, a literary, musical or artistic composition, a letter or memorandum or similar property that was created by the personal efforts of the taxpayer.

5.	Accounts or notes receivable that are acquired in the normal course of a trade or business.

6.	U. S. Government publications the taxpayer has received.

The most common forms of capital assets held by LLC's are real estate and securities. Capital gains rates for long-term capital gain are currently 28%.

The law regarding capital loss carryover is important if the LLC is treated as a partnership for tax purposes. If a member's capital losses (including allocated LLC capital losses) exceed capital gains, the member can deduct a maximum of $3,000 of the excess for the tax year ($1,500 if married and filing a single return). The unused capital loss may be carried forward to succeeding years until it is depleted. When carried over the capital loss retains its initial character as long-term or short- term loss.

XI. BASIS IN ACQUIRED PROPERTY

Basis is a way of measuring the LLC's investment in property for tax purposes. Cost basis is the amount of cash or its equivalent that the LLC pays for the property. It includes the fair market value of services and other property that is provided for the purchase. Cost basis also includes:

1.	Sales tax charged for the purchase.

2.	Freight charges for the property.

3.	Installation and testing charges.

The cost basis (investment in the property) is adjusted for changes in the property. As the basis decreases, gain (profit) increases and taxes on the sale increase.

Improvements are additional investments in the property and add to the cost basis. Just as cost basis may be increased, it may be decreased. Items that represent a return of capital operate to reduce the cost basis: depreciation, casualty losses and thefts.

XII . LIKE-KIND EXCHANGES

Certain trades and exchanges of property are nontaxable. They are considered "like-kind" exchanges. If an LLC exchanges qualified property, there is neither a tax from gain nor a deduction from loss. To be nontaxable, a like-kind exchange must meet all six of the following requirements:

1.	The property must be business or investment property.

2.	The property must not be property held for sale. It must be property held for investment or productive use in the LLC's trade or business.

3.	There must be an exchange for like-kind property. The exchanged property must be similar in nature and function.

4.	The property exchanged must be tangible property. A like-kind exchange is not permitted for stocks, bonds, notes and other intangible interests.

5.	The exchanged property must be identified within 45 days of the exchange.

6.	The exchange must be completed by the earlier of 180 days or the end of the tax year when the exchange occurred.

When an LLC engages in a tax-free exchange, there is no tax effect to the members. The newly acquired property takes the place of the exchanged property. The new property will take the basis of the property for which it was exchanged. For example, assume that a LLC exchanges an apartment house with a basis of $75,000 that is worth $300,000. It receives another with a basis of $45,000 and a fair market value of $300,000. LLC's basis in the acquired property is $75,000.

XIII . CASUALTY LOSSES

A LLC, as with any person or entity, may suffer a casualty loss. For tax purposes, an LLC casualty loss is treated the same as a casualty loss suffered by an individual, corporation or trust. A casualty loss is a loss suffered as a result of damage or destruction of property resulting from an identifiable event that is sudden, unexpected, or unusual. A sudden event is one that is swift, not gradual or progressive. An unexpected event is one that is ordinarily unanticipated and not intended. A unusual event is one that is not a day-to-day occurrence and is not typical in the activity in which the LLC was engaged.

A casualty loss may also include a government ordered demolition or relocation of a structure declared unsafe because of some disaster. Casualty losses may result from but are not limited to the following causes:

1.	Earthquakes.

2.	Hurricanes.

3.	Floods.

4.	Volcanoes.

5.	Shipwrecks.

6.	Cave-ins.

7.	Vandalism.

There is no casualty loss permitted for termite damage, disease to trees or shrubs, drought, or progressive deterioration due to age that an LLC may suffer on its rental or investment real estate.

XIV . THEFT LOSSES

One of the largest expenses that any retail business suffers is theft. Shoplifting nationwide costs retailers $20,000,000,000 annually. Besides shoplifting, ordinary burglary also accounts for losses suffered by businesses. The cost of the thefts are passed to customers in the form of higher prices. Unfortunately, if the price rise to cover the theft is too high, the business will lose customers and may go out of business. To help offset this result, theft losses are deductible to a certain extent. This allows a business some discretion in raising prices.

Theft is the unlawful taking and removing of the property of another with the intent to deprive the owner of it permanently. Theft includes but is not limited to larceny, robbery and embezzlement. Money taken by way of threats, extortion or blackmail are also theft losses. The LLC needs only to show that the property was taken illegally under the state law where it occurred and that it was done with criminal intent.

The loss of property through normal negligence is not theft. Accidental disappearance, however, may qualify as a casualty if the loss occurs from an identifiable event that is sudden, unusual and unexpected. For example, assume that a person accidentally trips another, causing " tripee " to break a string of pearls and lose several of them. The loss of the pearls is a reportable casualty loss.

XV . STATE TAXATION

State taxes on the income earned by an LLC is determined by the tax laws of each state in which the company does business. The taxes will be determined based upon whether the LLC will be treated for tax purposes as a corporation or as a partnership under state law. Many of the states that permit the formation of an LLC state in their Limited Liability Company Act that the company will be treated for state tax purposes the same as it is treated for federal tax purposes. In other words, many state hold that if an LLC is taxed as a corporation under federal tax law, it will also be taxed as a corporation for state tax purposes. Further, if the company is taxed as a partnership for federal purposes, these states will tax it as a partnership under their tax law. Florida will tax an LLC as a corporation regardless of how it is taxed for federal purposes.

For tax-planning purposes, the determining factor is how the company will be taxed for federal purposes. The federal tax rate on corporations is much higher than the corporate tax rates for any state. In addition, if a company is taxed as a corporation then the members' LLC income must also be taxed as dividends: a double taxation for federal tax purposes. If an LLC is taxed on the federal level as a partnership and on the state level as a corporation, the total taxes paid by the company and its members usually will be less than if the company is taxed as a corporation for both federal and state purposes.

CHAPTER 5

LIMITED LIABILITY OF MEMBERS

I. INTRODUCTION

It is the hallmark of an LLC that neither its members nor its managers are personally liable for the debts of the company. In this respect, a LLC is similar to that of a corporation. A limited partnership bestows limited liability on the limited partners, but the general partners remain personally liable for payments of all the partnership debts. It is the limited liability of its members that is the most important element of an LLC. Each state, along with the District of Columbia, have enacted laws specifically stating that the members of LLC's are not liable for the payment of the company's debts, liabilities or obligations except under certain circumstances. The American Bar Association's (ABA) Working Group on the Prototype Limited liability Company Act of November 1992 proposed in section 305 the following uniform provision:

"A member of a limited liability company is not a proper party to a proceeding by or against a limited liability company solely by reason of being a member of the limited liability company, except where the object of the proceeding is to enforce a member's right against or liability to the limited liability company or as otherwise provided in the operating agreement."

This provision is very similar to that contained in the LLC ACTS of all the states. The ABA hoped to create a Uniform Limited Liability Company Act that would be adopted throughout the United States.

This chapter explains the unique facts and circumstances under which members of an LLC can be found liable for the debts of the company. Such situations are few, but they can arise often enough that the specter of loss of limited liability protection is a real concern for the company.

II. LIABILITY IMPOSED BY LAW

As stated above, the general rule is that members of an LLC are not liable for the debts, liabilities and obligations of the company; hence the name LLC. As with any rule, there are exceptions. First, the law simply means that no member or manager will be liable for the company's debts just because they happen to be members or managers of the company. The non-liability of members is the main difference between an LLC and a general partnership (in which all of the partners are liable for the debts of the partnership). While members are not liable for the debts of the LLC because of their membership status, they may be liable for the company's debts based on other unrelated grounds.

A person cannot avoid liability for his personal acts regardless of the type of business in which he is engaged. Just as a shareholder is personally responsible for his own torts (civil wrongs), so is a member of an LLC. Example: If a member of an LLC illegally dumps hazardous wastes belonging to the company, he will be personally liable for the damages as well as the company being liable. The liability of the member is not because he is a member of the company but because he directly committed the tort. If a member could not be liable for torts committed for the benefit of the company, then all types of criminal or tortious conduct would be committed by individuals under the umbrella of their companies.

In the operating agreement or in the articles the members can agree that a member will be liable to the LLC or its individual members for damages derived from gross negligence or willful misconduct of the member. In fact, this is a common provision in most operating agreements because it requires all of the members to use ordinary business acumen and care in running the business. All members of a company are presumed by law to be bound by a fiduciary duty toward the other members. This same fiduciary duty exists between partners of a partnership and the officers of a corporation. A person who breaches such a fiduciary duty is normally liable to fellow members for all of the damages caused by the breach. The member may be sued by fellow members for damages caused to the company as a result of the breach. The member is liable for the debts or liabilities suffered by the company as a result of his gross negligence or willful misconduct.

Another instance in which liability may be imposed on a member is if the member agrees in the operating agreement or subsequent written agreement to make a future contribution, that is an asset of the company. If that contribution is not made and a creditor of the company obtains a judgement against it, the creditor may execute against the member for the value of the promised contribution. For example, assume that George had agreed to contribute $100,000 in the future as payment for his interest in the company. He had not paid the money by the time Ed obtained a judgment for $200,000 against the company. Ed can sue George for the $100,000 he agreed to contribute to the company.

In addition, a member will be liable for any company debt or obligation he personally guarantees. The liability for guaranteed debts is the same as that of shareholders who give personal guarantees for a corporation's debts. This is straight forward. If a lender loans a company money or grants it credit based on a member guaranteeing payment, the lender can sue the member for such payment if the company defaults on its performance.

The above are unique situations in which a member will be held liable for the debts or obligations of an LLC. They illustrate that liability for such debts occurs because a member breached a fiduciary duty or specifically agreed to be bound for the debts by a guarantee or promise to make future contributions.

III. LIABILITY UNDER THE ALTER-EGO THEORY

LLC's are rather new. As a result, much of the case law as to how courts will treat them is developing. A potential guide for this developing law is how the courts treat corporations. An aspect of corporate law that will be applicable to LLC's is the alter-ego theory (also called "piercing the corporate veil"). This theory is used to find shareholders personally liable for the debts of the corporation. Since LLC's share some of the characteristics of corporations, this theory should be of concern to LLC members.

Under the alter-ego theory, if shareholders disregard the corporate form and act as though the business were a partnership, it will be treated as a partnership. This is not for tax purposes but for personal liability for the company's debts. The courts look to substance over form. If a business acts as a partnership, it may well be treated as a partnership even if it was validly formed as an LLC. If a business is treated as a partnership, its members are personally liable for the debts of the company.

A court looks at several aspects to determine if the alter-ego theory applies. It determines if a corporations by-laws were ignored along with any pertinent state laws. In like manner, a court will probably investigate an LLC's comparable instrument, its operating agreement, to find violations of its provisions as well as violations of state laws. Many states also require corporations to maintain a minimum capitalization in order to conduct business. A court may look to the LLC for adequate capitalization, even though there is no statutory requirement.

As in corporate law, if members misrepresent the status of the LLC, such as saying it is a corporation or a partnership when it is a limited liability company, the courts will probably find it to be a partnership based upon those misrepresentations.

In a practical sense, courts probably will be reluctant to declare an LLC the alter-ego of a partnership and LLC's are not required to maintain a minimum amount of capitalization. Consequently, they cannot be declared partnerships for failing to maintain a certain amount of capital.

Unless the members have actually disregarded the terms of the operating agreement or deliberately misled third parties as to the company's true form, it is unlikely that a court will declare the LLC to be a partnership.

CHAPTER 6

CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS

I . INTRODUCTION

This chapter discusses the financial arrangement of an LLC: the capital contributions of the members and how they affect members' rights in the company. The states that permit LLC's to be formed have adopted specific statutes concerning contributions of the members and their effects. This chapter explains how LLC states treat a member's contributions and distributions.

II. CAPITAL CONTRIBUTIONS

A. A MEMBER'S SHARE IN PROFITS AND LOSSES

The members of an LLC can agree to split the profits and losses in any manner they wish. In the absence of a specific method defined in either the articles of organization or the operating agreement, state law will determine how they will be allocated. Most states will base a member's ownership in an LLC on the member's percentage of contributions to the firm rather than the per capita basis used for a partnership.

In the following states, for example, book value or a member's contributions to the LLC is used to determine percentage of the member's interest absent an agreement to the contrary:

Florida Illinois Iowa Maryland

Minnesota Nevada Oklahoma Rhode Island

Texas Utah Virginia W. Virginia

Wyoming

The only contribution considered in determining a member's interest is the value of the capital contribution actually given to the company. For example, assume that a member guarantees a loan for the company. The loan does not increase the book value of the company, but for purposes of per capita valuing the loan would be included. For example, assume that the members contribute services to the company. The services will not increase the book value of the company.

In some states, such as the following, a member's voting interest is based upon per capita interest of the member in the company absent an agreement to the contrary:

Arizona	Colorado	Kansas	Louisiana
Delaware

Per capita interest means equal splitting of the profits and losses among the members. The per capita formula is most often used where the members are personally liable for the debts of the business such as a partnership. The personal liability of the members gives them a greater interest in the company than just capital contributions. Since members in an LLC have limited liability, the rational for using per capita sharing is not present.

In most small businesses the members participate equally in business operations. Since the members have no personal liability, there is little reason to maintain the records necessary for per capita sharing. The majority rule for sharing requires only a record of capital contributions. Per capita, however, requires a record of every form of contribution. Loan guarantees and service contributions have to be constantly updated and calculated. The per capita rule is basically the rule used for a partnership stating that all profits and losses of a partnership are split equally among the partners unless a partnership agreement is written otherwise.

Use of the per capita rule would be an unnecessary burden for most LLC's. Consequently, the operating agreement in this book is written for capital contributions (the majority rule rather than the per capita rule).

B. AMOUNT OF CONTRIBUTIONS

Unlike the statutes for corporations, states do not require an LLC to have or maintain a minimum amount of capital to be formed or to continue to exist. The traditional reason for requiring a minimum amount of capital was to provide security for creditors of the business. In the modern business world, creditors do not base their dealings with a business on any minimum capitalization. Instead, creditors base their loan or credit with businesses on credit reports. Recognizing this, states that permit LLC's do not require them to maintain minimum capitalization.

Since state law does not require any specific amount of contributions, it therefore falls on the members to agree on amounts and forms of contributions. The amount of each member's contribution must consider the total needs of the company to conduct business. The agreement regarding capital contributions must be included in the operating agreement. State laws also permit members to agree to make future capital contributions if requested. Any agreement that binds members to future contributions must be in writing to be enforceable.

Generally, it is not a good idea to have a provision in the operating agreement that permits calls upon members for additional capital. If a company needs more money, members may voluntarily contribute funds. Members making additional contributions have their capital accounts increased. Thus their ownership interest and share of profits in the company will increase.

C. FORM OF CONTRIBUTIONS

Most states permit members to make contributions to an LLC in any form that has value to the company. Contributions in the form of cash, property, service, guarantees or promissory notes are acceptable. Loans from a member to a company are not treated as a capital contribution because the money must be paid back. If, however, the member forgives the loan to the company, the value of the loan will be treated as a capital contribution.

A few states (most notably Arizona, Colorado, Delaware, Florida and Wyoming) forbid contributions of services for an interest in the company. Generally, it is not wise to count services as a contribution to capital. In a small company all members contribute services, and it would be derisive to value one member's services over that of the others. To do so risks disharmony among the members.

It is wiser to base members' interests on cash and property actually contributed. In the long run, it will prove the better way. It is the combined contributed services and capital that makes the company work. As such, if the actual division is too unfair, the business will not continue. The members can always agree in writing to adjust the division of profits and losses to reflect the intentions of the members.

State law permits members to acquire their interests by promissory notes that are legally binding obligations to make contributions in the future. If a member does not fulfill his contribution obligations, the company can sue the member in court for breach of contract. The member has no defense if he actually received an interest in the company. In the same vein, if a person acquired an interest on the promise to pay in the future, a judgment creditor of the company can attach that payment. The member becomes a debtor of the company's judgment creditor. For example, assume that George acquires an interest in an LLC for a promise to pay $100,000 on demand. Harry sues the company and gets a judgment for $200,000. Harry can demand that George pay to him the $100,000 he owes the company.

III. DISTRIBUTIONS

The right of a member to receive a distribution from an LLC is determined solely by the terms of the operating agreement. State statutes, however, have rules regarding the form and allocation of distributions if they are covered in the operating agreement. Yet state law does not provide for periodic distributions, and such distributions will not be made unless the operating agreement provides for them during the year.

A. FORM AND SHARE OF DISTRIBUTIONS

Most states require, unless the operating agreement states otherwise, all distributions to be based on capital contributions rather than per capita. An LLC should review its state's law to determine how distribution will be made if not covered in the operating agreement. Note: Louisiana holds that distributions are allocated equally unless the operating agreement states otherwise.

Most states do not give members of an LLC the right to receive non-cash distributions, and most states do not require members to accept non-cash distributions that are disproportionate to those paid to other members. The states of Florida, Kansas, Maryland, Nevada, Texas, Utah and Wyoming specifically prohibit an LLC from making distributions in kind unless such distributions are permitted in the operating agreement. A distribution "in kind" is a non-cash distribution of the same type of property which the member contributed to the company.

Non-cash distributions can be advantageous to some of all members. Non-cash distribution do not entail the recognition of gain for tax purposes. Non-cash distributions also can be harmful: improper valuation of the distributed assets can cause serious tax consequences. Because of the problems that might arise, state laws usually prohibit non-cash distributions unless the members have specifically agreed to permit them.

B. WRONGFUL DISTRIBUTIONS

State laws permit creditors of a company to sue the members for the value of wrongful distributions they have received. Illinois, Louisiana, Maryland and Rhode Island have statutes that hold the members or managers of the company liable for wrongful distributions they authorized. The recipient is also liable if he knew that the distribution was wrongful. Delaware and Texas hold a recipient liable only if he knew the distribution was wrongful. Colorado holds all members liable for wrongful distributions regardless of knowledge.

A wrongful distribution is one that is excessive, makes the company insolvent or reduces the company's net asset value below the cumulative member contributions. The state laws are designed to protect creditors from distributions that increase the likelihood of a company's failure. Several states (including Colorado, Florida, Kansas, Nevada, Utah, West Virginia and Wyoming) permit creditors to sue for payment even if the company is not insolvent. These states permit a suit as long as the company's new asset value is below members' cumulative contributions.

Most states have adopted a six-year statutory period for return of a wrongful distribution. This is the same period that is given under the Revised Uniform Limited Partnership Act for return of wrongful distributions from a limited partnership.

CHAPTER 7

DOING BUSINESS IN OTHER STATES

I. INTRODUCTION

As an important consideration for an LLC that will be doing business in states other than where formed is how the company will be treated in these foreign states.

II. FOREIGN LLC ENTITIES

All states now permit LLC's to be formed under their state laws and also recognize LLC's from other states doing business within their borders(these are generally called foreign LLC's). To conduct business in a state which permits LLC's, a foreign LLC merely registers with the secretary of state just as a foreign corporation or limited partnership must do. Once the foreign LLC has filed the appropriate documents to conduct business in the state (usually no more than an application), it is permitted to engage in business on the same footing as an LLC formed under that state's LLC law.

A foreign LLC remains governed by its operating agreement in another state as long as those provisions do not violate the other state's law. The statutes of most states permitting LLC's have provisions that specifically detail that the state law of the foreign LLC controls on such issues as members' voting rights, capital contributions, members' liability and distribution. On the other hand, no state will permit a foreign LLC to conduct a business which is barred to LLC's formed under its own state law. Example: A provision of Virginia's Limited Liability Company Act states that a foreign LLC shall :

"have no greater rights and privileges than a domestic limited liability company to exercise any of its powers of purposes than a domestic limited liability company. The registration shall not be deemed to authorize the foreign limited liability company to exercise any of its powers or purposes that a domestic limited liability company is forbidden by law to exercise in this Commonwealth."

The Virginia statute makes clear that once a foreign LLC registers in the state it will be treated the same as a Virginia LLC. The operative word is registered. A foreign LLC will obtain similar treatment to a domestic company after it registers with the secretary of state of that state. Registration as a foreign LLC usually means filing an application which discloses:

1. The name of the LLC.

2. The state of formation.

3. The address of the registered office in that state.

4. The names and addresses of the managing members.

5. Other information a state may require.

Upon its submission, the secretary of state will review the application for compliance. If the application satisfies state law, the secretary of state will issue a certificate of qualification. After the certificate of qualification is issued, a foreign LLC can legally conduct business in the state. If a certificate of compliance is not issued, a foreign LLC cannot legally do business in the state. A foreign LLC that does not register with the secretary of state is taking a great risk. Without a certificate of compliance, the company is not allowed to file and maintain a lawsuit in court. Moreover, if a foreign LLC does not register with the secretary of state but continues to do business in the state, its members may lose limited liability protection. For example, assume that a foreign LLC from state A fails to register in state B. Its members may become personally liable for debts incurred by the company in state B. In addition, a company which does not register with the secretary of state will be liable for both fines and penalties.

CHAPTER 8

BULK SALE

When members transfer assets of a prior business to an LLC in return for stock, the LLC must consider the state's Bulk Sale Law. All states have adopted the Uniform Commercial Code in some fashion. A portion of the Code deals with giving notice to creditors of a bulk transfer of assets of a business.

The purpose of the Bulk Sale Law is to prevent business owners from attempting to defraud or avoid creditors by transferring all or substantially all (i.e. the bulk) of the business assets to another person or entity. The law also inhibits the sale of assets in a bargain or sweetheart sale (below fair market value), a scheme whereby the owner of the business still retains some control. Example: The sale of business assets to another business that the owner also controls.

For most new LLC's involving prior existing businesses there is no intention to defraud creditors. An LLC is usually established to change the form of the business, not to disassociate from the debts of the prior business. Where the LLC assumes both assets and debts of an unincorporated business, compliance with the Bulk Sale Law is merely a formality. The new LLC is responsible for the debts of the old business to the extent of the value of the assets transferred.

The real concern arises where the business transferring all of its assets to the LLC will have debts that the LLC will not assume. In this situation, the LLC should consult an attorney to ensure it will not be liable for those debts. The Bulk Sale Law of each state was enacted to settle such disputes.

Under the Bulk Sales Act of the Uniform Commercial Code, a LLC can safely issue its membership interests for property transferred to it by a business with outstanding liabilities, which the LLC will not assume, if it does the following:

1.	Prepare a Notice to Creditors of Bulk Transfer. The LLC publishes the notice in a paper of general circulation for the judicial district (usually a county) where the property to be transferred to the LLC is located. The notice must also be published in the judicial district or county where the principal executive office of the prior business is located. The publication must be completed at least 12 business days prior to the date of transfer of the property.

2.	File copies of the Notice of Bulk Transfer with the county recorder and the county tax collector in each judicial district or county where the property is located and where the prior business has its principal office at least 12 business days before the transfer.

Section 6-104 of the Uniform Commercial Code (adopted by all states) reads in part:

(1)	Except as provided with respect to auction sales (Section 6-108), a bulk transfer subject to this Article is ineffective against any creditor of the transferor unless:

(a) The transferee requires the transferor to furnish	a list of his existing creditors prepared as	stated in this section, and

(b)	The parties prepare a schedule of the property

transferred sufficient to identify it, and

© The transferee preserves the list and schedule for	six months next following the transfer and permits
inspection of either or both and copying therefrom,	or files the list and schedule in (a public office	to be here identified).

After the notice is given to the creditors, if the creditors do not object to the transfer, the LLC can take possession and title to the assets free of all creditors claims. If, however, creditors for the prior business present claims against the property, special rules apply. Section 6-106 Uniform Commercial Code reads as follows:

"In addition to the requirements of the two preceding sections:

(1)	Upon every bulk transfer subject to this Article for	which new consideration becomes payable except those made	by sale at auction it is the duty of the transferee to

assure that such consideration is applied so far as

necessary to pay those debts of the transferor (Section	6-104) or filed in writing in the place states in the	notice (Section 6-107) within 30 days after the mailing	of such notice. This duty of the transferee runs to all	the holders of such debts, and may be enforced by any of	them for the benefit of all.

(2)	If any of such debts are in dispute the necessary sum may	be withheld from distribution until the dispute has been	settled or adjudicated;

(OPTIONAL PROVISIONS FOR THE STATES)

(3) If the consideration payable is not enough to pay all of	the said debts in full distribution shall be made pro	rata.

(4)	The transferee may within 10 days after he takes
possessions of the goods pay the consideration into the	(specify court) in the county where the transferor has	its principal place of business in the state and	thereafter may discharge his duty under this section by	giving notice by registered or certified mail to all the

persons to whom the duty runs that the consideration has	been paid into that court and they should file their	claim there. On motion of any interested party, the	court may order the distribution of the consideration to	the persons entitled to it."

Basically, if the LLC wants to exchange an equity interest for property of a another business and creditors of that business are asserting their rights, the LLC has two choices. It can pay off the creditors of that business. This amounts to paying twice for the property. Secondly, the LLC can deposit the membership interest with the court and let the court decide who owns it. The court may decide to present the LLC with some entirely unexpected members with whom the existing members cannot operate. Neither of these eventualities are especially appealing. The third unspoken alternative is probably the one most often followed, forgetting the entire transaction. For this reason, in the event of a bulk transfer dispute, the LLC should, for its own protection, seek legal advice before proceeding with the transaction.

A typical form for a "Notice to Creditors" follows.

RECORDING REQUESTED BY )

)

)

)

)

)

WHEN RECORDED MAIL TO )

)

)

)

)

) Space above the line is for Recorder's use

NOTICE TO CREDITORS OF BULK TRANSFER

NOTICE is hereby given to the CREDITORS of

Transferor (s), whose business address is ,

County of , State of .

The property is described as general: ALL STOCK IN TRADE, FIXTURES EQUIPMENT AND GOOD WILL OF THAT:

TYPE OF BUSINESS

BUSINESS KNOWN AS NAME OF BUSINESS

and located at ,

County of State of .

The Bulk Transfer will be consummated on or after the

day of , 1999 at

OFFICE NAME

,

STREET ADDRESS

County of State of .

So far as known to the Transferee(s), all business names and

addresses, used by the Transferror(s) for the three years past are

(same, put same, if none, put none, if any, list them).

BUSINESS NAME STREET ADDRESS

COUNTY STATE

BUSINESS NAME STREET ADDRESS

COUNTY STATE

Dated:

TRANSFEREE

TRANSFEREE

CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity( ies ) and that by his/her/their signature(s) on he instrument the person(s), or the entity upon which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Membership certificates in an LLC are considered securities under both state and federal law. An LLC's sale of its membership certificates requires the membership certificate be registered and a permit (license) for the sale be obtained unless the membership certificate is exempt from registration. The costs for registering a security under federal law are $100,000 or more and it takes a year or longer to complete.

Both state and federal security laws provide exemption from registration for certain kinds of membership certificates. These exemptions are available only to small businesses that have not attempted to sell their securities through a public offering (public advertisement or solicitation). Exemptions for both state and federal security laws apply when the LLC is a new business being formed or an existing business (whether sole proprietorship or partnership) is being changing into an LLC. The company's members are the prior owners and possibly some of those who have worked closely with the prior business. In such a situation, there is no need for a public solicitation or advertisement. Therefore, exemptions from registration under both state and federal security laws will apply.

This book is not intended to be used by anyone desiring to raise money for an LLC through a public offering. Anyone intending to do so must consult with a securities attorney. There probably is not an exemption from registration under state or federal law.

Even if an LLC is exempt from the registration requirement for the sale of its securities, the LLC will still be governed by the anti-fraud provisions of the Securities and Exchange Act. There probably is not an exemption from registration under state or federal law. Even if a corporation is exempt from the registration requirement for the sale of its securities, the corporation will still be governed by the anti-fraud provisions of the Securities and Exchange Act.

II. EXEMPTION UNDER FEDERAL LAW

The Securities and Exchange Act of 1933 specifies that the sale in the United States of any security (including stocks of a corporation) must be registered with the Securities and Exchange Commission unless the security is exempt. The Securities and Exchange Act (the Act) lists several exemptions that are available for small businesses and small private offerings.

A. Intrastate Offering Exemption

Section 3(a)(11) of the Securities Act is generally known as the "intrastate offering exemption." This exemption facilitates the financing of local business operations. To qualify for the intrastate offering exemption, the company must: be incorporated in the state where it is offering the securities; carry out a significant amount of its business in that state; and make offers and sales only to residents of that state.

There is no fixed limit on the size of the offering or the number of purchasers. The company must determine the residence of each purchaser. If any of the securities are offered or sold to even one out-of-state person, the exemption may be lost. Without the exemption, the company could be in violation of the Securities Act registration requirements. If a purchaser resells any of the securities to a person who resides outside the state within a short period of time after the company's offering is complete (the usual test is nine months), the entire transaction, including the original sales, might violate the Securities Act. Since secondary markets for these securities rarely develop, companies often must sell securities in these offerings at a discount.

It could be difficult for a company to rely on the intrastate exemption unless its officers know the purchasers and the sale is directly negotiated with them. If the company holds some of its assets outside the state, or derives a substantial portion of its revenues outside the state where it proposes to offer its securities, it will probably have a difficult time qualifying for the exemption.

The company may follow Rule 147, a "safe harbor" rule, to ensure that it meets the requirements for this exemption. It is possible, however, that transactions not meeting all requirements of Rule 147 may still qualify for the exemption.

This is the most commonly used exemption from federal registration. Usually a company is established to change the legal form of operation for an existing business or to begin a new business with family shareholders or close friends. Normally, all of the shareholders will reside in the same state and qualify for the intrastate exemption. If not, the exemption is not available for the corporation; however, other exemptions from registration for the sale of the stocks may still be available.

B. Private Offering Exemption

Section 4(2) of the Securities Act exempts from registration "transactions by an issuer not involving any public offering." To qualify for this exemption, purchasers of the securities must: have enough knowledge and experience in finance and business matters to evaluate the risks and merits of the investment (the "sophisticated investor"), or be able to bear the investment's

economic risk; have access to the type of information normally provided in a prospectus; and agree not to resell or distribute the securities to the public.

In addition, the corporation may not use any form of public solicitation or general advertising in connection with the offering.

The precise limits of this private offering exemption are uncertain. As the number of purchasers increases and their relationship to the company and its management becomes more remote, it is more difficult to show that the transaction qualifies for the exemption. The corporation should know that if it offers securities to even one person who does not meet the necessary conditions, the entire offering may be in violation of the Securities Act.

Rule 506, another "safe harbor" rule, provides objective standards that a company can rely on to meet the requirements of this exemption. Rule 506 is a part of Regulation D, discussed below

C. Regulation A
Section 3(b) of the Securities Act authorizes the SEC to exempt from registration small securities offerings. By this authority, the SEC created Regulation A, an exemption for public offerings not exceeding $5 million in any 12-month period. If the company chooses to rely on this exemption, it must file an offering statement, consisting of a notification, offering circular, and exhibits, with the SEC for review.

Regulation A offerings share many characteristics with registered offerings. For example, the company must provide purchasers with an offering circular that is similar in content to a prospectus. Like registered offerings, the securities can be offered publicly and are not "restricted," meaning they are freely tradeable in the secondary market after the offering. The principal advantages of Regulation A offerings, as opposed to full registration, are:

1.	The financial statements are simpler and don't need to
be audited;

2.	There are no Exchange Act reporting obligations after
the offering unless the company has more than $10	million in total assets and more than 500 shareholders;

3.	Companies may choose among three formats to prepare the
offering circular, one of which is a simplified
question-and-answer document; and

4.	The company may "test the waters" to determine if there
is adequate interest in its securities before going	through the expense of filing with the SEC.

All types of companies which do not report under the Exchange Act may use Regulation A, except "blank check" companies, those with an unspecified business, and investment companies registered or required to be registered under the Investment Company Act of 1940. In most cases, shareholders may use Regulation A to resell up to $1.5 million of securities.

If the company chooses to "test the waters," it can use general solicitation and advertising prior to filing an offering statement with the SEC, giving it the advantage of determining whether there is enough market interest in its securities before it incurs the full range of legal, accounting, and other costs associated with filing an offering statement. The company may not, however, solicit or accept money until the SEC staff completes its review of the filed offering statement and the company delivers prescribed offering materials to investors.

Regulation D establishes three exemptions from Securities Act registration, Rule 504, Rule 505 and Rule 506 which shall be discussed separately as follows:

Rule 504 provides an exemption for the offer and sale of up to $1,000,000 of securities in a 12-month period. The company may use this exemption so long as it is not a blank check company and is not subject to Exchange Act reporting requirements. Like the other Regulation D exemptions, in general the company may not use public solicitation or advertising to market the securities and purchasers receive "restricted" securities, meaning that they may not sell the securities without registration or an applicable exemption.

However, the company can use this exemption for a public offering of its securities and investors will receive freely tradable securities under the following circumstances:

1.	The company registers the offering exclusively in one
or more states that require a publicly filed
registration statement and delivery of a substantive
disclosure document to investors;

2.	The company registers and sells in a state that
requires registration and disclosure delivery and also	sell in a state without those requirements, so long as	the company delivers the disclosure documents mandated	by the state in which the company registered to all	purchasers; or,

3. The company sells exclusively according to state law	exemptions that permit general solicitation and
advertising, so long as the company sells only to
"accredited investors," a term we describe in more	detail below in connection with Rule 505 and Rule 506	offerings.

Even if the company makes a private sale where there are no specific disclosure delivery requirements, care should be taken to provide sufficient information to investors to avoid violating the antifraud provisions of the securities laws. This means that any information the company provides to investors must be free from false or misleading statements. Similarly, the company should not exclude any information if the omission makes what it provides investors false or misleading.

Rule 505

Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period. Under this exemption, the company may sell to an unlimited number of "accredited investors" and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions. Purchasers must buy for investment only, and not for resale. The issued securities are "restricted."

Consequently, the company must inform investors that they may not sell for at least a year without registering the transaction. The company may not use general solicitation or advertising to sell the securities.

An "accredited investor" is: a bank, insurance company, registered investment company, business development company, or small business investment company; an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million; a charitable organization, corporation or partnership with assets exceeding $5 million; a director, executive officer, or general partner of the company selling the securities; a business in which all the equity owners are accredited investors;

a natural person with a net worth of at least $1 million; a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or a trust with assets of at least $5 million, not formed to acquire the securities offered, and whose purchases are directed by a sophisticated person.

It is up to the company to decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions. But the company must give non-accredited investors disclosure documents that generally are the same as those used in registered offerings. If the company provides information to accredited investors, it must make this information available to the non-accredited investors as well. The company must also be available to answer questions by prospective purchasers.

Here are some specifics about the financial statement requirements applicable to this type of offering:

1.	Financial statements need to be certified by an
independent public accountant;

2.	If a company other than a limited partnership cannot
obtain audited financial statements without
unreasonable effort or expense, only the company's	balance sheet, to be dated within 120 days of the start	of the offering, must be audited; and

3.	Limited partnerships unable to obtain required financial
statements without unreasonable effort or expense may	furnish audited financial statements prepared under the	federal income tax laws.

As discussed earlier, Rule 506 is a "safe harbor" for the private offering exemption. If the company satisfies the following standards, it can be assured that the offering is within the Section 4(2) exemption:

1.	The company can raise an unlimited amount of capital;

2.	The company cannot use general solicitation or
advertising to market the securities;

3.	The company can sell securities to an unlimited number
of accredited investor (the same group identified in	the Rule 505 discussion above) and up to 35 other	purchasers.

4.	Unlike Rule 505, all non-accredited investors, either
alone or with a purchaser representative, must be	sophisticated - that is, they must have sufficient	knowledge and experience in financial and business	matters to make them capable of evaluating the merits	and risks of the prospective investment;

5.	It is up to the company to decide what information it
will give to accredited investors, so long as it does	not violate the antifraud prohibitions. But it must	give non-accredited investors disclosure documents that	generally are the same as those used in registered	offerings. If the company provides information to	accredited investors, it must make this information	available to the non-accredited investors as well;

6.	The company must be available to answer questions by
prospective purchasers;

7.	Financial statement requirements are the same as for
Rule 505; and

8.	Purchasers receive "restricted" securities.
Consequently, purchasers may not freely trade the	securities in the secondary market after the offering.

E. Accredited Investor Exemption - Section 4(6)
Section 4(6) of the Securities Act exempts from registration offers and sales of securities to accredited investors when the total offering price is less than $5 million.

The definition of accredited investors is the same as that used in Regulation D. Like the exemptions in Rule 505 and 506, this exemption does not permit any form of advertising or public solicitation. There are no document delivery requirements. Of course, all transactions are subject to the antifraud provisions of the securities laws.

F. California Limited Offering Exemption - Rule 1001

SEC Rule 1001 provides an exemption from the registration requirements of the Securities Act for offers and sales of securities, in amounts of up to $5 million, that satisfy the conditions of §25102(n) of the California corporations Code. This California law exempts from California state law registration offerings made by California companies to "qualified purchasers"

whose characteristics are similar to, but not the same as, accredited investors under Regulation D. This exemption allows some methods of general solicitation prior to sales.

G. Exemption for Sales of Securities through Employee Benefit Plans - Rule 701

The SEC's Rule 701 exempts sales of securities if made to compensate employees. This exemption is available only to companies that are not subject to Exchange Act reporting requirements. The company can sell at least $1,000,000 of securities under this exemption, no matter how small the company is. The company can sell even more if it satisfies certain formulas based on the company's assets or on the number of its outstanding securities. If the company sells more than $5 million in securities in a 12-month period, it will need to provide limited disclosure documents to its employees. Employees receive "restricted securities" in these transactions and may not freely offer or sell them to the public.

CONCLUSION

This chapter has an example of a Member's Subscription Certificate that should be executed and filed with the LLC's books for each sale of a membership interest. This certificate is sufficient to satisfy the requirement that the investor is sophisticated and accredited. This subscription agreement should be used by every LLC to protect against allegations of fraud. Generally, when a business fails the members try to get their money back. it is not uncommon in such situations for disgruntled investors to claim that they were innocent dupes and tricked into investing in the business. Using a subscription certificate is evidence, though not dispositive, that the member was given all of the available information necessary to make an informed decision. Use of the form limits the success of suit for security fraud by upset members.

When substantial amounts of capital are sought to be raised through the sale of membership interests that are exempt under Rules 504, 505 or 506, the LLC should consult a securities attorney.

Although qualified offerings are exempt under Rules 504, 505 or 506, the LLC must nonetheless file a Form D with the Securities and Exchange if interest are sold to out of state members. It is envisioned that the LLC to be formed using this book will use the intrastate exemption instead and not be required to file a Form D.

This book assumes that the LLC will be a small business with less than 35 shareholders (for exemption from federal registration) who will be intimately associated with the day-to-day operations of the company. Consequently, the exemptions will apply. If substantial amounts of capital are to be raised through the sale of stocks that are exempt under Rules 504, 505 or 506, the corporation should consult a securities attorney. Although qualified offerings are exempt under Rules 504, 505 or 506, the LLC must nonetheless file a Form D with the SEC.

This book is written for corporation's where:

(1) The members will participate in the daily management of the business or reserve sufficient review powers in the operating agreement to be able to oversee effectively the conduct of the managing shareholders.

(2) The corporation is not selling its membership interests to

the general public to raise money.

It is envisioned that the corporation to be formed using this book will use the intrastate exemption and will not be required to file Form D.

As with federal law, nearly all states require that any LLC wishing to sell LLC membership interests in the state either obtain a permit to sell the LLC membership interests or that the LLC membership interests be exempt from registration. All states have similar limited offering exemptions that permit a LLC to sell a LLC membership interest in the state without having to obtain a permit. Most states also have laws which exempt from registration any security where the LLC has either registered the security with the SEC or has filed Form D for a federal exemption under Rule 504, 505 or 506.

In addition to an exemption based upon a federal filing, all states have limited offering exemptions. LLCs not engaged in a public offering may sell LLC membership interests without a permit. Even though the sale of the LLC interest is exempt, many states require that the LLC file some type of notice with the Secretary of State or security commissioner and pay a small fee. Although notice is for tax purposes, it also serves other informational needs.

Most states do not require a LLC issuing exempt membership interests to file any notification documents. To determine if a notice requirement exists, the person forming the limited liability company can ask the state's department of corporations (or equivalent agency) if there is any state requirement that a form be filed when a newly formed LLC makes a limited exempt offering. If there is a requirement, the agency will supply the necessary form on request. The laws governing the limited offering exemptions for each state are:

ALABAMA

Section 8-6-11. Sales of the securities are exempt if sold to less than 10 persons within twelve months, no commissions are paid on the sales and no public solicitations or public offerings are employed.

ALASKA

Section 45-55-140. Sales of securities are exempt if sold to less than 10 persons within 12 months, the sales do not exceed $100,000, no commissions are paid on the sales and no public solicitation is employed.

ARKANSAS

Section 23-42-504. Sales of securities are exempt if sold to less than 25 persons within a year, no commissions are paid on the sales and no public solicitation is presented. Proof of the exempt nature of the transaction must be filed with the Secretary of State. The state has also adopted the Uniform Federal-State Limited Offering Exemption 14(b) (14) which basically provides for a state exemption if the issuer received a federal exemption by filing a Form D.

ARIZONA

Section 44-1844. Sales of securities are exempt if sold to less than 10 persons within 24 months, no commissions are paid on the sales and no public solicitations or public offerings are employed.

CALIFORNIA

Corporation Code section 25102(f). Sales to no more than 35 persons are exempt if no commissions are paid on the sales and no public solicitation or public offering is employed. The corporation is required to file a Notice of Transaction with the Corporations Commissioner. The Notice is to be filed within 15 days of the sale. The fee for filing the Notice is usually about $25.00. This book has a copy of the notice form. As can be seen from the form, there is no requirement that the identity of the shareholders be revealed. Failure to file the Notice does not invalidate the exemption.

California has also enacted a new intra-state offering exemption under Section 25102(n). Under this exemption, if the offeror satisfies the same requirements as necessary for a Federal Regulation D exemption, the offeror can sell to an unlimited number of people in California and can engage in limited advertising in a newspaper. The advantage of this offering is that the offeror, if the sales are limited only to California, can advertise in a limited fashion which it can not do in a Federal Regulation D offering if the sales are made in other states. The costs for a Regulation D or 25102(n) offering is around $20,000 when an experienced security law firm is utilized. Most offerings in California rely on the 25102(f) exemption is used because it extremely cheap and fast even though the number of sales is limited to 35 persons.

COLORADO

Section 11-51-308. Sales of securities are exempt if sold to less than 25 persons prior to formation and afterward if the offer of sales is not made to more than 20 persons and the actual sales are made to not more than 10 persons per 12-month period, no commissions are paid on the sales and no public solicitation or public offering is employed.

CONNECTICUT

Section 36-490(B). Sales of securities are exempt if sold to less than 10 persons within 12 months, no commissions are paid on the sales and no public solicitation or public offerings are employed.

DELAWARE

Section 6-7309(b). Sales of securities are exempt if sold to less than 25 persons within the first year and no more than 35 persons in total, no commissions are paid on the sales and no public solicitations or public offerings are employed.

DISTRICT OF COLUMBIA

Section 2-2601(6) lists as exempt transactions as follows:

(E)	Any transaction pursuant to an offer directed by the offeror to not more than 25 persons in the District during any 12 consecutive months whether or not the offeror or any of the offerees is then present in the District if the Seller reasonably believes that all of the buyers in the District are purchasing for investment.

(F)	Any offer or sale of a preorganization certificate or subscription if:

(I)	No commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscribers;

(ii)	The number of subscribers does not exceed 25; and

(iii) No payment is made to the subscriber.

FLORIDA

Section 517.061. Sales of securities are exempt if sold to less than 35 persons within a year, no commissions are paid on the sales and no public solicitations or public offerings are employed. Proof of the exempt nature of the transaction must be filed with the Secretary of State.

GEORGIA

Section 10-5-9. Sales of securities are exempt if sold to less than 35 persons within a year, no commissions are paid on the sales and no public solicitations or public offerings are employed.

HAWAII

Section 485-6. Sales of securities are exempt if sold to less than 25 persons within 12 months, no commissions are paid on the sales and no public solicitations of public offerings are employed.

IDAHO

Section 30-1435. Sales of securities are exempt if sold to less than 10 persons within 12 months, no commissions are paid on the sales and no public solicitations or public offerings are employed.

ILLINOIS

Section 815 ILCS 5/4. Sales of securities are exempt if less than $100,000 is raised or if sold to less than 35 persons within a year, no commissions are paid on the sales and no public solicitations or public offerings are employed.

INDIANA

Section 23-2-1-2. Sales of securities are exempt and no filing is necessary if each purchaser is either an accredited investor or will participate in the management of the business and either (1) there are no more than 15 purchasers in the state or (2) there are no more than 25 shareholders in total and the offering raises less than $500,000.	IOWA

Section 502.203(9). Sales of securities are exempt if sold to less than 35 persons within a year, no commissions are paid on the sales and no public solicitations or public offerings are employed. The exemption does not apply for offerings involving oil, gas or mining.

KANSAS

Section 17-1262. Sales of securities are exempt if sold to less than 15 persons within 12 months, no commissions are paid on the sales and no public solicitations or public offerings are employed.

KENTUCKY

Section 292.410. Sales of securities are exempt if sold to less than 25 persons, no commissions are paid on the sales and no public solicitations or public offerings are employed.

LOUISIANA

Title 51, section 709. Sales of securities are exempt if sold to less than 20 persons within 12 months, no commissions are paid on the sales and no public solicitations or public offerings are employed.

MAINE

Title 32, section 10502. Offers and sales of securities to no more than 10 persons are exempt. Sales from 10 to 25 persons are exempt if the issuer files a Notice of Exemption.

MARYLAND

Section 71-402(b)11. General transactional exemption for any offer or sales to no more than 35 Maryland residents in any 12- month period provided no public advertisement or general solicitation or public offering is employed. The issuer is required to give each purchaser a disclosure statement called a Form MD-2. There is no filing requirement unless more than $100,000 is raised in a 12-month period. The Form MD-1 must be filed with the Maryland Department of Securities no later than 15 days after the first sales.

MASSACHUSETTS

Section 110A-402(b)(9). Sales of securities are exempt if sold to less than 25 persons within a year and if no commissions are paid on the sales and no public solicitations are employed. If a commission is paid, a notice must be filed with the Securities Division within five days. Offerings exempt from Federal Regulation under Rule 505 or 506 of Regulation D must have a Form D filed with the Securities Division within 15 days of the first sale. Again, if a corporation is raising so much capital that it must seek an exemption under Regulation D it should consult an attorney.

MICHIGAN

Section 451-802. A limited offering exemption. The offering requires that the security not be resold without compliance with state and federal securities laws, that there by no general advertisement or solicitation or public offerings and that no commissions be paid except to Michigan brokers. There can be sales to no more than 15 persons during a 12-month period. Under section 402(b)(9)(D)(3), of the Michigan Securities Act, sales to no more than 35 Michigan residents within a year can be exempt if the issuer files an application for an exemption along with an offering circular.

MINNESOTA

Section 80A.15. Sales of securities are exempt if sold to less than 25 persons, no commissions are paid on the sales and no public solicitations or public offerings are employed.

MISSISSIPPI

Section 75-71-203(9). Sales of securities are exempt if sold to less than 10 persons, no commissions are paid on the sales and no public solicitations or public offerings are employed.

MISSOURI

Section 409.402(b)(10). Sales of securities are exempt if sold to less than 15 persons within 12 months (with a total of no more than 25 shareholders), no commissions are paid on the sales and no public solicitations or public offerings are employed.

MONTANA

Section 30-10-105. Sales of securities are exempt if sold to less than 25 persons prior to formation and to no more than 10 persons per 12 months afterwards, no commissions or payments are paid on the sales and no public solicitations or public offerings are employed.

NEBRASKA

Section 8-1111(9). Sales of securities are exempt if sold to no more than 10 persons, no commissions or payments are made on the sales, and no public solicitations or public offerings are employed.

NEVADA

Section 90.530. Sales of securities are exempt if sold to no more than 25 persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed.

NEW HAMPSHIRE

Section 421 B:17. Sales of securities are exempt if sold to no more than five persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed.

NEW JERSEY

Section 49:30-50. Sales of securities are exempt if sold to no more than 10 persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed. The number of purchasers can be increased up to 35 with a filing of a notice.

NEW MEXICO

Section 58-13B-27(L). Sales of securities are exempt if sold to no more than 10 persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed.

NEW YORK

General Business Code Section 359(f)(2). Sales of securities are exempt if sold to no more than 40 persons under a limited offering exemption. This means no public solicitations of public offerings and no commissions or payments.

NORTH CAROLINA

Section 78A-17. Sales of securities are exempt if sold to no more than 25 persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed. The filing fee for the notice filing is $150.

NORTH DAKOTA

Section 10-04-6. Sales of securities are exempt if sold to no more than 25 persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed. The filing fee for the notice filing is $100.

OHIO

Section 1707.06. Sales of securities are exempt if sold to no more than 35 persons within a year, no commissions or payments are paid and no public solicitations or public offerings are employed. A notice application is required to be filed. Section 1707.03(Q) of the Ohio Blue Sky Law provides a limited exemption if the securities are sold free of federal registration under Section 4(2) of the Securities and Exchange Act (an offering under Rule 506). A sales report Form 3(Q) must be filed by the corporation within 60 days of the first sale. Under Section 1707.03 (O) there is an isolated exemption for a corporation selling its shareholders to no more than 10 Ohio residents within a 12-month period. A Form 3(O) must be filed with the Division of Securities. If the required forms are not filed the claim of exemption is ineffective.

OKLAHOMA

Section 401(b)(9). Sales of securities are exempt if sold to no more than 25 persons within 12 months, no commissions or payments are paid and no public solicitations or public offerings are employed.

OREGON

Section 59.035. Sales of securities are exempt if sold to no more than 10 persons per year, no commissions or payments are paid and no public solicitations or public offerings are employed.

PENNSYLVANIA

Section 70 P.S. section 1-203(d). Sales of securities are exempt if sold to no more than 25 persons within 12 months, no commissions or payments are paid and no public solicitations or public offerings are employed. A notice of exemption Form 203(D) is required to be filed with the Pennsylvania Securities Commission no later than the date the first sale takes place.

RHODE ISLAND

Section 7-11-402. Sales of securities are exempt if sold to less than 25 persons within 12 months, no commissions or payments are paid and no public solicitations or public offerings are employed.

SOUTH CAROLINA

Section 35-1-320. Sales of securities are exempt if sold to less than 25 persons within 12 months, no commissions or payments are paid and no public solicitations or public offerings are employed.

SOUTH DAKOTA

Section 47.31A-402(b)(13). Sales of securities are exempt if sold to less than 25 persons within 12 months, no commissions or payments are paid and no public solicitations or public offerings are employed.

TENNESSEE

Section 48-2-103. Sales of securities are exempt if sold to less than 15 persons per year, no commissions or payments are paid and no public solicitations or public offerings are employed. Under section 48-2-103(b)(4) of the Tennessee Securities Act, there is an exemption for a corporation selling its stock if it is sold to no more than 15 Tennessee residents within a 12-month period and the purchasers have the intent to hold for investment (presumed if they hold it two years).

An isolated exemption also exists for a corporation to sell not more than $100,000 of stock within any 12-month period under section 48-16-103(b)(6).

TEXAS

Section 581-51. Exemption from registration without having to file any notice documents. The exemption requires that the sales be made to no more than 15 Texas residents within a 12-month period. The sales are to persons who are sophisticated (the investment does not exceed 20% of the investor's net worth) and well-informed (either an officer or director or given offering material to evaluate). In addition, for the exemption there can be no more than a total of 35 purchasers of the securities after the sales.

UTAH

Section 61-1-14 et seq. Sales of securities are exempt if sold to less than 15 persons within 12 months, if less than $500,000 is raised, no commissions or payments are paid on the sales and no public solicitations or public offerings are employed.

VERMONT

Section 9-4204(a)(9). Sales of securities are exempt if sold to less than 25 persons per year, no commissions or payments had been made and no public solicitations or public offerings are employed. Vermont requires that a Certificate of Issuance of Shares be signed and filed by two officers with the Secretary of State within 30 days of the issuance of stock.

VIRGINIA

Section 13.1-514. Sales of securities are exempt if sold to less than 35 persons, no commissions or payments are paid and no public solicitations or public offerings are employed.

WASHINGTON

Section 21.20.320(10). Sales of securities are exempt if sold

to less than 10 persons, no commissions or payments are paid and no public solicitations or public offerings are employed.

WEST VIRGINIA

Section 32-4-402. Sales of securities are exempt if sold to less than 10 persons within 12 months, no commissions or payments are paid on the sales, and no public solicitations or public offerings are employed.

WISCONSIN

Section 551.23(8). Sales of securities are exempt if sold to less than 10 persons, no commissions or payments are made for the sales, and no public solicitations or public offerings are employed.

WYOMING

Section 17-4-101. Sales of securities are exempt if sold to less than 15 persons within 12 months, no commissions or payments are paid on the sales, and no public solicitations or public offerings are employed. Upon payment of $200, an issuer may apply for permission to sell to more than 15 persons without having to obtain a permit.

CONCLUSION

The issuance of the limited liability company interest is a security which must either be registered or be exempt from registration. The person forming the LLC should contact the state's department of corporations or securities and ask if there is a notice form to be used by a new LLC issuing limited liability company membership interests under a limited exemption (not necessary for California because the form is included in this book). For many states, such as Texas, there is no such requirement. If such a form is required to be filed after the membership certificate is issued, the person forming the LLC should request a blank form from the state's secretary of state, corporate division.

The person forming the LLC should review those state laws pertaining to securities to be sure that they have not recently been changed. Any questions regarding procedure can be answered by reviewing the state codes or by review of security law treatise.

Notification of the issuance of LLC membership certificates should not pose a problem because the purpose behind the notice requirement is to make sure the LLC does not defraud the members. Where the LLC is simply a family affair or one involving a few close friends, the fraud possibility is remote. All states have limited offering exemptions to avoid forcing small limited liability companies and other small businesses having to comply with the onerous registration requirements of a major Fortune 500 company.

MEMBER'S SUBSCRIPTION CERTIFICATE

FOR

KEPTON MINING COMPANY

This certificate is for use with security offerings exempt from registration under SEC Rules 504, 505 or 506. This certificate must be used for the sale of a limited liability company membership interest.

The statements contained herein are made and given by the undersigned hereinafter referred to as "the Subscriber" to KEPTON MINING COMPANY , a LIMITED LIABILITY COMPANY duly formed and existing under the laws of the State of COLORADO hereinafter referred to as "THE LIMITED LIABILITY COMPANY" as a condition for the purchase of TWENTY PERCENT (20%) membership interest of the limited liability company hereinafter referred to as "the Securities."

I.	NAME AND ADDRESS OF THE SUBSCRIBER.

Name: ABNER TIMMONS

Social Security Number: 444-333-2222

Residence Address: 237 Tyler Rock

Denver, Colorado

Business Address:

II.	SUBSCRIBER'S REPRESENTATIONS AND UNDERSTANDING.

A. PURCHASE FOR OWN ACCOUNT.

The Subscriber hereby expressly represents, warrants and covenants with the LIMITED LIABILITY COMPANY that the Securities are being purchased in the Subscriber's own name and account or for a trust account in which the Subscriber is trustee, and no other person has any interest or right with respect to the Securities.

B.	FOR INVESTMENT PURPOSES ONLY.

The Subscriber expressly states that the Subscriber is acquiring the Securities for investment and not with a view for sale in connection with any distribution of Securities. The Subscriber hereby acknowledges and understands the following:

1. The Securities have not been registered under the Federal Securities Act of 1933 or qualified under any state law, that any disposition of the Securities is subject to restrictions imposed by federal and state law and that the certificates representing the Securities will bear a restrictive legend.

2. That the Securities may not be sold, conveyed or transferred without registration and qualification, and that no undertaking has been made with regard to registering or qualifying the securities in the future. The Subscriber understands that no public market exists with respect to the Securities and no representation has been made to me that such a public market will exist at a future date. In addition, it is also understood that the Corporations Commissioner for the State of Colorado has made no finding or determination relating to the fairness for investment of the Securities offered by the company and that the Commissioner has not and will not recommend or endorse the securities.

3.	That it is not contemplated by the LIMITED LIABILITY COMPANY that the Securities will be subsequently registered with the Securities Exchange Act of 1934 to permit public resales of the Securities under the Securities Act Rule 144.

III. NO PUBLIC OFFERING WAS MADE REGARDING THE OFFERING.

The Subscriber expressly states that the Subscriber has not seen nor received any advertisement nor general solicitation with respect to the sale of the Securities ("the Offering").

IV.	CONSIDERATION FOR THE SECURITIES.

The total consideration that the Subscriber shall pay for the Securities both in cash and other property shall be:

Consideration Amount: $200,000

Other Property: none

V. SUBSCRIBER'S KNOWLEDGE AND EXPERIENCE.

The Subscriber represents and warrants as follows:

1.	That the Subscriber possesses sufficient knowledge and experience in financial and business matters to evaluate the risk factors involved.

2.	That the Subscriber has evaluated the risk factors and tax considerations involved in any purchase of the Securities.

3.	That the Subscriber has had the following personal or business relationship with the LIMITED LIABILITY COMPANY and its officers, directors and controlling partners:

I HAVE INVESTED IN THE MINING BUSINESS IN THE PAST

I HAVE KNOWN THE GENERAL PARTNERS FOR MANY YEARS

I HAVE REVIEWED THE MINING CLAIMS OWNED BY THE COMPANY

AND I BELIEVE THEM TO BE VALUABLE

The subscriber's business or financial experience is as follows (if none, state None): I HAVE WORKED IN THE MINING INDUSTRY FOR TWENTY EIGHT YEARS

VI. FINANCIAL ADVISORS.

The Subscriber represents and warrants that the Subscriber has consulted with such financial advisors as are listed below and that each is capable of evaluating the merits and risks of the investment, that each such person has had access to the LIMITED LIABILITY COMPANY's records, has had an opportunity to verify the accuracy of all information obtained and is satisfied that sufficient information necessary to make an informed decision has been received. By reason of the business or financial experience of my professional advisor named below, the Subscriber is capable of evaluating the merits and risks of this investment and/or protecting his own interest in connection with this investment.

NAME OF FINANCIAL ADVISOR (IF NONE, STATE NONE): none

FINANCIAL ADVISOR'S OCCUPATION: none

FINANCIAL ADVISOR'S ADDRESS: none

FINANCIAL ADVISOR'S BUSINESS OR FINANCIAL EXPERIENCE:

none

NAME OF FINANCIAL ADVISOR (IF NONE , STATE NONE): none

FINANCIAL ADVISOR'S OCCUPATION: none

FINANCIAL ADVISOR'S ADDRESS: none

FINANCIAL ADVISOR'S BUSINESS OR FINANCIAL EXPERIENCE:

none VII. ACKNOWLEDGMENT OF RECEIPT OF INFORMATION.

The Subscriber acknowledges receipt during the course of this transaction and before purchasing the Securities of financial and other written information about the LIMITED LIABILITY COMPANY and the terms and conditions of the offering. The Subscriber received information regarding:

1.	The risks of the offering including the speculative nature of the offering,

2.	The financial hazards involved in the offering,

3.	The lack of liquidity,

4.	The restrictions on the transferability of the
securities,

5.	The tax consequences of the investment,

6.	A written description of any written information concerning the offering that had been provided by the company to any "accredited investor" as defined in 17 CFR Section 230.501(a), and

7.	Such other information deemed necessary and desirable to evaluate the LIMITED LIABILITY COMPANY and the Securities offered.

Dated:

Subscriber

MEMBER'S SUBSCRIPTION CERTIFICATE

FOR

This certificate is for use with security offerings exempt

from registration under SEC Rules 504, 505 or 506. This certificate must be used for the sale of a LIMITED LIABILITY COMPANY MEMBERSHIP INTEREST.

The statements contained herein are made and given by the undersigned hereinafter referred to as "the Subscriber" to , a LIMITED LIABILITY COMPANY duly formed and existing under the laws of the State of hereinafter referred to as "THE LIMITED LIABILITY COMPANY" as a condition for the purchase of membership interest of the limited liability company hereinafter referred to as "the Securities."

I.	NAME AND ADDRESS OF THE SUBSCRIBER.

Name:

Social Security Number:

Residence Address:

Business Address:

II.	SUBSCRIBER'S REPRESENTATIONS AND UNDERSTANDING.

A. PURCHASE FOR OWN ACCOUNT.

The Subscriber hereby expressly represents, warrants and covenants with the LIMITED LIABILITY COMPANY that the Securities are being purchased in the Subscriber's own name and account or for a trust account in which the Subscriber is trustee, and no other person has any interest or right with respect to the Securities.

B.	FOR INVESTMENT PURPOSES ONLY.

The Subscriber expressly states that the Subscriber is acquiring the Securities for investment and not with a view for sale in connection with any distribution of Securities. The Subscriber hereby acknowledges and understands the following:

1. The Securities have not been registered under the Federal Securities Act of 1933 or qualified under any state law, that any disposition of the Securities is subject to restrictions imposed by federal and state law and that the certificates representing the Securities will bear a restrictive legend.

2. That the Securities may not be sold, conveyed or transferred without registration and qualification, and that no undertaking has been made with regard to registering or qualifying the securities in the future. The Subscriber understands that no public market exists with respect to the Securities and no representation has been made to me that such a public market will exist at a future date. In addition, it is also understood that the Corporations Commissioner for the State of has made no finding or determination relating to the fairness for investment of the Securities offered by the company and that the Commissioner has not and will not recommend or endorse the securities.

3.	That it is not contemplated by the LIMITED LIABILITY COMPANY that the Securities will be subsequently registered with the Securities Exchange Act of 1934 to permit public resales of the Securities under the Securities Act Rule 144.

III.	NO PUBLIC OFFERING WAS MADE REGARDING THE OFFERING.

The Subscriber expressly states that the Subscriber has not seen nor received any advertisement nor general solicitation with respect to the sale of the Securities ("the Offering").

IV.	CONSIDERATION FOR THE SECURITIES.

The total consideration that the Subscriber shall pay for the Securities both in cash and other property shall be:

Consideration Amount:

Other Property:

V.	SUBSCRIBER'S KNOWLEDGE AND EXPERIENCE.

The Subscriber represents and warrants as follows:

1.	That the Subscriber possesses sufficient knowledge and experience in financial and business matters to evaluate the risk factors involved.

2.	That the Subscriber has evaluated the risk factors and tax considerations involved in any purchase of the Securities.

3.	That the Subscriber has had the following personal or business relationship with the LIMITED LIABILITY COMPANY and its officers, directors and controlling partners:

The subscriber's business or financial experience is as follows (if none, state ) VI.	FINANCIAL ADVISORS.

The Subscriber represents and warrants that the Subscriber has consulted with such financial advisors as are listed below and that each is capable of evaluating the merits and risks of the investment, that each such person has had access to the LIMITED LIABILITY COMPANY's records, has had an opportunity to verify the accuracy of all information obtained and is satisfied that sufficient information necessary to make an informed decision has been received. By reason of the business or financial experience of my professional advisor named below, the Subscriber is capable of evaluating the merits and risks of this investment and/or protecting his own interest in connection with this investment.

NAME OF FINANCIAL ADVISOR (IF NONE, STATE NONE):

FINANCIAL ADVISOR'S OCCUPATION:

FINANCIAL ADVISOR'S ADDRESS:

FINANCIAL ADVISOR'S BUSINESS OR FINANCIAL EXPERIENCE:

NAME OF FINANCIAL ADVISOR (IF NONE , STATE NONE):

FINANCIAL ADVISOR'S OCCUPATION:

FINANCIAL ADVISOR'S ADDRESS:

FINANCIAL ADVISOR'S BUSINESS OR FINANCIAL EXPERIENCE:

VII. ACKNOWLEDGMENT OF RECEIPT OF INFORMATION.

The Subscriber acknowledges receipt during the course of this transaction and before purchasing the Securities of financial and other written information about the LIMITED LIABILITY COMPANY and the terms and conditions of the offering. The Subscriber received information regarding:

1.	The risks of the offering including the speculative nature of the offering,

2.	The financial hazards involved in the offering,

3.	The lack of liquidity,

4.	The restrictions on the transferability of the
securities,

5.	The tax consequences of the investment,

6.	A written description of any written information concerning the offering that had been provided by the company to any "accredited investor" as defined in 17 CFR Section 230.501(a), and

7.	Such other information deemed necessary and desirable to evaluate the LIMITED LIABILITY COMPANY and the Securities offered.

Dated:

Subscriber

(Department of Corporations Use Only) Department of Corporations File No., if any

Fee Paid $

Receipt No. (Insert File Number(s) of Previous Filings

Before the Department, if any)

$25.00 $35.00 $50.00 $150.00 $300.00

(Circle the appropriate amount of fee.

See Corp. Code Section 25608(c))

COMMISSIONER CF CORPORATIONS

STATE OF CALIFORNIA

NOTICE CF TRANSACTION PURSUANT TO CORPORATIONS CODE SECTION 25102(f)

A. Check one: Transaction under ( ) Section 25102(f) ( ) Rule 260.103.

1.	Name of Issuer:

2.	Address of Issuer:

Street	City	State	ZIP

Mailing Address:

Street	City	State ZIP

3.	Area Code and Telephone Number:

4.	Issuer's state (or other jurisdiction) of incorporation or organization:

5.	Title of class or classes of securities sold in transaction:

6. The value of the securities sold or proposed to be sold in the transaction, determined in accordance with Corp. Code Sec. 25608(g) in connection with the fee required upon filing this notice, is (fee based on amount shown in line (iii) under

"Total Offering" ): California Total Offering

(a) (i) in money	$ $

(ii) in consideration other than money $ $

(iii) total of (I) and (ii)	$ $

(b) ( ) Change in rights, preferences, privileges or restrictions of or on

outstanding securities. ($25.00 fee.) (See Rule 260.103.)

7. Type of filing under Securities Act of 1933, if applicable:

8.	Date of Notice: Issuer

( ) Check if issuer already has a

consent to service of process Authorized Signature on behalf of issuer

on file with the Commissioner.

Print name and title of signatory

Name, Address and Phone number of contact person:

Instruction: Each issuer (other than a California corporation) filing a notice under

Section 25102(f) must file a consent to service of process (Form 260.165), unless it

already has a consent on file with the Commissioner.

•

260.102.14(c) )10/84)

INSTRUCTIONS

1. This notice is to provide information on transactions conducted under the Section 25102(f) exemption from the qualification requirements of Section 25110 of the Corporate Securities Law of 1968 and under the Rule 260.103 exemption from the qualification requirements of Section 25120 of that Law. The form is not designed to indicate whether or not the transaction complies with the requirements of those exemptions but only to provide notice to the commissioner that the exemption is being relied on.

2. When to File Notice. The Notice must be filed with, or mailed to, the Commissioner within 15 calendar days after the first sale of a security in the transaction in this state, or, if the issuer has failed to file a notice, within 15 business days after demand by the Commissioner. The first sale in this state occurs when the issuer has obtained a contractual commitment in this state to purchase one or more of the securities the issuer intends to sell in connection with the transaction. No notice is required if none of the securities offered are purchased in this state. No subsequent notices are required for sales in connection with the same transaction. The information required by the form is to relate to the entire transaction, not just the first sale or sales in this state.

3. The Notice may be filed in person or by mail at any office

of the Department.

The heading. If the issuer has previously qualified securities with the Department, insert the file number of the qualification in the upper right hand corner of the form in the space provided. Circle the appropriate fee for filing this Notice. The fee is based on the value of all securities sold or intended to be sold in the entire transaction as

follows (see Item 6 for valuing securities):

Value of Securities	Filing Fee

$25,000 or less	$ 25

$25,001-$100,000	$ 35

$100,001-$500,000	$ 50

$500,001-$1,000,000	$150

$Over $1,000,000	$300

Item A.	Check appropriate box for exemption being relied on.

Item 1.	Give the issuer's legal name.

Item 2.	Give the street address, and the mailing address if different, of the issuer's principal place of business.

Item 3.	Give the telephone number of issuer's principal place of business.

Item 4.	Give the name of the state or other

jurisdiction under whose laws the issuer is incorporated or organized. If the issuer is not incorporated or organized under the laws of any jurisdiction, provide the name of the jurisdiction where issuer is domiciled and include parenthetical "(domicile)".

Item 5.	Set forth the name or title of each class or

type of security tobe sold in the transaction.

Item 6.See Corp. Code Sec. 25608(g). Generally,

the value of the securities shall be the price at which the issuer proposes to sell the securities, as alleged in the notice, or the actual value of the consideration (if other than money) to be received in exchange for the securities. See Sec. 25608(g) for valuing voting trust certificates, warrants, rights, and share dividends.

Item 7.If the transaction was registered under the

Securities Act of 1933, insert "registered". If conducted pursuant to an exemption from registration under that Act which requires a filing with the Securities and Exchange Commission, indicate the number of the rule pursuant to which such filing was made. If no such filing was required, insert 'none".

Item 8.Date and Signature. The notice should be

signed by an authorized officer, director, general partner or trustee of the issuer (or a person occupying a position with the issuer of equivalent responsibility) or by the authorized attorney of the issuer. If the person the Department is to contactin the event of questions concerning the transaction or the notice is different than the signer, insert the contact person's name, telephone number and correspondence address in the space provided. Otherwise, provide this information with respect to the signer.

Filing Fee. Each notice, whether under 25102(f) or Rule 260.103, must be accompanied by the filing fee required by Section 25608© of the Code.

Corporations Code Section 25165 requires each issuer, other than a California corporation, to file a consent to service of process with the notice filed pursuant to Section 25102(f) unless it already has a consent to service on

file with the Commissioner. Use Form 260.165 (see Rule 260.165, Title 10, California Administrative Code).

CHAPTER 10

ARTICLES OF ORGANIZATION

I. DEFINITION

It is the filing of the articles of organization that forms the LLC. No LLC can exist without filing articles (in Delaware, New Hampshire, New Jersey and Pennsylvania it is called a Certificate of Formation or Organization). The Articles are filed with the Secretary of State for the state in which the LLC is being formed. Out-of-state LLC's (called foreign LLC's) are also required to register with the secretary of state so that their operations can be monitored.

A limited liability company is a cross between a corporation and a partnership. As such, it possesses the following major characteristics of both:

1.	It bestows limited liability on its members,

2.	It can offer the free transferability of its membership interests, and

3.	It can have a continuity of life beyond the resignation, death or withdrawal of a member.

A LLC may give full management and control to just a few managing members: the same treatment that is available in a partnership and similar to that of the board of directors of a corporation.

The main advantage of an LLC is the limited liability it provides its members. As an LLC, the most that its members can lose in a lawsuit against the company are the assets they contributed to the LLC. The limitation of liability would naturally not extend to any personal guarantees of company debts by a member. For example, assume that a member personally guarantees a company loan of $100,000. The member is, thereafter, personally liable for the repayment. The member's liability arises not because the person is a member of the company but because the member personally guaranteed the loan to the company.

In April 1997, Hawaii, as the last holdout, enacted a Limited Liability Company Act. Now, all fifty states along with the District of Columbia permit limited liability companies to be formed under their laws and foreign limited liability companies to operate within their borders.

The purpose of this book is to aid the user in forming an LLC inexpensively. The normal cost of attorney fees for forming such a company is between $500.00 and $2,000. Therefore, even if some minor retyping or additions are added to the articles, the savings make use of this book and forms herein should make the process worthwhile.

II. FORMATION

As a statutory creation, an LLC can only be formed by strict compliance with the state law under which it is being created. LLC's, just as corporations and limited partnerships, require a public filing of formation documents with the secretary of state. The articles of organization document is an application for a license to do business as an LLC in the state. Once the articles are accepted and filed, the LLC is thereafter formed. While each state sets its own requirements for the contents of the articles, they all require:

1.	A name for the company that does not mislead the public but does disclose that it is an LLC.

2.	The address of the company's principal place of business.

3.	The name and address of the company's registered agent in the state.

Several states also require the following additional provisions be included in the articles:

1.	How capital contributions will be made to the company.

2.	Whether the company will be treated as a corporation or a partnership for tax purposes.

3.	The name and address of each organizer.

4.	Whether all the members or a centralized management team will manage the company.

The articles of an LLC can contain virtually anything that the LLC wants to put in them that does not violate state law. There is a reason the LLC might want certain inclusions in the articles rather than in the operating agreement. Once stated in the articles, they cannot easily be changed: the articles have to be amended. Most articles, however, only contain the bare basics required under state law.

A. ORGANIZERS

About a third of the states require an LLC to have more than one owner (member). This differs from corporation requirements which allow only one shareholder. Several states permit only one person to form an LLC but the company will not be given effect until it has more than one member. Most of the states that require a company to have two or more members also require that two or more persons sign the articles of organization or a subscription agreement prior to filing of the articles. If a company falls below the minimum number of members for an LLC, the company will not only be dissolved but will lose the limited liability shield for its members. The shield will still exist, however, for a reasonable and limited time to allow the surviving member to retire the company. If the company does not have at least two members, it cannot be considered a partnership for tax purposes.

B. NAME OF THE LIMITED LIABILITY COMPANY

Obviously, the Articles must state the name of the LLC. The name of a proposed LLC must not be so similar to an existing LLC or any other company as to be confusing. In addition, most states require that the name of the company include the words "limited liability company" or the initials "LLC" or "LC." Should the name become confused with another company, the LLC can be sued for trade infringement. To avoid that confusion, unless absolutely sure that no other LLC has a similar name, the organizer should contact the state's secretary of state for a name search. Sometimes it's free, but usually the secretary of state will charge for a name search and will reserve a proposed available name for the new LLC.

In each state there are attorney service companies located near the state's capital that will do the name search and reservation along with filing the articles for a slight fee (usually $50). This a bargain when the organizer does not live near the secretary of state's office. The attorney service companies can be found in a phone book for the state capital.

C. PURPOSE

Many states require that articles state the purpose for which the LLC is formed. Most states will accept a simple statement that the LLC is formed to do any business which is legal. The articles contained in this book have a purpose provision.

D. MANAGEMENT

The states of Colorado, Florida, Minnesota, Nevada, West Virginia and Wyoming require the articles to state if the company has an agreement to continue in affect upon the death, bankruptcy or withdrawal of a member. Several states require the articles to contain a provision stating whether or not the company is to be managed by elected managing members. If the company is to be managed by elected managers, their names and addresses must be stated in the articles. If the management is reserved to all the members, all of their names and addresses must be listed. Most states do not require the names of the managers or the members to be stated in the articles.

E. NUMBER OF MEMBERS

While an LLC could have any number of members (above the state minimum), it probably should not have more than 35 members (a husband and wife are counted as one member). This book is intended for use in changing an existing business into an LLC or for forming a new but small LLC. If the number of members exceeds 35, the LLC may have to register with the SEC to sell its membership interests. Such registration can easily cost $100,000. If the LLC is intended to have more than 35 members, it should consult an attorney because the members are entering a sensitive and complicated area.

While the Articles may state any number of members, it probably should not exceed the number permitted under state law for an exemption from security registration. The Security and Exchange Act (SEA) will exempt from federal registration the initial sale of an LLC's membership interest if it is made to less than 35 members (See Securities Chapter). Some states, however, limit an LLC to as few as five members in order to qualify for their exemptions from registration. Before any membership interests are sold the organizer should contact the state's corporation commissioner and ask whether a form is needed to be filed. This matter is discussed in more detail in the security section. Usually, it is only a formality when an existing business is being reformed or a new business is being formed by family members or close friends.

F. TERM

One of the major differences between an LLC and a corporation is that in some states, an LLC cannot have perpetual existence. Several states require that an LLC last no more than 30 years. These states require that the articles contain a specific date for the LLC's termination. The articles in this book contain clauses, depending on state law, for selecting either perpetual existence or a specific termination date which is no more than 30 years from the date of its formation. The point to bear in mind is that if the company cannot have a perpetual existence, then the articles must list a clear, definable termination date.

G. ACCEPTANCE OF APPOINTMENT AS REGISTERED AGENT

All of the jurisdictions which permit LLCs require that the Articles state the name and address of the registered agent for the Company. Some states, such as Nevada, require that the agent actually sign an acceptance of the appointment as registered agent to be filed. A few states actually require that the agent actually sign the Articles accepting the appointment. It is a good idea to have the agent sign a certificate of appointment to have it available for filing when necessary. Following the Articles is a generic Certificate of Acceptance of Appointment of Registered Agent.

III. WHERE TO FILE ARTICLES OF ORGANIZATION

ALABAMA

Alabama is unique. It is the only state in which the organizers do not file the articles directly with the secretary of state or a department of corporations. Instead, the organizers file the articles and two copies with the probate judge of the county where the company will have its registered office. The judge issues a certificate of formation to the organizers. Within 10 days of the filing of the articles, the probate judge sends the original articles to the secretary of state.

ARIZONA

Corporations Commission

Phoenix, Arizona 85007

ARKANSAS

Secretary of State

Little Rock, AR 72203

COLORADO

Secretary of State

Denver, CO 80203

CONNECTICUT

Secretary of State

Hartford, CT 06115

DELAWARE

Secretary of State

Dover, DE 19901

FLORIDA

Secretary of State

Tallahassee, FL 32304

GEORGIA

Secretary of State

Atlanta, GA 30334

IDAHO

Secretary of State

Boise, ID 83720

ILLINOIS

Secretary of State

Springfield, IL 62706

INDIANA

Secretary of State

Indianapolis, IN 46204

IOWA

Secretary of State

Des Moines, IA 50319

KANSAS

Secretary of State

Topeka, KS 66612

LOUISIANA

Secretary of State

Baton Rouge, LA 70804

MARYLAND

State Dept. of Assessments & Taxation

Baltimore, MD 21200

MICHIGAN

Department of Commerce,

Corporations Division

P. O. BOX 30054

Lansing, MI 48909

MINNESOTA

Secretary of State

St. Paul, MN 55155

MISSOURI

Secretary of State

Jefferson City, MO 65101

MONTANA

Secretary of State

Helena, MT 59601

NEBRASKA

Secretary of State

Lincoln, NE 68509

NEVADA

Secretary of State

Carson City, NV 89701

NEW HAMPSHIRE

Secretary of State

Concord, NH 03301

NEW JERSEY

Secretary of State

Trenton, NJ 08625

NEW MEXICO

State Corporation Commission

Santa Fe, NM 87501

NORTH CAROLINA

Secretary of State

Raleigh, NC 27611

NORTH DAKOTA

Secretary of State

Bismarck, ND 58501

OKLAHOMA

Secretary of State

Oklahoma City, OK 73152

OREGON

Corporations Commissioner

Salem, OR 97310

RHODE ISLAND

Secretary of State

Providence, RI 02903

SOUTH DAKOTA

Secretary of State

Pierre, SD 57501

TEXAS

Secretary of State

Austin, TX 78711

UTAH

Division of Corporations

and Commercial Code

P. O. Box 4581

Salt Lake City, UT 84145

VIRGINIA

State Corporations Commissioner

Richmond, VA 23203

WEST VIRGINIA

Secretary of State

Charleston, WV 25305

WISCONSIN

Secretary of State

Madison, WI 53702

WYOMING

Secretary of State

Cheyenne, WY 82001

IV. BASIC ARTICLES OF ORGANIZATION AND CERTIFICATE OF FORMATION (ORGANIZATION)FOR THE JURISDICTIONS PERMITTING LLC'S

In April 1997, Hawaii, as the last holdout, enacted a Limited Liability Company Act. Now, all fifty states along with the District of Columbia permit limited liability companies to be formed under their laws and foreign limited liability companies to operate within their borders.	The LLC Acts of these jurisdictions are very similar. Most of the states based their LLC Act on the Wyoming's LLC Act because it pioneered the LLC concept.

The LLC Act of each state specifies certain minimum requirements. All states will allow the LLC organizers to include whatever additional clauses they may want in their articles of organization. Consequently, there is included immediately hereafter, in this book, forms that are valid and totally acceptable with the designated states. There are a couple of items to be noted. Most states call the filings "articles of organization"; however, some states (Delaware, Massachusetts, New Hampshire, Pennsylvania and New Jersey) call them either a "Certificate of Formation or a Certificate of Organization." A second item to note is that Louisiana alone also requires immediate filing of an initial report with the LLC's Articles.

The forms for the Articles contained in this books are set forth as a follows:

1.	For states that have the same requirements for formation,
under their LLC Acts, one generic form is used for these	states, which are identified.

2.	For each state which has specific formation requirements,
a separate set of Articles is presented.

The Articles, contained in this book, are presented in the following sets:

1.	A generic set which can be used in most states that call
the formation document Articles of Organization rather	than a Certificate of Organization. More specific forms,	tailored to the specifics of particular states follow.

2.	Georgia, Iowa, Maryland, Oklahoma, Virginia and West Virginia.

3.	Alaska, Arizona, Arkansas, Colorado, Hawaii, Indiana, Kentucky, Maine, Michigan, Montana, New Mexico, North Carolina, Ohio, Oregon, Texas, Vermont and Utah.

4.	Nebraska, South Dakota and Wyoming.

5.	Delaware, Louisiana, Mississippi, Nevada, New Hampshire, New Jersey, Rhode Island and Washington.

6.	Alabama, Connecticut, Illinois, Kansas, Minnesota, Missouri, North Dakota and Wisconsin.

7. California and Idaho

8.	Colorado

9.	Florida

10. New York

11. Tennessee

IV. GENERIC FORM

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT

(SELECT ONE)

Under the terms of its operating agreement, the management of the company shall be reserved solely to its members. The names and addresses of the initial members of the company are:

Under the terms of its operating agreement, the management of the company shall be by elected managers. The names and addresses of the initial managers of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Division of Corporations of Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

I hereby accept the appointment as registered agent for the

in accordance with the law of the State of .

V. TERM

(SELECT ONE IN ACCORDANCE WITH STATE LAW.)

The limited liability company shall have perpetual existence from the date of the filing of these Articles of Organization.

YES ( ) NO ( )

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAME AND ADDRESS OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE
LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. PROFESSIONAL LIABILITY COMPANY

[Required for Montana if the company will engage in a profession (occupation requiring a professional license) optional elsewhere.]

The company will engage in the following profession:

IX. NUMBER OF MEMBERS

[Optional for Texas; Mandatory for Most States]

This company has or will have two or more members upon formation and will always maintain at least two members.

ADOPTED ( )	REJECTED ( )

X. CONTRIBUTIONS

[Mandatory for Florida, South Dakota and Wyoming; Optional for	Other States]

The members of the company have made the following contributions to the company:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

The members of the company have agreed to make the following contributions to the company in the future on the following conditions:

MEMBER:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER:

CONTRIBUTION:

WHEN TO BE MADE:

XI. ADMISSION OF NEW MEMBERS

[Mandatory for Florida, South Dakota and Wyoming

Optional for Other States]

New members may be added to the company only with the unanimous consent of all the existing members. If a member sells or assigns an interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of a majority of the non-selling members.

XII. CONTINUATION OF BUSINESS

[MANDATORY FOR FLORIDA, SOUTH DAKOTA AND WYOMING; OPTIONAL FOR OTHER STATES]

Under the terms of the operating agreement, the members MAY ( ) MAY NOT ( ) continue the business without dissolution upon the death, expulsion, resignation, or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

XIII. NON-STATUTORY GROUNDS FOR DISSOLUTION

Required in Illinois; Optional in Other States

The members agree that the non-statutory grounds for dissolution of the company are as follows:

XIV. STATE LAW

[For Wisconsin Only]

This limited liability company is formed under the Wisconsin Limited Liability Company Act, Chapter 183 and will be governed by its terms thereunder.

ADOPTED ( )	REJECTED ( )

XV. TAX TREATMENT

Required Only in Rhode Island; Optional for Other States

The members intend that this company will for federal tax purposes be treated as a CORPORATION ( ) PARTNERSHIP ( ).

XVI. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on the day of at .

DECLARATION

The undersigned declare under penalty of perjury by the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization.

3.	The foregoing Articles of Organization are our acts and deeds.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Signature

V. BASIC ARTICLES OF ORGANIZATION FOR GEORGIA ET AL

The following is the basic form for the articles of organization that can be used in the following states:

GEORGIA IOWA MARYLAND

OKLAHOMA VIRGINIA WEST VIRGINIA

Members can include any additional provisions in the articles that they wish as long as the provisions do not violate state law. The provisions which are included in the articles can thereafter only be changed by filing an amendment of the articles with the secretary of state.

POINT TO REMEMBER: The Articles in this book are based upon the required contents of Articles of Organization as set forth under the various state laws. While these required contents do not change often occasionally they do so. We try to keep to keep our material up to date but if the law changes prior to an update, the Articles could be returned unfiled . In such a case, there will always be a letter of explanation as to what needs to be changed for the Articles to be accepted. With this knowledge, the Articles can be easily redrafted and resubmitted. Even in this worse case scenario, this is only a delay of about two weeks in getting the LLC formed.

As an alternative, with the Internet, it is now possible to check the Articles for completeness and recent changes in the legal requirements in a matter of minutes. Virtually every Secretary of state has a web site wherein sample articles can be downloaded in the Adobe PDF format. The forms can then be compared to the ones in the book and any changes quickly attended to. To find a particular Secretary of State's web site, simply do a web search on your browser using the Secretary of State's name for example such as "New York Secretary of State". You will then be taken to that Secretary of State's web site and by browsing it you will come upon a place to download business forms in the Adobe PDF format. A few states, such as Colorado, also furnishes its forms in the WordPerfect format but most Secretaries of State only offer their forms in the Adobe PDF format so as to preserve the integrity of the document's formatting.

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Secretary of State is appointed as the successor registered agent for the company.

IV. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

V. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed the Articles of Organization are:

VII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury by the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization.

3.	The foregoing Articles of Organization are our acts and deeds.

Executed on at

.

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

VI. BASIC ARTICLES OF ORGANIZATION

FOR ALASKA ET AL

The following are the basic forms for the articles of organization that can be used in the following states and the District of Columbia:

ALASKA	ARIZONA ARKANSAS	HAWAII

INDIANA	KENTUCKY MAINE	MICHIGAN

MONTANA	NEW MEXICO N. CAROLINA OHIO
OREGON	S. CAROLINA TEXAS VERMONT UTAH

A general generic set is provided that can be used in these states along with more specific sets that can be more tailored to individual state law. The selection of the form is left to convenience of the reader.

These states require that the articles contain a provision stating whether the company will be managed by elected managers or by the body of members themselves. If the management is by elected managers, the names and addresses of all the elected managers must be listed and if management is reserved for the members, the names and addresses of all the members must be listed. The articles for both forms of management are presented.

Arizona, Arkansas, Ohio and South Carolina require the articles to contain a statement that the company has or will have two or more members upon formation. This is optional for all other states. This is accomplished by typing in the additional provision:

(a)	NUMBER OF MEMBERS: This company has or will have two or more members upon formation and will always maintain at least two members.

Montana requires the profession to be stated in the articles if a professional limited liability company is formed. This can be done by adding:

(a)	PROFESSION OF COMPANY: The company will engage in the following profession:

SPECIAL CLAUSES FOR HAWAII AND VERMONT

Hawaii and Vermont require that the Articles contain a specific clause stating whether the members will be liable for the debts of the company and if so to what extent they will be liable.

This is an odd requirement. Most people form a limited liability company in order not to be liable for the company's debts, hence the name "LIMITED LIABILITY COMPANY". Nonetheless, the articles must have such a clause in order to be filed.

To comply with the Hawaiian requirement, type one of the clauses, below as appropriate, in the Additional Provisions section of the master Articles:

"The members will not be liable for the debts and obligations of the Company", or

The members will be liable for the debts and obligations of the company under Section 303© of the Hawaii Limited Liability Company Act as follows:

To comply with the Vermont requirement, type one of the clauses, below as appropriate, in the Additional Provisions section of the master Articles:

"The members will not be liable for the debts and obligations of the Company", or

The members will be liable for the debts and obligations of the company under Section 3043 of the Vermont Limited Liability Company Act as follows:

Utah requires the articles to contain the signature of the registered agent accepting the appointment. The other states do not contain this requirement. This can be done by adding:

(a) CONSENT OF AGENT: I agree to serve as registered agent for the company.

Signed:	Dated:

The states of Arkansas, Indiana, Kentucky, New Mexico, Ohio and Oregon permit a limited liability company to have perpetual existence rather than a fixed termination date. If the limited liability company is to have a perpetual existence, then type "N/A" in the space under Paragraph V, TERM. Under Paragraph VIII, ADDITIONAL PROVISIONS, type "TERM: The limited liability company shall have perpetual existence.

Additional clauses can be added as desired.

POINT TO REMEMBER: The Articles in this book are based upon the required of contents Articles of Organization as set forth under the various state laws. While these required contents do not change often occasionally they do so. We try to keep to keep our material up to date but if the law changes prior to an update, the Articles could be returned unfiled . In such a case, there will always be a letter of explanation as to what needs to be changed for the Articles to be accepted. With this knowledge, the Articles can be easily redrafted and resubmitted. Even in this worse case scenario, this is only a delay of about two weeks in getting the LLC formed.

As an alternative, with the Internet, it is now possible to check the Articles for completeness and recent changes in the legal requirements in a matter of minutes. Virtually every Secretary of state has a web site wherein sample articles can be downloaded in the Adobe PDF format. The forms can then be compared to the ones in the book and any changes quickly attended to. To find a particular Secretary of State's web site, simply do a web search on your browser using the Secretary of State's name for example such as "New York Secretary of State". You will then be taken to that Secretary of State's web site and by browsing it you will come upon a place to download business forms in the Adobe PDF format. A few states, such as Colorado, also furnishes its forms in the WordPerfect format but most Secretaries of State only offer their forms in the Adobe PDF format so as to preserve the document's formatting.

FORMATION OF A

LIMITED LIABILITY COMPANY

The Texas Limited Liability Company Act, Tex. Rev. Civ . Stat. Ann. art. 1528n , governs the formation of limited liability companies. The limited liability company (LLC) is an m~incorporated business association which has characteristics of both partnerships and corporations. The information provided here is designed to meet minimum statutory filing requirements and no warranty is made regarding the suitability of this information for any particular purpose. This summary and the information provided are not substitutes for the advice of an attorney and it is recommended that the services of an attorney be obtained for information and advice concerning the formation of a company as well as information on state taxes and applicable licensing requirements.

To form a limited liability company, you must file articles of organization pursuant to article 3.02 of the Texas Limited Liability Company Act. The secretary of state does not provide forms for articles of organization. The articles of organization must minimally set forth'

I.	The name of the limited liability company. The name must contain the words

"Limited Liability Company" or "Limited Company" or the abbreviations

" L.L.C. ," "LLC," "LC," "L.C." or "Ltd. Co." The name of a limited liability

company cannot be the same as or deceptively similar to that of another limited

liability company, corporation, limited partnership, name reservation or

registration.

2.	The Period of duration, which may be perpetual, or a specific date of termination.

3.	The purpose for which the limited liability company is organized, which may be

stated to be, or include, the transaction of any or all lawful business for which

limited liability companies may be organized.

4.	The street address of its initial registered office in Texas and the name of its initial

registered agent at such address.

5.	If the limited liability company is to be managed by a manager or managers, a

statement that the company is to be managed by a manager or managers and the

names and addresses of the initial manager or managers. If the management of a

limited liability company is reserved to the members, a statement that the limited

liability company will not have managers and the names and addresses of its initial

members.

6.	The name and address of each organizer.

The organizer must sign the articles of organization. Prior to signing, please review carefully the statements set forth in the articles of organization. A person commits an offense under the Texas Business Corporation Act, the Texas Limited Liability Company Act or the Texas Non- Profit Corporation Act if the person signs a document the person knows is false in any material respect with the intent that the document be delivered to the Secretary of state for filing. The offense is a Class A misdemeanor,

Two copies of the document along with the filing fee should be mailed to Secretary of State, Statutory Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas 787113697. The delivery address is: Secretary of State, Statutory Filings Division, Corporations Section, James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701. The filing fee is $200.00. Personal checks and MasterCard®, Visa®, and Discover® are accepted in payment of the filing fee. Checks should be made payable to the secretary of state. Fees paid by credit card are subject to a statutorily authorized processing cost of 2.1% of the total fees.

We will place one document on record and, if a duplicate copy has been provided for such purpose, return a file stamped copy. The telephone number is (512) 463-5555, TDD ' (800) 735-
2989, FAX: (512) 463-5709.

Availability of the corporation's name may be checked prior to submission of the articles by calling (512) 463-5555 or by e-mail at corpinfo @ sos.state.tx.us / This is only a preliminary clearance and does not ensure that the name will be acceptable upon filing the articles of incorporation. Do not make any financial expenditures or execute documents utilizing the name based upon this preliminary clearance. The final determination as to availability of the name is made when the document is submitted for filing.

Limited liability companies are subject to state franchise taxes. Questions concerning franchise taxes should be directed to the Comptroller of Public Accounts, Tax Assistance Section, Austin, Texas 78774-0100, (512) 463-4600 or (800) 252-1381. TDD ' (800) 248-4099 or (512) 463- 4621.

Under article 9.03 of the Texas Limited Liability Act Company, a business may choose to make the filing of certain documents effective as of a date within 90 days of the date of submission. This can be accomplished by stating either a future date or describing a future event within the document submitted for filing. Please refer to article 9.03 of the Texas Limited Liability Company Act for the specific requirements necessary for filing documents with a future effective date.

Form No. 205 Revised 8/99

FORMATION OF A PROFESSIONAL

LIMITED LIABILITY COMPANY

The Texas Limited Liability Company Act ( TLLCA ), Tex. Rev. Civ . Stat. Ann. art. 1528n , governs the formation of professional limited liability companies. A professional limited liability company ( PLLC ) is a type of limited liability company organized for the purpose of rendering a professional service (and ancillary services), such as those performed by architects, attorneys- at- law, certified public accountants, dentists, physicians, or veterinarians, or other professional services that require as a condition precedent to the rendering of the service the obtaining of a license, permit or other legal authorization. Except as otherwise provided by the TLLCA , a PLLC may be organized only for the purpose of rendering one specific kind of professional service.

Doctors of medicine and osteopathy and podiatrists my form a PLLC that is jointly owned by those practitioners to perform a professional service that falls within the scope of practice of those practitioners. In addition, professionals, other than physicians, engaged in related mental health fields, such as psychology, clinical social work, licensed professional counseling, and licensed marriage and family therapy, may form a PLLC that is jointly owned to perform professional services that fall within the scope of practice of those practitioners.

A PLLC has as its members or managers only professional individuals or professional entities. A professional individual is an individual licensed or otherwise authorized within this slate to render the same profession service as the PLLC . A professional entity means a person (other than an individual), Whether organized 'for profit or not, that renders the same professional service as the.: PLLC only through its partners, members, shareholders, managers, associates, employees or agents who are professional individuals or professional entities. A professional entity would include a Texas nonprofit organization organized under the Texas Non-Profit Corporation Act and an unincorporated nonprofit association governed by the Texas Uniform Unincorporated Nonprofit Association Act.

To form a PLLC , you must. file articles of organization pursuant to article 11.01 of the Texas Limited Liability Company Act. The articles must minimally set forth:

1.	The name of the PLLC . The name may not be contrary to the law or ethics
regulating the practice of the professional service rendered through the professional	limited liability company. The name must contain the words "Professional Limited	Liability Company" or the abbreviations " PLLC " or " P.L.L.C. " The name cannot	be the same as or deceptively similar to that of another limited liability company,	corporation, limited partnership, name reservation or registration.

2.	The period of duration, which may be perpetual.

3.	A statement describing one specific kind of professional service to be rendered by
the PLLC .

4.	The address of its initial registered office and the name of its initial registered agent	at such address in Texas.

5.	If the PLLC is to be managed by a manager or managers, a statement that the

company is to be managed by a manager or managers and the names and addresses

of the initial manager or managers. If the management of a PLLC is reserved to the

members, a statement that the company will not have managers, and the names	and addresses of its initial members.

6.	The name and address of each organizer.

7.	A statement that the limited liability company is a professional limited liability

company.

The organizer(s) must sign the articles of organization. Prior to signing, please review carefully the statements set forth in the articles of organization. A person commits an offense under the Texas Business Corporation Act, the Texas Limited Liability Company Act or the Texas Non- Profit Corporation Act if the person signs a document the person knows is false in any material respect with the intent that the document be delivered to the secretary of state for filing. The offense is a Class A misdemeanor.

Two copies of the document along with the filing fee should be mailed to Secretary of State, Statutory Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas 787113697. The delivery address is: Secretary of State, Statutory Filings Division, Corporations Section, James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701. The filing fee is $200.00. Personal checks and MasterCard®, Visa®, and Discover® are accepted in payment of the filing fee. Checks should be made payable to the secretary of state. Fees paid by credit card are subject to a statutorily authorized processing cost of 2.1% of the total fees.

We will place one document on record and, if a duplicate copy has been provided for such purpose, return a file stamped copy. The telephone number is (512) 463-5555, TDD ' (800) 735- 2989, FAX' (512) 463- 5709.

In view of the legal complexities involved, it is recommended that you consult the attorney of your choice to give you complete information and advice concerning limited liability companies, as well as information on federal taxation, state taxes, and applicable licensing requirements.

A PLLC is subject to state franchise tax. Questions concerning franchise taxes should be directed to the Comptroller of Public Accounts, Tax Assistance Section, Austin, Texas 78774-
0100, (512) 463-4600 or (800) 252-1381. TDD : (800) 248-4099 or (512) 463-4621.

Name availability may be checked prior to submission of the articles by calling (512) 463-5555 or by e-mail at corpinfo @ sos.state.tx.us /, This is only a preliminary clearance. The final decision on the name will be made when the document is submitted for filing. Expenditures should not be made on the basis of preliminary clearance of a proposed professional limited liability company name.

Form No. 206 Revised 9/99

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT (ELECT ONE)

[ ] Under the terms of its operating agreement, the management of the company shall be reserved solely to its members. The names and addresses of the initial members of the company are:

[ ] Under the terms of its operating agreement, the management of the company shall be by elected managers. The names and addresses of the initial managers of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

I hereby accept the appointment as registered agent for the

in accordance with the law of the State of .

V. TERM (ELECT ONE)

[ ] The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

[ ] The limited liability company shall have perpetual existence.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on

DECLARATION

The undersigned declare under penalty of perjury by the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization.

3.	The foregoing Articles of Organization are our acts and deeds.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

VII. BASIC ARTICLES OF ORGANIZATION

FOR NEBRASKA ET AL

The following are the basic forms for the articles of organization that can be used in the following states:

NEBRASKA	SOUTH DAKOTA	WYOMING

These states require that the articles contain a provision stating whether the company will be managed by elected managers or by the body of members themselves. If the management is by elected managers, all of the managers must be listed. If management is reserved for all the members, the names and addresses of all the members must be listed. The articles for both forms of management are presented.

Included in these articles are clauses for adding new members and for continuing the company. The organizers must choose. Restrictions on the right to add new members or continue the business may affect the company's worth, but they may also keep the company from being treated as a corporation for tax purposes (review the tax chapter).

In addition to the above requirements, these states require the articles also to state the total contributions the members have made or have agreed to make to the company for their membership interests. The other states which permit LLC's do not require this provision although it might be added as an optional provision in the articles of those other states. These states require the specific contributions that have been or will be made to be stated in the articles. If contributions will be or might be made, the time of the contribution and the condition for making the contribution must be stated. Usually the members will not be required to make additional contributions, and the provision in the article can be marked "none" or "not applicable."

Members can include any additional provisions in the articles that they wish as long as the provisions do not violate state law. The provisions which are included in the articles can thereafter only be changed by filing an amendment to the articles with the secretary of state.

POINT TO REMEMBER: The Articles in this book are based upon the required contents of Articles of Organization as set forth under the various state laws. While these required contents do not change often occasionally they do so. We try to keep to keep our material up to date but if the law changes prior to an update, the Articles could be returned unfiled . In such a case, there will always be a letter of explanation as to what needs to be changed for the Articles to be accepted. With this knowledge, the Articles can be easily redrafted and resubmitted. Even in this worse case scenario, this is only a delay of about two weeks in getting the LLC formed.

As an alternative, with the Internet, it is now possible to check the Articles for completeness and recent changes in the legal requirements in a matter of minutes. Virtually every Secretary of state has a web site wherein sample articles can be downloaded in the Adobe PDF format. The forms can then be compared to the ones in the book and any changes quickly attended to. To find a particular Secretary of State's web site, simply do a web search on your browser using the Secretary of State's name for example such as "New York Secretary of State". You will then be taken to that Secretary of State's web site and by browsing it you will come upon a place to download business forms in the Adobe PDF format. A few states, such as Colorado, also furnish its forms in the WordPerfect format but most Secretaries of State only offer their forms in the Adobe PDF format so as to preserve the document's formatting.

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be reserved solely to its members. The names and addresses of the initial members of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. CONTRIBUTIONS

The members of the company have made the following contributions to the company:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

The members of the company have agreed to make the following contributions to the company in the future on the following conditions:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:	IX. ADMISSION OF NEW MEMBERS

New members may be added to the company only with the unanimous consent of all the existing members. If a member sells or assigns an interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of a majority of the non-selling members.

X. CONTINUATION OF BUSINESS

Under the terms of the operating agreement, the members MAY ( ) MAY NOT ( ) continue the business without dissolution upon the death, expulsion, resignation, or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

XI. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury by the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization.

3.	The foregoing Articles of Organization are our acts and deeds.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be by elected managers. The names and addresses of the elected managers of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. CONTRIBUTIONS

The members of the company have made the following contributions to the company:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

MEMBER:

CONTRIBUTION:

The members of the company have agreed to make the following contributions to the company in the future on the following conditions:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

MEMBER

CONDITION:

CONTRIBUTION:

WHEN TO BE MADE:

IX. ADMISSION OF NEW MEMBERS

New members may be added to the company only with the unanimous consent of all the existing members. If a member sells or assigns an interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of a majority of the non-selling members.

X. CONTINUATION OF BUSINESS

Under the terms of the operating agreement, the members MAY ( ) MAY NOT ( ) continue the business without dissolution upon the death, expulsion, resignation, or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

XI. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury by the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization.

3.	The foregoing Articles of Organization are our acts and deeds.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

VIII. BASIC ARTICLES OF ORGANIZATION FOR DELAWARE ET AL

The following are the basic forms for the articles of organization that can be used in the following states:

DELAWARE LOUISIANA MASSACHUSETTS

MISSISSIPPI NEW HAMPSHIRE NEW JERSEY PENNSYLVANIA RHODE ISLAND WASHINGTON

Most of these states refer to the formation document as a Certificate of Formation or Organization rather than Articles of Organization.

The generic form can be in most of these states but specific forms are also included for those states that have specific requirements.

These states have additional requirements that are different from those of other states, so they are covered separately.

Members can include any additional provisions in the articles that they wish, as long as the provisions do not violate state law. The provisions which are included in the articles can thereafter only be changed by filing an amendment to the articles with the secretary of state.

Louisiana requires the names of the company's managers or its members to be listed. Therefore, the articles for Louisiana are written in both cases as it has been done for the other states that have this requirement. Much of the information that other states require in the articles is required by Louisiana in a separate document called the "initial report." Following the articles for Louisiana is an initial report that covers the information Louisiana requires.

Rhode Island alone requires the organizers to state whether the company will be treated as a corporation or partnership for federal tax purposes. Most states including, Mississippi and Washington, permit an LLC to have perpetual existence. If a fixed term of life is required or desired, mark "NO" in Article V and complete the blank with the termination date.

POINT TO REMEMBER: The Articles in this book are based upon the required of Articles of Incorporation as set forth under the various state laws. While these required contents do not change often occasionally they do so. We try to keep to keep our material up to date but if the law changes prior to an update, the Articles could be returned unfiled . In such a case, there will always be a letter of explanation as to what needs to be changed for the Articles to be accepted. With this knowledge, the Articles can be easily redrafted and resubmitted. Even in this worse case scenario, this is only a delay of about two weeks in getting the LLC formed.

As an alternative, with the Internet, it is now possible to check the Articles for completeness and recent changes in the legal requirements in a matter of minutes. Virtually every Secretary of state has a web site wherein sample articles can be downloaded in the Adobe PDF format. The forms can then be compared to the ones in the book and any changes quickly attended to. To find a particular Secretary of State's web site, simply do a web search on your browser using the Secretary of State's name for example such as "New York Secretary of State". You will then be taken to that Secretary of State's web site and by browsing it you will come upon a place to download business forms in the Adobe PDF format. A few states, such as Colorado, also furnishes its forms in the WordPerfect format but most Secretaries of State only offer their forms in the Adobe PDF format so as to preserve the integrity of the document's formatting.

CERTIFICATE OF FORMATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The general purpose of the limited liability company is to

and is also authorized engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT

(Select One)

Under the terms of its operating agreement, the management of the company shall be reserved solely to its members. The names and addresses of the initial members of the company are:

Under the terms of its operating agreement, the management of the company shall be by elected managers. The names and addresses of the initial managers of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, Division of Corporations or the Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

I hereby accept the appointment as registered agent for the

in accordance with the law of the State of .

V. TERM

(Select One in Accordance with State Law)

The limited liability company shall have perpetual existence from the date of the filing of these Articles of Organization.

YES ( ) NO ( )

The limited liability company shall terminate and dissolve on ,a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed this Certificate of Formation are:	VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. NUMBER OF MEMBERS

This company has or will have two or more members upon formation and will always maintain at least two members.

IX. ADMISSION OF NEW MEMBERS

(Optional)

New members may be added to the company only with the unanimous consent of all the existing members. If a member sells or assigns an interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of a majority of the non-selling members.

X. CONTINUATION OF BUSINESS

(Optional)

Under the terms of the operating agreement, the members MAY

( ) MAY ( ) continue the business without dissolution upon the death, expulsion, resignation, or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

XI. NON-STATUTORY GROUNDS FOR DISSOLUTION

(Optional

The members agree that the non-statutory grounds for dissolution of the company are as follows:

XII. TAX TREATMENT

The members intend that this company will for federal tax purposes be treated as a CORPORATION ( ) PARTNERSHIP ( ).

XIII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this Certificate of Formation on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Certificate of Formation.

3.	The foregoing Formation is our act and deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

CERTIFICATE OF FORMATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of Delaware other than the banking business or the trust company business.

III. AGENT FOR SERVICE OF PROCESS

The name and address in the State of Delaware of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, Secretary of State is appointed as the successor registered agent for the company.

IV. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of this Certificate of Formation.

V. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed this Certificate of Formation are:

VII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this Certificate of Formation on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of Delaware that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Certificate of Formation.

3.	The foregoing Certificate of Formation is our act and	deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Signature

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of LOUISIANA other than the banking business or the trust company business.

III. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on at .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of Louisiana that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization.

3.	The foregoing Articles of Organization are our act and deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Signature

INITIAL REPORT

OF

The following is the initial report of , a limited liability company formed under the Louisiana Limited Liability Company Act.

I. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be by elected managers, The names and addresses of the initial managers of the company are:

II. AGENT FOR SERVICE OF PROCESS

The name and address in the State of LOUISIANA of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

III. TERM

The limited liability company shall terminate and dissolve on ,a date no later than 30 years from the date of the execution of these Articles of Organization.

IV. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed the Articles of Organization are:

V. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this initial report on

.

STATE OF

COUNTY OF

On before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

ACCEPTANCE BY REGISTERED AGENTS

The undersigned were named in the Initial Report as the registered agents of a limited liability company formed under the laws of Louisiana. The undersigned hereby agree to serve as the registered agent for the said company.

STATE OF LOUISIANA

PARISH OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Signature

CERTIFICATE OF FORMATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is .

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of NEW HAMPSHIRE other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be by elected managers. The names and addresses of the initial managers of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of New Hampshire of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed the Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this Certificate of Formation on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of New Hampshire that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Certificate of Formation.

3.	The foregoing Certificate of Formation is our act and	deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

CERTIFICATE OF FORMATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is .

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of NEW HAMPSHIRE other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be by reserved solely to its members, including the right to contract debts for the company. The names and addresses of the initial members of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of New Hampshire of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed the Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this Certificate of Formation on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of New Hampshire that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Certificate of Formation.

3.	The foregoing Certificate of Formation is our act and deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

_________________________________________

CERTIFICATE OF FORMATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of NEW JERSEY other than the banking business or the trust company business.

III. AGENT FOR SERVICE OF PROCESS

The name and address in the State of NEW JERSEY of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

IV. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of this Certificate of Formation.

V. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed this Certificate of Formation are:

VII. NUMBER OF MEMBERS

The limited liability company shall have at formation and maintain thereafter at least two members.

VIII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this Certificate of Formation on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of New Jersey that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Certificate of Formation.

3.	The foregoing Certificate of Formation is our act and deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

CERTIFICATE OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of PENNSYLVANIA other than the banking business or the trust company business. If the company is to practice as a restricted professional company its service or services to be rendered are:

III. AGENT FOR SERVICE OF PROCESS

The name and address in the State of NEW JERSEY of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

IV. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of this Certificate of Formation.

V. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed this Certificate of Organization are:

VII. NUMBER OF MEMBERS

The limited liability company shall have at formation and maintain thereafter at least two members.

VIII. MEMBERSHIP CERTIFICATES

Each members's interest in the company shall be evidenced by a membership certificate issued by the company.

IX. EFFECTIVE DATE

(check one)

The Certificate of Organization shall become effective ( )

immediately upon its filing ( ) on the hour of on the date of .

X. MANAGEMENT

(SELECT ONE)

Under the terms of its operating agreement, the management of the company shall be reserved solely to its members. The names and addresses of the initial members of the company are:

Under the terms of its operating agreement, the management of the company shall be by elected managers. The names and addresses of the initial managers of the company are:

VIII. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed this Certificate of Formation on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of Pennsylvania that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Certificate of Organization.

3.	The foregoing Certificate of Formation is our act and	deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL

Signature

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of RHODE ISLAND other than the banking business or the trust company business.

III. NUMBER OF MEMBERS

At least two persons have agreed to join together to form this limited liability company.

IV. TAX TREATMENT

The members intend that this company for federal tax purposes will be treated as a Corporation ( ) Partnership ( ).

V. AGENT FOR SERVICE OF PROCESS

The name and address in the State of RHODE ISLAND of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with responsible diligence, the Secretary of State is appointed as the successor registered agent for the company.

VI. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

IX. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Articles of Organization.

3.	The foregoing Articles of Organization are our act and
deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Signature

IX. BASIC ARTICLES OF ORGANIZATION FOR ALABAMA ET AL

The following are the basic forms for the articles of organization that can be used in the following states:

ALABAMA CONNECTICUT ILLINOIS KANSAS

MINNESOTA MISSOURI NEVADA NORTH DAKOTA

WISCONSIN

These states require that the articles contain a provision stating whether the company will be managed by elected managers or by the body of members themselves. If the management is by managers, the names and addresses of all the elected managers must be listed. If the management is by all of the members, all members must be listed. The articles for both forms of management are presented.

Included in these articles are clauses for adding new members and for continuing the company after the disassociation of a member. The organizers must choose. Restrictions on the right to add new members or continue the business may affect the company's worth, but they may also keep the company from being treated as a corporation for tax purposes (review the tax chapter for a discussion on the effects of making these elections).

Illinois is the only state which requires the articles to contain a non-statutory ground for dissolving the company and the members have agreed. One such ground could be when the company achieves a desired goal; for example, building and selling a building. If there are no non-statutory grounds for dissolution, then fill in "none." This provision may be omitted for the other states if the organizers wish by retyping the page without it and renumbering subsequent pages.

Members can include any additional provisions in the articles that they wish as long as the provisions do not violate state law. The provisions which are included in the articles can thereafter only be changed by filing an amendment to the articles with the secretary of state.

The states of Alabama, Nevada Missouri permit a limited liability company to have a perpetual existence. If the company is to have a perpetual existence rather than a fixed length of time, check that box for the states which do not permit perpetual existence complete the other portion of the paragraph. State law should be checked to determine the term of existence. Because of the Federal 1997 changes in the tax law which now gives LLC's automatic partnership tax treatment some states, such as Nevada in October 1997, changed their LLC act to permit perpetual existence.

North Dakota requires that the articles contain a statement that the company will have at least two members when formed. Under Paragraph VIII, ADDITIONAL PROVISIONS, type: "NUMBER OF MEMBERS: The limited liability company shall have and shall maintain at all times at least two members."

POINT TO REMEMBER: The Articles in this book are based upon the required contents of Articles of Organization as set forth under the various state laws. While these required contents do not change often occasionally they do so. We try to keep to keep our material up to date but if the law changes prior to an update, the Articles could be returned unfiled . In such a case, there will always be a letter of explanation as to what needs to be changed for the Articles to be accepted. With this knowledge, the Articles can be easily redrafted and resubmitted. Even in this worse case scenario, this is only a delay of about two weeks in getting the LLC formed.

As an alternative, with the Internet, it is now possible to check the Articles for completeness and recent changes in the legal requirements in a matter of minutes. Virtually every Secretary of state has a web site wherein sample articles can be downloaded in the Adobe PDF format. The forms can then be compared to the ones in the book and any changes quickly attended to. To find a particular Secretary of State's web site, simply do a web search on your browser using the Secretary of State's name for example such as "New York Secretary of State". You will then be taken to that Secretary of State's web site and by browsing it you will come upon a place to download business forms in the Adobe PDF format. A few states also furnish its forms in the WordPerfect format but most Secretaries of State only offer their forms in the Adobe PDF format so as to preserve the document's formatting.

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be reserved solely to its members, including the right to contract debts for the company. The names and addresses of the initial members of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company (select one) shall have [ ] perpetual existence; shall not have [ ] perpetual existence and shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. ADMISSION OF NEW MEMBERS

New members may be added to the company only with the unanimous consent of all the existing members. If a member sells or assigns an interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of a majority of the non-selling members.

IX. CONTINUATION OF BUSINESS

Under the terms of the operating agreement, the members MAY

( ) MAY NOT ( ) continue the business without dissolution upon the death, expulsion, resignation or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

X. NON-STATUTORY GROUNDS FOR DISSOLUTION

The members agree that the non-statutory grounds for dissolution of the company are as follows:	XI. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these Articles of Organization

3.	The foregoing Articles of Organization are our act and	deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

Signature

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be elected managers. The names and addresses of the initial managers of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company (select one) shall have [ ] perpetual existence; shall not have [ ] perpetual existence and shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. ADMISSION OF NEW MEMBERS

New members may be added to the company only with the unanimous consent of all the existing members. If a member sells or assigns an interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of a majority of the non-selling members..

IX. CONTINUATION OF BUSINESS

Under the terms of the operating agreement, the members MAY

( ) MAY NOT ( ) continue the business without dissolution upon the death, expulsion, resignation or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

X. NON-STATUTORY GROUNDS FOR DISSOLUTION

The members agree that the non-statutory grounds for dissolution of the company are as follows:	XI. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed these

Articles of Organization.

3.	The foregoing Articles of Organization are our act and	deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. STATE LAW

This limited liability company is formed under the Wisconsin Limited Liability Company Act, Chapter 183 and will be governed by its terms thereunder.

III. NAME OF INITIAL REGISTERED AGENT

The name and address in the State of WISCONSIN of the limited liability company's initial registered agent is: IV. INITIAL PRINCIPAL OFFICE OF THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address (The complete address, including street and number, as assigned, and ZIP Code, P.O. Box address may be included as part of the address, but is insufficient alone.):

V. MANAGEMENT

Management of he limited liability company shall be vested in:

(Select and check (X) the one appropriate choice below)

( ) a manager or managers

OR

( ) its members

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:	IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

This document was drafted by

(Name the individual who drafted the document)

*** OPTIONAL - Second Choice Company Name if First Choice is Not Available.

+

+

( ) -

^^Your Name, return address and phone number during the day,

INSTRUCTIONS (Ref. sec. 183.0202 Wis. Stats. for document content)

Submit one original and one exact copy to Dept. of Financial Institutions, P O Box 7846, Madison WI, 53707-7846, together with a FILING FEE of $130.00, payable to the department. (If sent by Express or Priority U.S. mail, address to 345 W. Washington Ave, 3*d Floor, Madison WI, 53703). The original must include an original manual signature, per sec. 183.0107(2), Wis. Stats. This document can be made available in alternate formats upon request to qualifying individuals with disabilities. Upon filing, the information in this document becomes public and might be used for purposes other than that for which it was originally furnished. If you have any questions, please contact the Division of Corporate & Consumer Services at 608-261- 7577. Hearing-impaired may call 608-266-8818 for TDY .

Article 1. The name must contain the words "limited liability company" or "limited liability co." or end with the abbreviation " L.L.C. " or "LLC". If you wish to provide a second choice name that you would accept if your first choice is not available, enter it in the "Optional" area on page 1.

Article 2. This statement is required by sec. 183.0202(1).

Articles 3 & 4. The company must have a registered agent located at a registered office in Wisconsin. The address of the registered office is to describe the physical location where the registered agent maintains their business office. Provide the street number and name, city and ZIP code in Wisconsin. P O Box addresses may be included as part of the address, but are insufficient alone. The company may not name itself as its own registered agent.

Article 5. Indicate whether management of the company will be vested in a manager or managers, or in its members Select only one choice. (Ref. sec. 183.0401, Wis. Stats.)

Article 6. Print or typewrite the name and complete address of each organizer. At least one organizer is required to sign the document, although all organizers may sign.

If the document is executed in Wisconsin, sec. 182.01(3), Wis. Stats., provides that it shall not be filed unless the name of the drafter (either an individual or a governmental agency) is printed in a legible manner. If the document is not executed in Wisconsin, enter that remark.

This document may declare a delayed effective date. To do so, enter a remark: "This document has a delayed effective date of (enter the future date) ." The delayed effective date may not before, or more than 90 days after, the document is received by the Department of Financial Institutions for filing.

NOTE: The articles of organization may contain only that information required under items 1 through 6. The company may create a separate operating agreement that includes additional information.

BASIC ARTICLES FOR COLORADO

The basic Articles for Colorado as set forth by the Secretary of State follow. The filing fee is $50 and two copies are required.

Mail to: Secretary of State For office use only 031

Corporations Section

1560 Broadway, Suite 200

Denver, CO 80202

(303) 894-2251

MUST BE TYPED	Fax (303) 894-2242

FILING FEE: $50.00

MUST SUBMIT TWO COPIES

Please include a typed	ARTICLES OF ORGANIZATION

self-addressed envelope

I/We the undersigned natural person(s) of the age of eighteen years or more, acting as organizer(s) of a limited liability company under the Colorado Limited Liability Company Act, adopt the following Articles of Organization for such limited liability company:

FIRST:	The name of the limited liability company is:

SECOND:	Principal place of business (if known):

THIRD:	The street address of the initial registered office of the limited liability company is:

The mailing address (if different from above ) of the initial registered office of the limited liability company is:

The name of its proposed registered agent in Colorado at that address is:

FOURTH:	The management is vested in managers (check if appropriate)

FIFTH:	The names and business addresses of the initial manager or managers or if the management is vested in the members, rather than managers, the names and addresses of the member or members are:

NAME	ADDRESS (include zip codes)

SIXTH:	The name and address of each organizer is:

NAME	ADDRESS (include zip code)

Signed	Signed	Organizer	Organizer

ARTICLES OF ORGANIZATION FOR THE STATE OF FLORIDA

The name must end in the words "limited liability company" the abbreviation, or "limited company" or L.L.C. , L.C., LLC or LC.

Florida requires that the Resident Agent is sign the Certificate accepting the appointment. Utah is the only other state which requires the Resident Agent to sign the Articles. Most states require the Agent a separate statement of acceptance because they realize that it is not always possible to get an agent's signature at the same time that the Articles are executed.

The original and one copy of the Articles are to be submitted. The Articles can be mailed to:

REGISTRATION SECTION

DIVISION OF CORPORATIONS

P.O. BOX 6327

TALLAHASSEE, FL. 32314

(850) 487-6051

The filing fee is dependent on whether a Certificate of Status and certified copy of the Articles is requested.

For just filing the Articles $100.00

For Filing and a Certificate $105.00

For Filing and a Certified Copy $130.00

For Filing, Certified Copy and Certificate $135.00

DESIGNATION OF RESIDENT AGENT $25.00

ARTICLES OF INCORPORATION FOR FLORIDA LIMITED LIABILITY COMPANY

ARTICLE I NAME:

The name of the Limited Liability Company shall be:

ARTICLE II. ADDRESS

The mailing address and street address of the principal office of the Limited Liability Company is:

ARTICLE III REGISTERED AGENT, REGISTERED OFFICE & RESIDENT AGENT'S SIGNATURE

The name and Florida Street address of the initial registered agent are:

Name

Florida Street address (P.O. Box NOT acceptable)

City, State and Zip Code

Having been named as registered agent and to accept service for the above stated Limited Liability Company at the place designated in this certificate, I hereby accept the appointment as registered agent and agree to act in this capacity. I further agree to comply with the provisions of all statutes relating to the proper and complete performance of my duties, and I am familiar with and accept the obligations of my position as registered agent as provided for in Chapter 608, F.S.

Signature/Registered Agent

ARTICLE IV MANAGEMENT (Check box if applicable)

[ ] The Limited Liability Company is to be managed by one manager or more managers and is, therefore, a manager-managed company.

(An additional article must be added if an effective date is requested)

Signature of a member or an authorized representative of a member

(In accordance with Section 608.408(3),	Florida Statutes, the execution

of this document constitutes an affirmation under penalty of

perjury that the facts stated herein are true.)

Typed or printed name of signee

BASIC ARTICLES FOR NEW YORK

New York differs from the other states in two aspects. It requires that the articles contain a provision designating the Secretary of State as agent for service of process and listing a post office box where the Secretary of State can mail a copy of any process served.

Since the Secretary of State must be named as the agent for service of process, the designation of a resident agent is optional. It is a good idea however to name a registered agent. In the event of a lawsuit service can be made on the agent. Consequently, the company will know of the lawsuit sooner and have more time to prepare an answer to the complaint.

New York also permits an LLC to have perpetual existence. Not all states permit perpetual existence of their LLC's.

Within 120 days after the filing date, the company must publish in newspapers a copy of the Articles of Organization or a notice containing the text of the Articles of Organization. Publication must be done once a week for six successive weeks in two newspapers in the County in which the LLC is located. The newspapers must be designated by the County Clerk. At least one such newspaper must be published in the city or town on which the LLC office is intended to be located. If the newspaper is not published within such city or town, it must be published in the newspaper of the next nearest city or town. A proof of publication affidavit with a filing fee of $25.00 from the printer or publisher of each newspaper must be filed with the Department of State.

FAILURE TO FILE THE PROOF WITHIN 120 DAYS OF THE EFFECTIVE DATE OF THE ARTICLES SHALL PROHIBIT THE LLC FROM MAINTAINING ANY ACTION OR SPECIAL PROCEEDING IN THIS STATE UNLESS AND UNTIL SUCH THE PROOF OF PUBLICATION IS FILED.

New York State

Department of State

Division of Corporations, State Records

and Uniform Commercial Code

Albany, NY 12231

(THIS FORM MUST BE PRINTED OR TYPED IN BLACK INK)

ARTICLES OF ORGANIZATION

OF

(INSERT COMPANY NAME)

Under Section 203 of the Limited liability Company Law

FIRST: The name of the Limited Liability Company is:

SECOND: The county within this state, in which the office of the Limited Liability Company is to be located is:

THIRD: (OPTIONAL) The latest date on which the limited liability company is to dissolve is:

(month/day/year)

FOURTH: The secretary of state is designated as agent of the Limited Liability Company upon whom process against it may be served. The address within or without this state to which the Secretary of State shall mail a copy of any process against the limited liability company served upon him or her is::

FIFTH: (OPTIONAL) The name and street address within this state of the registered agent of the limited liability company upon whom process against the limited liability company may be served is:

SIXTH: (OPTIONAL) The future effective date of the Articles of Organization, which does not exceed 60 days from the date of filing is :

(month/day/year)

SEVENTH: (OPTIONAL) If all or specified members are to be liable in their capacities as members for all or specified debts, obligations, or liabilities of the limited liability company as authorized by section 6098 of the Limited Liability Company Law, an affirmative statement must be made. A statement of such effect is made as follows:

(Signature) (Name and capacity of signer)

------------------------------------------------------------------------------------------------

ARTICLES OF ORGANIZATION

OF

Under Section 203 of the Limited Liability Company Law

------------------------------------------------------------------------------------------------

Filed by:

(Name)

(Mailing Address)

(City, State, Zip code)

NOTE: This form was prepared by the New York State department of State for articles
of organization. It does not contain all optional provisions under the law. You are not	required to use this form. You may draft your own form or use forms available at legal	supply stores. The Department of State recommends that legal documents be prepared	under the guidance of an attorney. The certificate must be submitted with a filing fee	of $200 made payable to the Department of State.

*This form may not be accompanied by any riders ir attachments except a certificate	evidencing reservation of name.

BASIC ARTICLES FOR TENNESSEE

Tennessee has a few unique provisions in its limited liability act The following articles are designed to meet the basic requirements. Tennessee requires that the articles state whether creditors or members are given preemptive rights for loans to the company: Are the members or creditors given rights to control or influence the company's decisions? The answer will be "no" for most companies because such rights seriously impair the rights of the other members to protect their investment. The organizers can add additional provisions as desired.

POINT TO REMEMBER: The Articles in this book are based upon the required contents of Articles of Organization as set forth under the various state laws. While these required contents do not change often occasionally they do so. We try to keep to keep our material up to date but if the law changes prior to an update, the Articles could be returned unfiled . In such a case, there will always be a letter of explanation as to what needs to be changed for the Articles to be accepted. With this knowledge, the Articles can be easily redrafted and resubmitted. Even in this worse case scenario, this is only a delay of about two weeks in forming the LLC.

As an alternative, with the Internet, it is now possible to check the Articles for completeness and recent changes in the legal requirements in a matter of minutes. Virtually every Secretary of state has a web site wherein sample articles can be downloaded in the Adobe PDF format. The forms can then be compared to the ones in the book and any changes quickly attended to. To do a web search on your browser using the Secretary of State's name for example such as "Tennessee Secretary of State". You will then be taken to that Secretary of State's web site and by browsing it you will come upon a place to download business forms in the Adobe PDF format. A few states also furnish their forms in the WordPerfect format but most Secretaries of State only offer their forms in the Adobe PDF format so as to preserve the document's formatting.

ARTICLES OF ORGANIZATION

OF

I. NAME OF LIMITED LIABILITY COMPANY

The name of the limited liability company formed herein is

II. PURPOSE

The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Limited Liability Company Law of the State of Tennessee other than the banking business or the trust company business.

III. MANAGEMENT

Under the terms of its operating agreement, the management of the company shall be reserved solely to its members, including therein the right to contract debts for the company. The names and addresses of the initial members of the company are:

IV. AGENT FOR SERVICE OF PROCESS

The name and address in the State of Tennessee of the limited liability company's initial agent for service of process is:

In the event that the agent resigns or cannot be found or served with reasonable diligence, the Division of Corporations or Secretary of State is appointed as the successor registered agent for the company pursuant to state law.

V. TERM

The limited liability company shall terminate and dissolve on , a date no later than 30 years from the date of the execution of these Articles of Organization.

VI. NAMES AND ADDRESSES OF THE ORGANIZERS

The names and addresses of each of the organizers who prepared and signed these Articles of Organization are:

VII. INITIAL PRINCIPAL OFFICE OF
THE LIMITED LIABILITY COMPANY

The limited liability company shall maintain its principal and registered office in the state at the following address:

VIII. NUMBER OF MEMBERS

The limited liability company shall have at formation and maintain thereafter at least two members.

IX. NUMBER OF MEMBERS UPON FORMATION

Upon the filing of the articles, the company shall have members.

X. POWER TO EXPEL MEMBERS

Members of the company MAY ( ) MAY NOT ( ) be expelled from the company in accordance with the provisions set forth in the operating agreement for the company.

XI. ADMISSION OF NEW MEMBERS

New members may be added to the company only with the unanimous consent of all existing members. If a member sells or assigns his interest in the company, the purchaser or assignee is entitled to all of the financial rights of the selling or assigning member in the company. The purchaser or assignee IS ( ) IS NOT ( ) permitted to participate in the management of the company without the consent of the majority of the non-selling members.

XII. CONTINUATION OF THE BUSINESS

Under the terms of the operating agreement, the members MAY

( ) MAY NOT ( ) continue the business without dissolution upon the death, expulsion, resignation or withdrawal of a member from the company WITH ( ) WITHOUT ( ) the consent of all of the remaining members.

XIII. PREEMPTIVE RIGHTS

Preemptive rights MAY ( ) MAY NOT ( ) be granted in any contribution agreement between members or in any allowance agreement between the company and third parties.

XIV. ADDITIONAL PROVISIONS

IN WITNESS WHEREOF the undersigned as the organizers of this limited liability company have executed these Articles of Organization on .

DECLARATION

The undersigned declare under penalty of perjury under the laws of the State of Tennessee that:

1.	We are the persons whose names are subscribed below.

2.	We are the organizers of and we have executed this Articles of Organization.

3.	The foregoing Articles of Organization are our act and

deed.

Executed on at .

ORGANIZER ORGANIZER

ORGANIZER ORGANIZER

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

ARTICLES FOR CALIFORNIA AND IDAHO

California and Idaho are unique in that these are the only states that have mandated specific forms which must be used as the articles of organization for any LLC being formed in their territory. Idaho also has a special form of articles for a professional LLC.

The Secretary of State for California has adopted a set of forms for a Limited Liability Company. Included in these forms are forms for Articles of Organization, Amendment of Articles, Resignation of Resident Agent and a Certificate of Dissolution. These forms are free and can be obtained from the Secretary of State's Limited Liability Company Unit, Box 944228, Sacramento, CA. 94244-2280.

California is among a minority of states that do not permit persons to form LLC's in order to engage in the operation of a profession. Generally, a profession any activity for which a person needs a state license to practice such as an attorney, doctor, or to operate a skilled care facility. An individual wishing to form an entity in which to practice a profession in California is limited to forming a professional corporation which can be a Subchapter S corporation for tax purposes or forming a California Limited Liability Partnership.

State of California File #

Secretary of State

LIMITED LIABILITY COMPANY

ARTICLES OF ORGANIZATION

A $70.00 filing fee must accompany this form

IMPORTANT - Read the Instructions before completing the form. This Space For Filing Use Only

ENTITY NAME ( End the name with the words "Limited Liability Company," "Ltd. Liability Co., or the abbreviations ""LLC" or "L.L.C. ")

1.	NAME OF LIMITED LIABILITY COMPANY

PURPOSE: (The following statement is required by statute and may not be altered

2. THE PURPOSE OF THE LIMITED LIABILITY COMPANY IS TO ENGAGE IN ANY LAWFUL ACT OR ACTIVITY FOR WHICH A LIMITED LIABILITY COMPANY MAY BE ORGANIZED UNDER THE BEVERLY- KILLEA LIMITED LIABILITY COMPANY ACT.
INITIAL AGENT FOR SERVICE OF PROCESS( If the agent is an individual, the agent must reside in California and both Items 3 and 4 must be completed. If the agent is a corporation, the agent must have n file with the California Secretary of State a certificate pursuant to Corporations Code section 1505 and item 3 must be completed (leave item, 4 blank).

3. NAME OF INITIAL AGENT FOR SERVICE OF PROCESS

4. IF AN INDIVIDUAL, ADDRESS OF INITIAL AGENT FOR SERVICE OF PROCESS IN CALIFORNIA CITY STATE ZIP CODE

CA
MANAGEMENT (Check only one)
5.	THE LIMITED LIABILITY COMPANY WILL BE MANAGED BY:

[ ] ONE MANAGER

[ ] MORE THAN ONE MANAGER

[ ] ALL LIMITED LIABILITY COMPANY MEMBERS
ADDITIONAL INFORMATION
6. ADDITIONAL INFORMATION SET FORTH ON THE ATTACHED PAGES, IF ANY, IS INCORPORATED HEREIN BY THIS REFERENCE AND MADE A PART OF THIS CERTIFICATE.
EXECUTION

7. I DECLARE I AM THE PERSON WHO EXECUTED THIS INSTRUMENT, WHICH IS MY ACT AND DEED.

SIGNATURE OF ORGANIZER DATE

TYPE OR PRINT NAME OF ORGANIZER
RETURN TO: (Enter the name and the address of the person or firm to whom a copy of the filed document should be returned).

NAME [ ]

FIRM

ADDRESS

CITY/ STATE

ZIP CODE [ ]

LLC-1 (REV 03/2005) APPROVED BY SECRETARY OF STATE

Statutory tiling requirements are found in California Corporations Code sections 17051 and 17052. All statutory references to the California Corporations Coda, unless otherwise staled.

The fee for filing the Articles of Organization is $70.00 A $15.00 special handling fee is applicable for processing documents delivered in person to the Sacramento office- The $15.00 special handling fee must be remitted by separate check for each submittal and will be retained whether the documents are filed or rejected The special handling fee does not apply to documents submitted by mail. Check(s) should be made payable to the Secretary of State

Pursuant to Section 17375, a domestic Limited liability company may not render professional services, as defined in Sections 13401(a) and 13401.3 Professional services are defined as any type of professional services that may be lawfully rendered only pursuant to a license, certification or registration authorized. by the Business and Professions Code, the Chiropractic Ad, the Osteopathic Act or the Yacht and Ship Brokers Act. If your business is required to be licensed, certified or registered, it is recommended that you contact the appropriate licensing authority before filing with the Secretary of State s office in order to determine whether your services are considered professional.

Filing this document shall obligate most Limited liability companies to pay an annual minimum tax of $800 to the Franchise Tax Board pursuant to Revenue and Taxation Code section 17941

Item 1. Enter the name of the Limited liability company. The name must end with the words "Limited Liability Company", "Ltd Liability Co." or the abbreviation "LLC" or "L.L.C." The name of the Limited liability company may not contain the words: "bank", "trust", "trustee", "incorporated," "lnc." "corporation," or "corp.," and must not contain the words "insurer" or "insurance company" or any other words suggesting that It is in the business of issuing policies of insurance and assuming insurance risks.

Item 2. This statement is required by statute and must not be altered. Provisions limiting or restricting the business of
the limited liability company may be included as an attachment.

Item3 Enter the name of the initial agent for service of process in California. The person named as agent must be a resident of California or a corporation that has filed a certificate pursuant to section 1505. If an individual is designated as agent, both Items 3 and 4 must be completed. If a corporation is designated, complete Item 3 and proceed to Item 5 (do not complete Item 4). An Agent for Service of Process is an individual or corporation designated by a Limited liability company to accept service of process if the Limited liability company is sued.

Please Note: A Limited liability company cannot name itself as agent for service of process. Further, no domestic or

foreign corporation may file pursuant to section 1505 unless the corporation is currently authorized to engage in business in California and is in good standing in the records of the Secretary of State.

Item 4. If an individual is designated as agent for service of process, enter the agent s business or residential address in California. Please do not enter "in care of" or abbreviate the name of the city. Please do not enter an address if a corporation is

designated as the agent for service of process.

Item 5. Check the appropriate provision indicating whether the Limited liability company is to be managed by one manager, more than one manager or all of the Limited liability company members. Only one box may be checked.

Item 6. If additional information is to be included in the Articles of Organization, attach additional pages, as necessary.

Additional information may include the latest date on which the Limited liability company is to dissolve.

Item 7. The Articles of Organization must be signed by the organizer. The person signing the Articles of Organization need not be a member or manager of the Limited liability company.

* If the Articles of Organization are signed by an attorney-in-fact, the signature should be followed by the words "Attorney-in-fact" for (name of person).

* If the Articles of Organization are signed by an entity, the person who signs on behalf of the entity should note their name and position/title and the entity name Example; if a Limited liability company ("Smith LLC") is the organizer, the signature of the person signing on behalf of the Smith LLC should be reflected as Joe Smith. Manager of Smith LLC.

* If the Articles of Organization are signed by a trust, the trustee should sign as follows: ____________ trustee for _________________________ trust (including the date of the trust, if applicable) Example: Mary Todd, trustee of the Lincoln Family Trust.

Item 8. Enter the name and the address of the person or firm to whom a copy of the filed document should be returned

ARTICLES OF ORGANIZATION

LIMITED LIABILITY COMPANY

To the Secretary of State of Idaho,

Statehouse, Boise, Idaho 83720

1.	The name of the limited liability company is:

2.

The address of the initial registered office is
(Not a PO Box)
, and the name of the initial registered
agent at that address is:
Signature of registered agent:

3.

The latest date certain on which the limited liability company will dissolve:
4.	Is management of the limited liability company vested in a manager or managers?
Yes	No	(check appropriate box)
5.	If management is vested in one or more manager(s), list the name(s) and address(es) of at

least one initial manager. If management is vested in the members, list the name(s) and address(es) of at least one initial member.
Name:	Address:

6.

Signature of at least one person listed in #5 above:
Secretary of State use only

LLC1 /593	File Two Copies	Fee:	$100 if typed with no attachments

$120 if not typed or if attachments are included

ARTICLES OF ORGANIZATION

PROFESSIONAL LIMITED LIABILITY COMPANY

To the Secretary of State of Idaho,

Statehouse, Boise, Idaho 83720

1.	The name of the professional limited liability company is:
2.	The professional limited liability company is organized for the practice of the profession(s)
of:
3.	The address of the initial registered office is
(Not a PO Box)
, and the name of the
initial registered agent at that address is:
Signature of registered agent:
4.	The latest date certain on which the professional limited liability company will dissolve is:
5.	Is management of the limited liability company vested in a manager or managers?
Yes	No	(check appropriate box)
6.	If management is vested in one or more manager(s), list the name(s) and address(es) of at

least one initial manager. If management is vested in the members, list the name(s) and address(es) of at least one member.
Name:	Address:

7.

Signature(s) of at least one person listed in #6 above:
Secretary of State use only
LLC3 /593	File Two Copies	Fee:	$100 if typed with no attachments

$120 if not typed or if attachments are included

CERTIFICATE OF ACCEPTANCE OF APPOINTMENT

AS RESIDENT AGENT FOR

a Limited Liability Company

I, , hereby accept the appointment as Resident Agent for in accordance with the terms of the .

My address in this state is:

The principal executive office for the corporation in the state is

IN WITNESS WHEREOF, I have hereunder set my hand this

day of

STATE OF

COUNTY OF

On before me,

personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS MY HAND AND OFFICIAL SEAL.

CHAPTER 11

OPERATING AGREEMENT

I. DEFINITION

An operating agreement contains the rules adopted for the general day-to-day management and operation of the LLC. At the first meeting of members when the LLC is formed, the operating agreement is adopted by the organizer. The articles of organization establish the governing structure of the LLC. The operating agreement regulates the management of the business and general conduct of the LLC. It prescribes the rights and duties of the members among themselves in relationship to the management and affairs of the company.

The operating agreement is an attempt to cover areas of potential conflict within an LLC and to assign duties and responsibilities. The terms of the operating agreement can be of a general nature or closely tailored to meet the needs and desires of the members. Most operating agreements will contain or mention most of the issues covered in the enclosed sample operating agreement.

The terms of the operating agreement are not set in concrete. Members can alter or amend the operating agreement simply by holding a meeting to do so. The purpose of the operating agreement is to establish procedures for the daily administration and management of the LLC. As the LLC develops the operating agreement can be amended to keep pace with the new requirements of the LLC.

The operating agreement contained in this book is a basic agreement. The members can add clauses as they wish. The only limitation on adding clauses to the operating agreement is that the new clauses must not conflict with any of the terms of the articles of organization. All clauses of the operating agreement, including additional ones added by the members, control the management of the company and remain in effect until amended or repealed.

II. ADOPTION

A. AUTHORITY TO ADOPT

The LLC can adopt, amend and repeal terms of the operating agreement. An LLC has the inherent right to adopt an operating agreement whose terms are consistent with federal and state laws. On the other hand, an LLC cannot adopt an operating agreement whose terms are in conflict with the articles of organization, and terms must always be reasonable with regard to the responsibilities they address.

Many states that permit LLC's require the operating agreement to be in writing. The purpose behind the requirement for it to be in writing is so that there is an evidentiary statement of the provisions of the operating agreement. Should there be managing members and they fail to comply with the provisions of the operating agreement, the authority to perform those acts that are normally governed by the operating agreement automatically becomes vested in the members in total.

Failure to adopt an operating agreement can be fatal to the LLC. A court may determine that the failure to adopt an operating agreement proves, ipso facto, that a real LLC was never intended to be created. The prime proof of the existence of an LLC is the manner in which it is operated. A business that acts as a partnership will be treated as a partnership even though it is formed as an LLC. Not having an operating agreement, while permitted, is evidence that infers an LLC really was never intended. Not adopting an operating agreement may result in the LLC losing its shield against personal liability for the members. There is just no reason to endure such a risk. There is no real justification for not having an operating agreement. Not having an operating agreement could be used as evidence by creditors of the company that a real LLC was not intended. If the Court agrees, then the members would lose their shield against personal liability for the LLC's debts.

B. ADOPTION

The operating agreement must be adopted by a majority vote of the members. A meeting of members is called and the proposed agreement is accepted by the LLC if a majority of the members approve it. The procedure for adopting or changing the operating agreement is by a majority vote of the managing members of the LLC where they approve the amendment or repeal specific provisions and adopt new clauses. There are some provisions in the operating agreement, however, that can only be changed by amending the articles of organization. Any change of a provision in the operating agreement that relates to a clause in the articles will only become effective when the articles are also amended to incorporate the change. For example, many states require that the articles state whether the company will be managed by all of the members or if it will be administered and operated by a group of elected managing members. A company formed, in such states, that might wish later to change its form of management must amend both the operating agreement and the articles.

NOTE: the articles may restrict or eliminate the power of the members to adopt, alter, amend or in any way affect the operating agreement as long as the provision does not violate state law.

III. CONSTRUCTION

A LLC is required to construe the provisions contained in the operating agreement reasonably and in a way that sustains their validity. When a provision in an operating agreement is subject to different constructions, the one most in harmony and accordance with state law is the one given effect. Nothing in an operating agreement can overrule or violate the articles of an LLC. For this reason, all of the provisions of an operating agreement must be construed in a manner that does not violate the articles. Any provision that cannot be so construed is automatically rendered void and invalid by operation of law.

Unless a provision of an operating agreement specifically states that it is intended to operate retroactively, it will not do so. In addition, no provision in an operating agreement can operate retroactively if it will unfairly and unreasonably violate rights of members. Example: A new provision changes the number of managing members of the company. The provision cannot be applied retroactively because it would invalidate every past action taken by the members.

IV. WAIVER OF TERMS OF THE OPERATING AGREEMENT

An operating agreement exists to govern the operation of the LLC and to protect the members. Just as the members can add new provisions to the operating agreement for their protection, they can waive that protection without having to actually repeal the entire operating agreement.

Members may agree to ratify conduct of the business that otherwise would violate provisions of the operating agreement. Without the inherent ability to waive provisions of the operating agreement, the members would not have the authority to perform the anticipated act. Ratification of the proposed or completed act requires the same number of members needed to adopt or repeal a provision of the operating agreement. Example: A provision requires a managing member to obtain approval from a majority of members before executing a contract on behalf of the LLC. Without the majority approval the managing member executes a favorable contract for the LLC. The contract is invalid unless a majority of the members ratify the managing member's conduct that was in violation of the operating agreement.

V. LOCATION

The operating agreement of an LLC in either original form or true copies as amended is required to be kept at the principal executive office in every state where the LLC does business. The operating agreement is required to be kept open for inspection by the members at all reasonable times during regular business hours. When the principal place of business is outside the state of formation, most states require the LLC to furnish copies of the current operating agreement as amended to members upon request.

The next few pages contain a complete operating agreement for an LLC. It is both valid and acceptable in all jurisdictions that have statutes permitting LLC's.

OPERATING AGREEMENT

OF

LIMITED LIABILITY COMPANY

This is the Operating Agreement of Limited Liability Company, a limited liability company, hereinafter titled the Company, which has been organized pursuant to the Limited Liability Company Act of the State of . This Operating Agreement is entered and shall be effective upon execution by and among the Company and the persons executing this Agreement, hereinafter titled Members.

ARTICLE I

FORMATION

1.01	ORGANIZATION. The company shall be organized as a limited liability company pursuant to the limited liability company laws of the State of .

1.02	AGREEMENT. In consideration of the mutual covenants herein contained, the Members agree to be bound by the terms and conditions of this Operating Agreement as written and as it may from time to time be amended.

1.03	NAME. The name of the Company shall be

1.04	TERM. Choose one the following (See state law)

(A) The Company shall have perpetual existence. YES( )NO ( )

(B) The Company shall be dissolved and discharged in accordance with this Operating Agreement and State Law on unless the term of the Company is extended pursuant to State law or the Company is earlier dissolved and discharged in accordance with State law or the terms of this Operating Agreement. YES ( ) NO ( )

1.05	PRINCIPAL OFFICE. The principal office of the Company shall be located at

until changed by the Members.

1.06 PURPOSE. The Company shall engage in any lawful business for which a limited liability company can be formed. Specifically, the Company intends to engage in the following business:

ARTICLE II

MEMBERS

2.01 NAMES AND ADDRESSES. The names and addresses of the members shall be set forth in an attachment to this Operating Agreement entitled Exhibit A.

2.02 ANNUAL MEETINGS. All annual meetings of the Members shall be held at the principal office of the limited liability company in the City of or at such other place as designated by the Members. Special meetings may be held at such time and place within or without the State of as shall be stated in the notice of meetings or in a duly executed waiver of notice thereof.

2.03 ANNUAL MEETINGS ARE TO HELD. Annual meetings of Members commencing with the year shall be held each year within 120 days following the close of the Company's tax year.

2.04 SPECIAL MEETINGS. Special meetings of the Members for any purpose unless otherwise prescribed by statute or by the articles of incorporation may be called by a majority of the Members or at the request in writing given to all Members by any Member owning a majority interest in the capital account of the Company. Such request shall state the purpose of the proposed meeting. Notice shall be deemed given at the time it is delivered personally or deposited in the mail or sent by other means of written communication to each Member at the last known Company address for each member.

2.05 BUSINESS AT MEETINGS. Business transacted at any special meeting of Members shall be limited to the purpose stated in the notice calling the special meeting.

2.06 QUORUM. The holders of a majority interest in the company as based on their capital contribution to the Company in relation to the total capital contribution of all Members and entitled to vote if present in person or represented by proxy shall constitute a quorum at all meetings of the Members for the transaction of business except as otherwise provided by statute or by the Articles of Organization. If a quorum is initially present, the Members may continue to transact business until adjournment, notwithstanding the withdrawal of enough Members to leave less than a quorum, if any action taken is approved by a majority of the Members required initially to constitute a quorum.

2.07 MEETING WHEN QUORUM PRESENT. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the membership interests in the Company as based upon their capital contribution in relation to the total capital contribution by the Members present in person or represented by proxy shall decide any question brought before such meeting unless the question is one upon which by express provision of the statutes or of the Articles of Organization a different vote is required in which case such express provision shall govern and control the decision of such question.

2.08 VOTING. Only persons in whose names membership interests entitled to vote stand in the membership records of the limited liability company on the day of any meeting of Members shall be entitled to vote at such meeting.

2.09 PROXIES. At any meeting of the members any Member may be represented and vote by a proxy or proxies appointed by an instrument in writing. In the event that any such instrument shall designate two or more persons to act as proxies a majority of such persons present at the meeting or if only one shall be present that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall provide otherwise. No such proxy shall be valid after the expiration of six months from the date of its execution.

2.10 ACTION AT A MEETING. Any action except the election of the managing members that must be taken by vote of Members at a meeting may be taken without a meeting if authorized by the written consent of the Members holding at least a majority of the voting power unless the provisions of the statutes or of the Articles of Organization require a greater proportion of voting power to authorize such action, in which case such greater proportion of written consent shall be required.

2.11 WAIVERS AND CONSENTS TO MEETINGS. The transactions of any meetings of Members however called and noticed shall be valid as though completed at a meeting duly held after regular call and notice if a quorum be present either in person or by proxy and if either before or after the meeting each of the Members entitled to vote, not present in person or by proxy, sign a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof.

ARTICLE III

A. MANAGEMENT

3.01 The Members of the Company must agree upon the form of management of the Company. The Members either:

1. Will agree to retain and reserve the power to manage the business affairs themselves according to the procedures set forth in Article II, or

2. The Members will elect managing members to manage the business affairs of the Company in accordance with the terms and conditions set forth below.

The Members must select one or the other of the above provisions and in some cases must include the choice in the Articles of Organization. The election to have the Company managed by elected members is a corporate characteristic that could result in the Company being treated for tax purposes as though it were a corporation under some state laws.

The members DO ( ) DO NOT ( ) elect to have the company managed by elected members. The Members should each sign this provision to acknowledge their consent to the management decision.

A. MANAGING MEMBERS

3.02 NUMBER. If the Members elect to have the Company managed by managing members, the number of managing members shall be . All shall be of full age and at least one shall be a citizen of the United States. The managing members shall be elected at the annual meeting of Members, and except as provided in 3.05 of this article each managing member elected shall hold office until the managing member's successor is elected and qualified. The initial managing members shall be:

3.03 STANDARD OF CARE. Each managing member shall perform the duties of a managing member including the duties as a member of any committee of the board upon which the managing member may serve, in good faith and in a manner such managing member believes to be in the best interests of the limited liability company, and with such care, including reasonable inquiry, as an ordinary and prudent person in a like position would use under similar circumstances.

3.04 VACANCIES. The Members may elect managing members at any time to fill any vacancies, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote.

3.05 REMOVAL OF MEMBERS. The Members may remove and replace any managing member at any time at any meeting of Members annual or special by vote of Members holding a majority interest in the Company as related to the total capital contribution by its managing members. Managing members may exercise powers of the limited liability company and do all lawful acts and things as are not by statute or the Articles of Organization or by this Operating Agreement directed or required to be exercised or done by all Members in concert.

3.06 POWERS OF MANAGING MEMBERS. The business of the limited liability company shall be managed by its managing members. The Managing members may exercise all powers of the limited liability company and do all lawful acts and things as are not by statute or the Articles of Organization or by this Operating Agreement directed or required to be exercised or done by all Members in concert.

3.07 FORMATION OF COMMITTEES. The managing members may by resolution passed by a majority of the managing members designate one or more committees, each committee to consist of one or more of the managing members, that to the extent provided in the resolution shall have and may exercise the powers of the managing members in the management of the business and affairs of the limited liability company and may have power to authorize the seal of the limited liability company to be affixed to all papers which may require it. Such committees shall have such names as may be determined from time to time by resolution adopted by the managing members.

3.08 REPORT TO MEMBERS, DUE DATE. Managing members shall cause an annual report to be sent to the Members not later than 90 days after the close of the fiscal year or the calendar year adopted by the limited liability company. This annual report shall be sent at least 15 days before the annual meeting of Members to be held during the next fiscal year and in the manner specified in this operating agreement for giving notice to the Members of the limited liability company. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and statement of changes in financial position for the fiscal year, accompanied by any report of independent accounts or, if there is no such report, the certificate of a managing member that the statements were prepared without audit from the books and records of the limited liability company.

3.09 WAIVER. The annual report to Members is required as long as the limited liability company has less than 10 Members. However, nothing herein shall be interpreted as prohibiting the managing members from issuing annual or other periodic reports to the Members of the limited liability company as they consider appropriate.

B. MAJOR DECISIONS

3.10 (OPTIONAL) UNANIMOUS VOTE. Any major act or decision of the Company can only be undertaken or implemented with the unanimous decision of all of the Members. Minor business decisions or actions for the Company may be undertaken by any Member.

This provision is REJECTED

This provision is ADOPTED

3.11 (OPTIONAL) MAJORITY VOTE. Any major act or decision of the Company can only be undertaken after an affirmative majority vote of the Members. Each Member's vote shall be proportionate to that Member's percentage interest in the Company's capital as determined by the Member's capital account.

This provision is REJECTED

This provision is ADOPTED

ARTICLE IV

CAPITAL CONTRIBUTION AND MEMBERSHIP INTERESTS

4.01 INITIAL CONTRIBUTIONS. Each initial Member shall make capital contributions of services, property or cash as described below for that Member at the time and on the terms specified and shall perform that Member's commitment. If no time for contribution is specified, the capital contribution shall be made at the time of filing of the Articles of Organization with the Secretary of State. If such cash, expertise and services are not fully granted by the time agreed and stated herein or by the time of filing of the Articles of Organization, the acquired interest in the Company shall be reduced to reflect the true value of such management expertise and services actually provided.

a. shall contribute no cash but will contribute management expertise and services equal to

dollars. The contribution shall be made as follows:

b. shall contribute no cash but will contribute management expertise and services equal to

dollars. The contribution shall be made as follows:

c. shall contribute cash equal to dollars. The contribution shall be made as follows	d. shall contribute cash equal to dollars. The contribution shall be made as follows:

e. shall contribute no cash but will contribute property equal to dollars. The contribution shall be made as follows:

f. shall contribute no cash but will contribute property equal to dollars. The contribution shall be made as follows:

If there is not enough space in this article to list the capital contributions of all the members, then they will be listed on an attachment to this operating agreement entitled Exhibit B.

4.02 ENFORCEMENT OF CONTRIBUTIONS. In the event that a Member fails to make the capital contributions agreed in 4.01, the other members or the managing members may take such action including but not limited to enforcing the member's obligation to make the contribution in the appropriate court which the Company has its Principal Office. The members agree to the jurisdiction of this court for the purposes of enforcing this provision.

ARTICLE V

ACCOUNTING, ALLOCATIONS AND DISTRIBUTIONS

5.01 ACCOUNTING YEAR AND METHOD. The accounting and taxable year of the Company (the "Company Year") shall be the calendar year. The Company shall use a cash basis method of accounting and the books of the Company shall be kept in accordance with the accounting principles employed by the Company for federal income tax purposes.

5.02 CAPITAL ACCOUNT. The Company shall maintain a capital account for each Member. The initial balance of the capital account of each Member shall be that Member's proportionate share of the total capital contributions. The capital account of each Member:

(a)	Shall be increased at the end of each taxable year by the amount of the Company's income and gain allocated to the Member for the taxable year,

(b)	Shall be decreased at the end of each taxable year by the amount of the Company's deductions and losses allocated to the Member for that taxable year, and

©	Shall be decreased at the time of any distributions by the amount of that distribution.

5.03 DETERMINATION OF PROFITS AND LOSSES. For the purposes of this Agreement, the profits and losses of the Company shall be the net profits or losses of the Company for federal income tax purposes as determined by the Company's accountant in accordance with the accounting principles employed by the Company for federal tax purposes.

5.04 ALLOCATION OF PROFITS AND LOSSES. All profits and losses of the Company and each item of income, gain, loss, deduction or credit entering into the computation thereof, shall be allocated among and borne by the Members as follows:

(a)	shall be allocated percent ( ) of the Company's profits and losses for each taxable year.

(b)	shall be allocated percent ( ) of the Company's profits and losses for each taxable year.

©	shall be allocated percent ( ) of the Company's profits and losses for each taxable year.

(d)	shall be allocated percent ( ) of the Company's profits and losses for each taxable year.

(e)	shall be allocated percent ( ) of the Company's profits and losses for each taxable year.

(f)	shall be allocated percent ( ) of the Company's profits and losses for each taxable year.

Profits and losses and each item of income, gain, loss, deduction or credit entering into the computation thereof shall be allocated among the Members on the last day of each accounting year of the Company.

5.05 FEDERAL INCOME TAX TREATMENT. The items of income, gain, loss, deduction or credit hereinabove allocated among the Members shall for federal income tax purposes be deemed to retain their character as ordinary income, short-term or long-term capital gain or loss, depreciation, income or receipts entitled to tax-free or non-recognition treatment or other federal tax characterization in the hands of the Member to whom allocated in the same proportion as each Member's proportionate share.

5.06 FEDERAL INCOME TAX ELECTIONS. The Company shall elect to treat as an expense for federal tax purposes all amounts incurred for taxes, interest, and other fees, charges and expenses to the extent that such expenditures are permitted or required to be currently deductible expenses in accordance with applicable laws and regulations. The Members agree that no election shall be made under Section 761 of the Internal Revenue Code of 1954, as amended, to exclude the Company from application of any provisions of Subchapter K, Chapter 1, thereof. It is the intent of the members to have the Company treated as a partnership for tax purposes to the fullest extent possible.

5.07 BOOKS AND RECORDS. The Company shall keep or cause to be kept complete and accurate books and records with respect to the Company's operations and financial condition and shall cause annual financial statements regarding the Company to be reviewed by the Company's accountant and shall submit the same to the Members within 60 days after the end of the Company's taxable year. This obligation may be satisfied by delivering to each Member a copy of the Company's federal income tax return for that year and schedule K-1 setting forth such Member's distributions and allocations.

5.08 DISTRIBUTIONS. The Company shall distribute to each Member at least annually enough of the net profits from that Member's account to cover the Member's tax liabilities from his participation in the Company.

5.09 (a) (OPTIONAL) SALARIES. No salary will be paid to any member. Salaries may be paid in the future only on the unanimous consent of all members.

This provision is ADOPTED

This provision is REJECTED

(b) (OPTIONAL) SALARIES. Only reasonable salaries shall be paid to the Members as set by unanimous vote of the Members. The initial salaries of the Members shall be:

This provision is ADOPTED

This provision is REJECTED

5.10 (a) (OPTIONAL) DRAWS. No Member shall be permitted to take any draw against the profits of the Company prior to distribution to all of Members.

This provision is ADOPTED

This provision is REJECTED

(b) (OPTIONAL) DRAWS. Members are entitled to a draw against expected Company profits. The amount of draw will be determined by unanimous vote of Members. To the extent that any draw exceeds a Member's actual share of profits, it will be treated as a loan payable days after the close of the Company's fiscal year.

This provision is ADOPTED

This provision is REJECTED

ARTICLE VI

DUTIES AND POWERS OF MEMBERS

6.01 (OPTIONAL) INDEPENDENT ACTIVITIES. All Members may, notwithstanding the existence of this Agreement, engage in whatever activities they choose, whether the same be competitive with the Company or otherwise, without having or incurring any obligation to offer any interest in such activities to any party hereto. Neither this Agreement nor any activity undertaken pursuant hereto shall prevent any Member from so doing or from engaging in other activities of any nature by itself or jointly with others, or as part of any other association to which a Member is or may be a party, in any locale, or in fields or areas of operation which the Company may likewise be active. No Member is required to permit the Company or any other Member to participate in any of the foregoing. Each Member hereby waives, relinquishes and renounces any such right or claim of participation.

This provision is ADOPTED and made a part of this Company Agreement.

This provision is REJECTED and not made a part of this Company Agreement.

(OPTIONAL) No Member shall engage in activities that directly compete with the activities in which the Company engages. Any Member who engages in such competing activities shall be liable to the Company for all profits derived therefrom.

This provision is ADOPTED and made a part of this Company Agreement.

This provision is REJECTED and not made a part of this Company Agreement.

6.02 PRESERVATION OF TAX STATUS. It is intended by all parties that the Company shall be classified for federal income tax purposes at all times during its existence as a Partnership and not as an association taxable as a corporation. The Members will use their best efforts to maintain the partnership classification and tax treatment for the Company.

ARTICLE VII

TERMINATION AND DISSOLUTION

7.01 DISSOLUTION OF THE LIMITED LIABILITY COMPANY

(a) (OPTIONAL) The Company shall not be dissolved by reason of death, dissolution, withdrawal or expulsion of a Member or by the admission of a new Member in accordance with section 9.01.

This provision is ADOPTED and made a part of this Company Agreement.

This provision is REJECTED and not made a part of this Company Agreement.

(b) (OPTIONAL) The Company shall immediately be dissolved and thereafter the Company business shall be discharged in an orderly manner and the Company terminated upon the occurrence of any of the following events:

(I)	The expiration of the term of the Company in Article I above.

(ii)	The affirmative vote to terminate by Members possessing majority interest (over 50%) in the Company.

(iii)The occurrence of any event which makes it unlawful
for Company business to be continued.

(iv)	The sale or disposition of all or substantially all of Company assets.

(v)	The Company is no longer able to engage in the purpose for which the Company was created.

(vi)	(OPTIONAL) The Company shall dissolve upon the bankruptcy or insolvency of any Member.

This provision is ADOPTED

This provision is REJECTED

7.02 LIMITATION ON EFFECT OF DISSOLUTION. No act or event (including the passage of time) causing dissolution of the Company shall in any way affect the validity of or shorten the term of any charter, deed of trust, mortgage contract or obligation entered by or on behalf of the Company or acquired by the Company or assignee.

7.03 DISTRIBUTION UPON TERMINATION. The net cash proceeds resulting from liquidation of Company assets shall be distributed and applied in the following order of priority:

(a)	To payment of debts and liabilities of the Company other than debts and liabilities to the Members.

(b)	To the establishing of any reserves which are deemed
reasonably necessary to hold for future distribution pending resolution of contingent, unmatured or unforeseen liabilities or obligations of the Company other than liabilities or obligations to Members.

©	To the repayment of any unpaid loans theretofore made by
any of the Members to the Company, but if the amount	available for such repayment shall be insufficient, then	pro rata among the Members.

(d)	To the Members in an amount less than or equal to their
respective capital accounts.

(e)	To the Members according to proportionate shares.

7.04 RETURN OF CONTRIBUTION. Upon dissolution the Members shall look solely to the assets of the Company for the return of their capital contribution.

ARTICLE VIII

NEW MEMBERS

8.01 ADDITION OF NEW MEMBERS. No new members may be added to the company as the result of the selling of new membership interests without the consent of all the existing Members.

8.02 The Members must specifically adopt one of the following provisions. To prove the adoption, each of the Members should sign after the provision.

a. Any Member may sell or transfer his interest in the company and the purchaser or transferee will be entitled to full financial and managerial rights in the company.

This provision is ADOPTED

This provision is REJECTED

b. Any Member may sell or transfer his interest in the company and the purchaser or transferee will be entitled to full financial rights in the company, but the new purchaser will only be permitted to participate in the management of the company upon the consent of a majority of the remaining Members.

This provision is ADOPTED

This provision is REJECTED

ARTICLE IX

CONTINUATION OF THE BUSINESS

9.01 AFTER THE DISSOCIATION OF A MEMBER. It is important for tax purposes that the Members state whether the Members agree or reject to have the company continue automatically upon the dissociation by death, expulsion, bankruptcy, resignation or withdrawal of a Member, whether the Members agree or reject to have the company terminate upon such dissociation, and whether the Members agree or reject to have remaining Members continue the Company by a unanimous vote. To prove the adoption of the provision chosen, Members should sign after the provision.

a. (OPTIONAL) Following the dissociation of a member as a result of death, resignation, expulsion, withdrawal or bankruptcy, the Company will be dissolved.

This provision is ADOPTED

This provision is REJECTED

b. (OPTIONAL) Following the dissociation of a member as a result of death, resignation, expulsion, withdrawal or bankruptcy, the Company will continue in effect without the necessity of membership vote. This is a corporate characteristic which may have the Company treated as a limited liability company for tax purposes.

This provision is ADOPTED

This provision is REJECTED

c. (OPTIONAL) Following the dissociation of a Member as a result of death, resignation, expulsion, withdrawal or bankruptcy, the Company will continue in effect only with the consent of all the remaining Members. This is a partnership characteristic which may have the Company treated as a partnership for tax purposes.

This provision is ADOPTED

This provision is REJECTED

ARTICLE X

MISCELLANEOUS

10.01 (OPTIONAL) EXPULSION OF A MEMBER. A Member may be expelled from the Company by a vote of the other Members holding at least 66% of the capital of the Company. Upon expulsion the expelled Member shall be entitled to receive the fair market value of his interest in the Company. The fair market value of the Company shall be set by an appraisal of two independent accountants as chosen one each by the expelled Member and the remaining Members. If the accountants cannot reach an agreement, the court of the Company's domicile shall appoint an accountant to make the valuation, and that accountant's valuation shall be final.

This provision is ADOPTED

This provision is REJECTED

10.02 (OPTIONAL) ARBITRATION. It is agreed by the Members that in the event of a dispute over the terms and conditions of this Operating Agreement the Members will have the matter decided by arbitration through the American Arbitration Association or an arbitrator appointed by the court where the Company is located.

This provision is ADOPTED

This provision is REJECTED

10.03 SURVIVAL OF REPRESENTATIONS. The covenants, representations, warranties and other written statements set forth in this Agreement or in any exhibit hereto shall survive the execution and delivery hereof and formation of the Company. All of the same shall be deemed to be independently material to the party to whom made and the party relied upon them.

10.04 COMPLIANCE WITH THE LAW. The Company shall conduct all operations on the property in compliance with all applicable federal and state laws, ordinances, orders, rules and regulations.

10.05 ATTORNEY FEES. If legal action is commenced over the terms of this Operating Agreement, it is agreed that the prevailing party shall be entitled to reasonable attorney fees and costs.

10.06 GOVERNING LAW. It is agreed among the parties that the Company Agreement shall be governed and interpreted in accordance with the laws of the State of .

10.07 SUCCESSOR IN INTEREST. Except as otherwise provided herein all provisions of this Company Agreement shall be binding upon, inure to the benefit of and be enforceable by and against all of the respective heirs, executors, administrators, personal representatives, assigns and successors in interest of the parties.

10.08 FURTHER ASSURANCES. Each of the Members shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intents and purposes of this Agreement that are not inconsistent with the terms hereof.

10.09 NO GUARANTY OF SUCCESS. No party has relied upon any warranty or guarantee of success and none have been made. The parties acknowledge that the obtaining of profit through the pursuit of the Company's stated purpose is speculative in nature and not always successful.

10.10 CHECKS. All checks or demands for money and notes of the limited liability company shall be signed by such Members or such other persons as the majority of Members or managing members may form time to time designate.

10.11 FISCAL YEAR SET BY MEMBERS. The fiscal year of the limited liability company shall be fixed by a Member's resolution and may be set at other than the calendar year voted in clause 5.01 upon notification to and waiver by the IRS.

10.12 AMENDMENT. This Operating Agreement may be altered or repealed at any regular meeting of the Members or at any special meeting of the Members if notice of such alteration or repeal be contained in the notice of such special meeting. Whenever an amendment of the Operating Agreement is adopted, it shall be copied and placed with the original Operating Agreement.

10.13 INDEMNITY. The limited liability company may indemnify agents of the limited liability company for breach of duty to the limited liability company and the Members where approval from the Members has been obtained. An agent, however, may not in any circumstance be indemnified for acts or omissions that constitute intentional misconduct, the knowing and culpable violation of the law, the absence of good faith, the receipt of an improper personal benefit, or a reckless disregard or unexcused inattention to the agent's duty to act in the best interests of the limited liability company and its members. An agent also may not be indemnified for an act which is expressly prohibited under state law.

10.14 RECORDS. The Limited Liability company shall maintain, in accordance with generally accepted accounting principles, adequate and correct accounts, books and records of its business and properties. All of such books, records and accounts shall be kept at its principal executive office as fixed by the members in the Articles of Organization. All books and records shall be open to inspection of any Member during normal business hours at the limited liability company's principal executive office.

10.15 EXECUTION OF CONTRACTS, ETC. A majority of the Members or the managing members, except as otherwise provided in this Operating Agreement, may authorize any member or agent to enter into any contract or execute any instrument in the name of and on behalf of the limited liability company. Such authority may be general or confined to specific instances. Unless so authorized by the majority of members managing the Company, no Member, agent or employee shall have any power or authority to bind the limited liability company by any contract or agreement or to pledge its credit or to render it liable for any purpose or to any amount.

10.16 MEMBERSHIP CERTIFICATE. Every Member shall be entitled to have upon request a certificate, signed by the members managing the Company certifying that the Member owns a membership interest in the company.

10.17 ADDITIONAL CLAUSES.

10.18 ENTIRE AGREEMENT AND AMENDMENT. This Operating Agreement incorporates the entire agreement and understanding among the parties. This agreement may not be modified or amended except with the written consent of all Members.

IN WITNESS WHEREOF this Operating Agreement has been duly executed as of this day of at

.

CHAPTER 12

AFTERWARDS: POST-FORMATION ACTS

This chapter is an information chapter to remind the members managing an LLC of the various acts that may be required after formation. The members will already be familiar with most of these requirements if they have previously operated a business. The chapter summarizes general aspects most often encountered after forming a new business entity. It does not profess to cover each item in detail. References are made to the appropriate code sections when available.

Many of the post-formation acts pertain to tax filings. Members managing the LLC should work closely with the business' tax advisor to establish the appropriate accounting procedures for the LLC. Some matters can be handled by the LLC's accountant or bookkeeper; others must be accomplished by the members. An understanding of what is expected and by whom is important for the smooth operation of the business.

I. STATE LICENSES

A state may require a state license for a certain type of business whether the business is conducted in corporate form or not. For example, a state may require anyone disposing of hazardous waste to have a state license or permit to do so. The fact that the company doing the hauling is or is not an LLC is irrelevant. It is important that the LLC obtain all the necessary licenses and permits for the operation of its business in the state.

State permits are not transferable. If a partnership that has the necessary permits and licenses to do business changes its business form to an LLC, the LLC must apply for new state licenses and permits in its own name. The LLC is a legal entity in its own right and is treated separate and apart from the members and any business they may have previously operated.

II. LOCAL BUSINESS LICENSES

Many states, usually those that have corporate taxes, permit counties, parishes, cities and other government entities to raise revenue by taxing LLC's doing business in their jurisdictional area. The taxing usually takes one of two forms. The first is a straight license fee for a permit to do business. The second is a corporate income tax that the city and the county may charge to grant a business license. The LLC must determine if there is a city or county business license required to operate. Such licenses are required regardless of whether the business is a LLC or not.

III. EMPLOYER IDENTIFICATION NUMBER

The LLC as an employer must obtain a federal employer's identification number (EIN) from the IRS. The application is Employer Identification Number Form SS-4. Form SS-4 must be filed within seven days after the first payment of earnings to an employee. There is no filing fee for the form, and upon filing the IRS issues the LLC an identification number. This identification number will be used on all tax returns. Form SS-4 and its instructions are in the Adobe version of this book and and can also be obtained from the IRS by calling 1 (800) TAX FORMS.

IV. ESTIMATED TAX

A. FEDERAL INCOME TAX

Internal Revenue Code Section 6655, requires LLC's that are being treated taxwise as though they were corporations to pay to the IRS installments on estimated income tax. Corporations are required to make their estimated payments to an authorized commercial bank depository or a Federal Reserve Bank by the statutory payment dates. Accompanying the payment is Federal Deposit Form 8109. Instructions for the estimated tax are provided in IRS Form 1120W (Worksheet), "Corporation Estimated Tax."

B. STATE ESTIMATED TAX

An LLC that is being treated taxwise as a corporation must comply with the tax law of any state in which it does business. Therefore, if an LLC does business in a state that has a corporate tax, the LLC is taxed even though it might be formed out of state. Example: Nevada has no corporate income tax; California does. If a Nevada LLC does business in California, it must pay California tax on that portion of its income derived from its California operations.

California and most states that have corporate income taxes require an LLC doing business in the state to pay estimated income taxes. It is important for an LLC to know and comply if a state in which it is doing business requires the payment of estimated tax.

V. PERSONAL PROPERTY TAXES

Some states, such as California, tax the personal business property of a company ( whether a corporation, partnership or an LLC) that is located within the state. For this reason, some of the airlines doing business in California actually fly to Las Vegas or Reno just to park their aircraft so they will not be taxed in California.

An LLC should be aware of the personal property taxes that a state may charge for corporate assets located in the state. Usually the same taxes apply for the personal property of an LLC, a partnership, or a sole-proprietorship.

VI. SALES AND USE TAXES

If the LLC expects to engage in the business of selling tangible personal property, the company must determine if it needs to obtain a sales and use tax permit. Generally, the states that have sales taxes presume that all gross receipts of personal property are subject to the sales tax. As with personal property taxes, it makes no difference what form the business entity takes. As long as goods subject to the tax are sold, sales tax must be charged.

VII. ANNUAL STATEMENT OF MANAGING MEMBERS

After a LLC is formed, several states, such as Louisiana, require that it file an annual statement of its managing members with the secretary of state. The state is thereby able to stay aware of and monitor the LLC. The information required on the statement includes the names and addresses of the members managing the company, the address of the registered office and the name and address of the registered agent.

VIII. EMPLOYEE CONCERNS

A. PAYROLL WITHHOLDING

A LLC, as with any other employer, must withhold income tax and social security tax from all employees' salary. Instructions for federal withholding are in the IRS Circular E, "Employer's Tax Guide." The LLC must have each employee complete the Employee's Withholding Allowance Certificate W-4. If the LLC is being treated as a corporation, the company must withhold payroll taxes on salaries and draws paid to its members. If an LLC is being treated taxwise as a partnership, the company does not withhold payroll taxes from payments made to its members. If an LLC is treated as a partnership for tax purposes, its members are required to make estimated payments of company earnings to the IRS and every state in which the company does business.

The withheld income and social security taxes are deposited in an authorized commercial bank depository or a Federal Reserve Bank along with Federal Deposit Form 8109. An "Employer's Quarterly Federal Tax Return" (Form 941) is required to be filed by the LLC before the end of the month following each quarter. If the taxes are not withheld or paid, any person whose duty it is to make the payments will be held 100% liable for the taxes. This can work a manifest injustice, but it remains the law.

In states which have income taxes, such as California, there must be state payroll withholding as well. It is important that the LLC understand its tax obligation for each state in which it will operate.

B. FEDERAL UNEMPLOYMENT TAX

Any LLC that has an employee at least part of one day every week during the current or preceding calendar year, or has paid wages of $1,500 or more during any calendar year is subject to the Federal Unemployment Tax (FUTA). The LLC can receive credit against FUTA for taxes paid into a state's unemployment fund. The taxes are deposited in an authorized commercial bank depository or a Federal Reserve Bank along with a Federal Deposit Form 8109. An "Employers Annual Federal Unemployment Tax Return" (Form 940) must be filed by the LLC by January 31 of each year. More information can be obtained from the IRS's "Employer Tax Guide."

C. UNEMPLOYMENT COMPENSATION INSURANCE

Many states, such as California, require employers provide unemployment and disability insurance for employees. The employers must make annual contributions for unemployment insurance based on a percentage of the employee's payroll for a year to a state fund. The disability coverage is paid by withholding from the employee's wages. Some states, like California, permit the employer to elect private disability insurance coverage under a state-approved voluntary disability program. If such an election is made, the employees are not required to pay disability taxes to the state.

D. WORKER'S COMPENSATION

All states have enacted Worker's Compensation Laws. An employer is liable for any injuries to a worker on the job regardless of any negligence of either the employer or the employee. The employee, however, cannot sue the employer for punitive damages regardless of how egregious the employer's conduct was. The employer must either carry workers compensation insurance through a state fund or carry it through an approved private insurance carrier. In some states the employer may be permitted to be self-insured provided his company is considered large enough and stable enough to do so.

Failure to carry the insurance could be disastrous for an LLC. It means an injured employee can sue the LLC for punitive damages; if the insurance is in place, there is no lawsuit.

IX. FICTITIOUS NAME FILINGS

If the LLC is going to do business in a name other than its own, the members must look into the state's requirements for filing a fictitious name statement. Most states require anyone, even an LLC, doing business in a name other than its own to file a fictitious name statement with the county clerk.

This statement provides the public a means to identify the owner of the business in the event of litigation or other need to contact the owner. For example, assume that ABCD Limited Liability Company operates a restaurant named Guido's where a patron suffers food poisoning. The patron checks the fictitious name filings and finds the name of the owner of Guido's even though the employees would not divulge it. The forms for each state are usually available at the county clerk's office for the county where the company's principal will be located.

X. AMENDMENT OF ARTICLES

The provisions contained in the Articles of Organization for an LLC can only be altered or changed by the filing of an amendment to the articles. Because it is so procedurally difficult to amend the articles, members often place the important management provisions in the articles. The articles contained in this book are all that are needed to meet minimum requirements under state law. In practice, the entire operating agreement or any of its provisions may be included in the articles. The only thing to remember is that once something is listed in the articles, it can only be changed by filing an amendment.

The procedure for filing an amendment is the same as for filing the original articles. A duplicate or triplicate of the proposed amendment must be filed with the secretary of state. Under the law, an amendment to correct information in the original articles which is false or erroneous is usually a criminal offense.

In the situation of the articles contained in this book, an amendment probably would never be needed. A probable change in the articles of this book is the designation of the resident agent. In most states, when the designated resident agent changes, an amendment to the articles need not be filed. Instead of an amendment for the change of resident agent, a notarized statement giving the name and address of the new agent is usually quite sufficient. When a resident agent dies or resigns and is not replaced, state law automatically designates the secretary of state as the temporary resident agent. It is not wise to let the secretary of state be the resident agent. Speaking from practical experience, it can take months for documents served on the secretary of state as the resident agent to reach the company before the LLC knows of a lawsuit.

CHAPTER 13

MEMBER AGREEMENTS

This chapter contains three of the most common types of member agreements. The first agreement is a buy-sell agreement. The second is adoption of a medical plan. The third type is a purchase of life insurance on the members. These agreements are addressed separately from the LLC operating agreement. It is possible to include the terms and provisions in the actual LLC operating agreement. Incorporation of these provisions into the LLC operating agreement, however, makes it long and cumbersome. An advantage in having the enclosed agreements separate from the LLC operating agreement is that it allows the LLC flexibility in adopting the agreements with minimal effort.

A. BUY-SELL AGREEMENT

A frequent concern among members is what is to happen to the LLC in the event a member should die or a member should transfer his LLC interest. The LLC would have new members. The remaining original members may find themselves operating a business with people they do not like and with whom they do not wish to associate.

The common resolution to this dilemma is for the members to enter a members' agreement. The general form of this type of agreement gives surviving members the first right of refusal to purchase the shares of the LLC from the estate of a deceased member, usually for book value. In the same vein a member wishing to sell his LLC interest must first offer it to the other members for the price that it would be sold to a third party. If the remaining members do not elect to buy the LLC interest, the selling member can sell it for the price offered to the members.

Following this chapter is a basic buy-sell agreement governing the situations discussed above. The buy-sell agreement can be as complicated as the parties wish and can include voting trusts, tax allocations and any other aspect the members may want. In the event of violation of the terms of the buy-sell agreement, the non- violating and non-breaching members can purchase the breaching member's LLC interest for book value as calculated under the agreement.

Buy-sell agreements provide for the continuity of the LLC. They add a degree of stability to the LLC. Many LLC's are family affairs, usually with a father and one or more children. Bad feelings can arise when a parent dies and the parent's interest in the business is inherited by children who have not participated in the business. The children who have participated in the business together with non-family members may not want to share the benefit of their work with the new members. Many LLC's have dissolved because the LLC could not integrate the new members.

The buy-sell agreement in this chapter is a skeletal form from which the parties may fashion their own agreement for this sensitive area.

MEMBERS' BUY-SELL AGREEMENT

Agreement made this first day of by and between being the Members of

a Limited Liability Company created and existing under the laws of the State of with its principal place of business at ,

hereinafter titled the Limited Liability Company.

WHEREAS the parties hereto believe that the maintenance of harmonious management is in the best interest of the Limited Liability Company and the Members, and

WHEREAS it is the purpose of this Agreement (a) to require that the capital interest in the Limited Liability Company of a living Member who desires to dispose of it be offered first to the other Members for purchase, (b) to provide for purchase by the surviving Members of the Limited Liability Company interest of a deceased Member, and (c) to provide the funds necessary to purchase such interest,

NOW THEREFORE in pursuance of this purpose and in consideration of the mutual agreements and covenants contained herein it is hereby mutually agreed as follows:

ARTICLE 1

PURCHASED DURING LIFE

No Member during his lifetime shall in any way transfer or dispose of any portion of his capital Limited Liability Company interest by sale or otherwise unless the Member shall first offer to sell such Limited Liability Company interest to the other Members. Such offer shall be in writing, and a copy of said offer shall be sent to each of the Members. If such other Members elect to purchase any or all of such shares, the purchase shall be at a price determined in accordance with the provisions of ARTICLE 3. In the event the other Members have rejected said offer in whole or in part, either by written rejection or by failure to purchase all of said Limited Liability Company interest within thirty (30) days after receipt of the Member's offer to sell, the offering Member shall be entitled to sell to any person all or any portion of the remaining Limited Liability Company interest so offered.

ARTICLE 2

PURCHASE AT DEATH

Upon death of a Member, the Member's estate or the Member's successor-in-interest by reason of form of ownership shall sell and the surviving Members of the Limited Liability Company shall buy all of the Member's interest in the Limited Liability Company at a price determined in accordance with the provisions of ARTICLE 3.

ARTICLE 3

PURCHASE PRICE OF LIMITED LIABILITY COMPANY INTEREST

The price to be paid for the purchase of a Member's interest in the Limited Liability Company, as provided in ARTICLES 1 and 2, shall be determined periodically by mutual agreement of the Members. The initial purchase price of the Limited Liability Company interest hereby is agreed to be DOLLARS ($ ) for each percent of ownership in the Limited Liability Company as determined by the represented share of the Member's capital account. This price shall be redetermined within thirty (30) days following the close of each fiscal year of the Limited Liability Company and shall be based upon the net book value of the Limited Liability Company. Until such redetermination the prior value shall continue in effect; provided, however, in the event the Members have not agreed to such a redetermination within the period of eighteen (18) months prior to the death of a Member, the price shall be fixed by arbitration in the following manner: one arbitrator shall be named by the surviving Members and one by the representative of the decedent's estate within thirty (30) days after qualification of the executor or administrator of the estate of the deceased Member; if the two arbitrators cannot agree upon the price of each share within thirty (30) days after their appointment, the probate court shall appoint a third arbitrator, and the decision of the majority shall be made within thirty (30) days thereafter and shall be final on this issue.

ARTICLE 4

TERMINATION OF AGREEMENT

This Agreement shall terminate upon the dissolution, receivership, insolvency, or bankruptcy of the Limited Liability Company.

ARTICLE 5

PERSONS BOUND BY THIS AGREEMENT

All provisions of this Buy-Sell Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the respective heirs, administrators, personal representatives, executors, assigns and successors in interest of the Members.

ARTICLE 6

MISCELLANEOUS

6.A.	SURVIVAL OF REPRESENTATIONS. The covenants, warranties, representations and other written statements set forth in this Agreement or in any exhibit hereto shall survive the execution and delivery hereof and formation of the Limited Liability Company. All of the same shall be deemed to be independently material and reliable by the party to whom made.

6.B. ATTORNEY FEES. If legal action is commenced over the terms of this Buy-Sell Agreement, it is agreed that the prevailing party shall be entitled to reasonable attorney fees and costs.

6.C. GOVERNING LAW. This Agreement and all of its terms and conditions shall be governed in accordance with the laws of the State of .

6.D. CONSTRUCTION. None of the provisions of this Buy-Sell Agreement shall be for the benefit of or enforceable by any creditors of the Limited Liability Company.

6.E. FURTHER ASSURANCES. Each of the Members hereafter shall execute and deliver such further instruments and do such further acts and things as may be required or useful to fulfil the intents and purposes of this Agreement that are not inconsistent with the terms hereof.

6.F. ENTIRE AGREEMENT AND AMENDMENT. This Buy-Sell Agreement incorporates the entire agreement and understanding among the Members with respect to the subject matter. This Agreement may not be modified or amended except with the written consent of all Members.

6.G. SEVERABILITY. If any part of this Agreement is void or otherwise invalid and hence unenforceable, such invalid or void portions of this Agreement and the other portions shall be given full force and effect as though said void and invalid portions of provisions had never been part of the Agreement.

6.H. PARAGRAPH HEADINGS. The heading of each paragraph of this Agreement is solely for convenience, is not a part of this Agreement, and is not intended to govern, limit or aid in the construction of any term or provision of this Agreement.

6.I. INTERPRETATION. This Agreement is deemed to have been prepared equally by the parties hereto, and if any inconsistency or ambiguity exists herein, it shall not be interpreted against either party but according to the application of rules of interpretation of contracts.

6.J. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original and such counterparts shall together constitute one and the same agreement.

6.K. ASSIGNMENT PROHIBITED. This Agreement may not be assigned by any Member without the prior written consent of all the remaining Members. Any assignment made in violation of this paragraph shall be void.

6.L. WAIVER OF RIGHTS. Failure of any Member to insist on compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any rights or power hereunder at any time be deemed a waiver or relinquishment of such rights or powers at any other time.

6.M. CUMULATIVE REMEDIES. No right or remedy herein conferred on or reserved to any party is intended to be exclusive of any other remedy or right, and each and every right or remedy shall be cumulative and in addition to any right or remedy given hereunder or now or hereafter existing at law or in equity or by statute.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement this day of at .

B. ADOPTION OF A MEDICAL PLAN

The delivery and payment of health care is changing. Addressing inadequacies in the health care system has been of national importance since the 1992 Congressional elections. Various national plans have been proposed all of which share the requirement that all businesses to carry health insurance for employees. If the limited liability company has employees, it may, one day, be required to furnish them with health coverage. The issue is unclear. Under today's law, partners are not considered employees. Therefore, whether a LLC may, in the future, be required to furnish health coverage for its partners remains to be clarified. Given the avowed purpose of the proposed health plans to provide coverage for everyone, the LLC may be, one day, required to provide coverage at the very least for those members who participate in the LLC's daily management and control.

When the LLC is treated as a partnership, the value of medical insurance is attributed to the member as a distribution of income. There usually is not much benefit for the LLC to adopt a medical plan unless it can get group rates or it is necessary to provide coverage for non-member employees. Many states are also considering requiring employers to provide medical insurance for their employees. Following this chapter is a basic medical expense payment and reimbursement plan. The LLC need not use this plan, may instead adopt its own plan or might not adopt one at all. It is important to remember that the plan may not discriminate between the coverage for highly paid and lower paid workers.

The Plan offered in this book is a basic reimbursement for certain medical costs paid by the LLC's employees. As stated above, such a plan is not mandated, as yet by state or federal law. This is simply a fringe benefit which may be useful in small company's benefit package for employees.

MEMBERS' MEDICAL PLAN AGREEMENT

Agreement made this day of by and between being the Members of a Limited Liability Company created and existing under the laws of the State of with its principal place of business at

hereinafter titled the Limited Liability Company.

WHEREAS the parties hereto believe that the maintenance of harmonious management is in the best interest of the Limited Liability Company and the Members, and

WHEREAS in order to maximize employee efficiency, productivity, improve employee health, welfare and morale the Limited Liability Company finds that it is in its best interest to adopt a Medical Expense Payment and Reimbursement Plan, hereafter titled the Plan. The plan will be created pursuant to Section 105(b) of the Internal Revenue Code of 1986, as amended.

NOW THEREFORE in pursuance of this purpose and in consideration of the mutual agreements and covenants contained herein it is hereby mutually agreed as follows:

ARTICLE 1

ADOPTION OF A MEDICAL PLAN

The Plan adopted herein shall reimburse qualified employees for the medical expenses incurred by them. Coverage under the Plan shall also extend to a qualified employee's spouse, children and dependents as defined in Section 152 of the Internal Revenue Code, provided those persons are members of the employee's household at the time any such medical or dental expenses are incurred.

There shall be two types of benefits payable under the Plan. These benefits are:

1. Elective Plan Benefits which are defined as being those benefits paid with respect to preventive or non-life threatening medical services such as dental, vision, psychological, orthodontia and other elective procedures such as cosmetic surgery.

2. Basic Plan Benefits which are defined under the Plan herein adopted as those benefits that are not elective plan benefits.

ARTICLE 2

COVERAGE

Coverage shall extend to the members and all qualified employees. Qualified employees shall include all of the employees of the Limited Liability Company with the exception of those employees who fall within any of the following excluded classes:

1. Those employees who were less than eighteen (18) years of age at any time during the Plan year are not covered.

2. Employees who are members of a union, employee association or other unit of employees covered by a collective bargaining agreement for which the benefits under the agreement are the subject of good faith bargaining are not covered by this Plan.

3. Those employees having less than one (1) year of service for elective benefits are not covered. Such employees, however, must be covered by the Plan on the first day of the first month beginning after completion of such service.

4. Those employees having less than six (6) months of service for basic benefits are not covered. Such employees, however, must be covered on the first day of the first month beginning after completion of such service.

5. Those employees working less than 17½ hours per week are not covered.

6. Those employees working less than six (6) months during the Plan year are not covered.

7. Non-resident aliens who are employees are not covered if they receive no earned income within the meaning of IRC Section 911 (d) (2) from the Limited Liability Company. This income constitutes income from sources within the United States as defined by Section 861 (a) (3).

ARTICLE 3

NOTIFICATION OF COVERAGE

The Limited Liability Company intends for the payments of Plan benefits to comply with and be made in accordance with Sections 89 and 105(b) of the Internal Revenue Code. The Members are hereby directed to inform all current employees and new employees under employment of the Plan provisions. All questions concerning the administration and interpretation of the Plan shall be determined by the Members. Any questions concerning payments or reimbursements shall be asked of the Members.

ARTICLE 4

PAYMENT UNDER THE PLAN

Payments of Plan benefits shall be governed by the dollar limitation set herein. The medical expense payments or reimbursements for which qualified employees shall be eligible shall consist of all medical and dental expenses incurred by such employees or their dependents to the extent allowable under and as defined in Section 213 of the Internal Revenue Code that are in excess of such payment or reimbursement as said employee may be entitled to receive from any group health and accident or medical insurance under which employees may be covered under any Medicare or other federal or state health and accident benefit program.

It is specifically stated herein that notwithstanding anything to the contrary in these resolutions, the Limited Liability Company hereby limits and will not pay or reimburse any eligible employee for any medical or dental expenses under the Plan, whether for basic or elective benefits, for a total aggregate amount greater than ($ ) that are incurred by the employee in any fiscal year. There shall be no discrimination or difference in any way by or between the maximum amounts which can be reimbursed or paid to highly compensated and non-highly compensated employees.

Any qualified employee applying for reimbursement or payment under the Plan will be required to submit to the President or Board all medical and dental bills as incurred for which reimbursement or payment is claimed. Also to be included are any premium notices for accident or health insurance and any verification of the appropriateness thereof for payment or reimbursement under the Plan. Should any qualified employee fail to comply with the above requirements for coverage, the Board of Directors may at its option deny coverage and terminate the employee's right to such payment or reimbursement.

ARTICLE 5

AMENDMENTS OF THE PLAN

The Limited Liability Company reserves the right to alter, amend or terminate the Plan at any time. Any such alteration, amendment or termination of the Plan shall not affect the right of any qualified employee to receive payment or reimbursement for medical or dental expenses incurred prior to the Plan's alteration, amendment or termination by the Board.

ARTICLE 6

TERMINATION OF AGREEMENT

This Agreement shall terminate upon the dissolution, receivership, insolvency or bankruptcy of the Limited Liability Company.

ARTICLE 7

PERSONS BOUND BY THIS AGREEMENT

All provisions of this Medical Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the respective heirs, administrators, personal representatives, executors, assigns and successors in interest of the Members.

ARTICLE 8

MISCELLANEOUS

8.A. SURVIVAL OF REPRESENTATIONS. The covenants, warranties, representations and other written statements set forth in this Agreement or in any exhibit hereto shall survive the execution and delivery hereof and formation of the Limited Liability Company. All of the same shall be deemed to be independently material and reliable by the party to whom made.

8.B. ATTORNEY FEES. If legal action is commenced over the terms of this Medical Agreement, it is agreed that the prevailing party shall be entitled to reasonable attorney fees and costs.

8.C. GOVERNING LAW. This Agreement and all of its terms and conditions shall be governed in accordance with the laws of the State of .

8.D. CONSTRUCTION. None of the provisions of this Medical Agreement shall be for the benefit of or enforceable by any creditors of the Limited Liability Company.

8.E. FURTHER ASSURANCES. Each of the Members hereafter shall execute and deliver such further instruments and do such further acts and things as may be required or useful to fulfill the intents and purposes of this Agreement that are not inconsistent with the terms hereof.

8.F. ENTIRE AGREEMENT AND AMENDMENT. This Medical Agreement incorporates the entire agreement and understanding among the Members with respect to the subject matter. This Agreement may not be modified or amended except with the written consent of all Members.

8.G. SEVERABILITY. If any part of this Agreement is void or otherwise invalid and hence unenforceable, such invalid or void portions of this Agreement and the other portions shall be given full force and effect as though said void and invalid portions of provisions had never been part of the Agreement.

8.H. PARAGRAPH HEADINGS. The heading of each paragraph of this Agreement is solely for convenience, is not a part of this Agreement, and is not intended to govern, limit or aid in the construction of any term or provision of this Agreement.

8.I. INTERPRETATION. This Agreement is deemed to have been prepared equally by the parties hereto, and if any inconsistency or ambiguity exists herein, it shall not be interpreted against either party but according to the application of rules of interpretation of contracts.

8.J. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original and such counterparts shall together constitute one and the same agreement.

8.K. ASSIGNMENT PROHIBITED. This Agreement may not be assigned by any Member without the prior written consent of all the remaining Members. Any assignment made in violation of this paragraph shall be void.

8.L. WAIVER OF RIGHTS. Failure of any Member to insist on compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any rights or power hereunder at any time be deemed a waiver or relinquishment of such rights or powers at any other time.

8.M. CUMULATIVE REMEDIES. No right or remedy herein conferred on or reserved to any party is intended to be exclusive of any other remedy or right, and each and every right or remedy shall be cumulative and in addition to any right or remedy given hereunder or now or hereafter existing at law or in equity or by statute.

IN WITNESS WHEREOF the parties hereto have executed this Agreement this day of at .

C. LIFE INSURANCE AGREEMENT

Common among small businesses is the use of key-life insurance. This is a life insurance policy on the key shareholders or members of a small business. The reason behind such insurance is quite sound. When a key person in any business dies, that business is bereft of the abilities of that person. Many small companies will fail when they lose their key personnel.

In most small companies only one or two people actually run the management details of the company. When this person is removed, the entire company changes. There was a small water disposal company in Los Angeles. The owner of the company was a highly respected and personable individual who doted on his customers. Upon his death, the company was inherited by his son. Unfortunately, the son lacked his father's tact or business acumen. Within a year of the father's death, the business was dead and had to be sold. If the company had key men insurance, it would have had a source of funds on which to draw while the business was being restructured.

Another reason for having such insurance is it can provide the funds necessary to purchase the LLC interest from a deceased member's estate. If the members had executed a buy-sell agreement, the LLC or individual members would need to come up with a sizable amount of cash to purchase a deceased member's share in the LLC. Insurance can provide that source of funds without having to borrow money or sell LLC assets.

The Internal Revenue Code specifically states in section 264 that the premiums paid for the life insurance on a key-person are not deductible where the payor of the premium (the LLC) is directly or indirectly the beneficiary of the policy. Since the proceeds of the insurance policy will be used to purchase the LLC interest of the deceased member, the LLC is thereby benefited. For that reason, the LLC is not permitted to deduct the insurance payments as ordinary and necessary business expenses.

MEMBERS' LIFE INSURANCE AGREEMENT

Agreement made this day by and between being the Members of a Limited Liability Company created and existing under the laws of the State of

with its principal place of business at

hereinafter titled the Limited Liability Company.

WHEREAS the parties hereto believe that the maintenance of harmonious management is in the best interest of the Limited Liability Company and the Members, and

WHEREAS it is the purpose of this Agreement to provide for key-man insurance on the lives of all of the Members so that the Limited Liability Company will be compensated for the loss of services upon the death of any Member,

NOW THEREFORE in pursuance of this purpose and in consideration of the mutual agreements and covenants contained herein it is hereby mutually agreed as follows:

ARTICLE 1

Life Insurance

Each member shall apply to

for the issuance of the following life insurance policies for the following amounts:

Insured Amount Member

The Limited Liability Company will be named as owner of the policies and the Limited Liability Company shall pay all of the premiums for the life insurance policies. Additional policies may be purchased upon agreement of the members.

ARTICLE 2

RIGHT OF INSURED TO ASSIGNMENT

If any member sells or transfers his interest in the Limited Liability Company, that former member may request assignment to him of the life insurance policy carried on his life. The life policy upon the life of said former member shall be assigned upon receipt by the Limited Liability Company of the cash value of the policy from the former member.

ARTICLE 3

TERMINATION OF AGREEMENT

This Agreement shall terminate upon the dissolution, receivership, insolvency or bankruptcy of the Limited Liability Company.

ARTICLE 4

PERSON BOUND BY THIS AGREEMENT

All provisions of this Medical Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the respective heirs, administrators, personal representatives, executors, assigns and successors in interest of the Members.

ARTICLE 5

Miscellaneous

5.A. SURVIVAL OF REPRESENTATIONS. The covenants, warranties, representations and other written statements set forth in this Agreement or in any exhibit hereto shall survive the execution and delivery hereof and formation of the Limited Liability Company. All of the same shall be deemed to be independently material and reliable by the party to whom made.

5.B. ATTORNEY FEES. If legal action is commenced over the terms of this Medical Agreement, it is agreed that the prevailing party shall be entitled to reasonable attorney fees and costs.

5.C. GOVERNING LAW. This Agreement and all of its terms and conditions shall be governed in accordance with the laws of the State of .

5.D. CONSTRUCTION. None of the provisions of this Medical Agreement shall be for the benefit of or enforceable by any creditors of the Limited Liability Company.

5.E. FURTHER ASSURANCES. Each of the Members hereafter shall execute and deliver such further instruments and do such further acts and things as may be required or useful to fulfil the intent and purposes of this Agreement that are not inconsistent with the terms hereof.

5.F. ENTIRE AGREEMENT AND AMENDMENT. This Medical Agreement incorporates the entire agreement and understanding among the Members with respect to the subject matter. This Agreement may not be modified or amended except with the written consent of all Members.

5.G. SEVERABILITY. If any part of this Agreement is void or otherwise invalid and hence unenforceable, such invalid or void portions of this Agreement, and the other portions shall be given full force and effect as though said void and invalid portions of provisions had never been part of the Agreement.

5.H. PARAGRAPH HEADINGS. The heading of each paragraph of this Agreement is solely for convenience, is not a part of this Agreement, and is not intended to govern, limit or aid in the construction of any term or provision of this Agreement.

5.I. INTERPRETATION. This Agreement is deemed to have been prepared equally by the parties hereto, and if any inconsistency or ambiguity exists herein, it shall not be interpreted against either party but according to the application of rules of interpretation of contracts.

5.J. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original and such counterparts shall together constitute one and the same agreement.

5.K. ASSIGNMENT PROHIBITED. This Agreement may not be assigned by any Member without the prior written consent of all the remaining Members. Any assignment made in violation of this paragraph shall be void.

5.L. WAIVER OF RIGHTS. Failure of any Member to insist on compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any rights or power hereunder at any time be deemed a waiver or relinquishment of such rights or powers at any other time.

5.M. CUMULATIVE REMEDIES. No right or remedy herein conferred on or reserved to any party is intended to be exclusive of any other remedy or right, and each and every right or remedy shall be cumulative and in addition to any right or remedy given hereunder or now or hereafter existing at law or in equity or by statute.

IN WITNESS WHEREOF the parties hereto have executed this Agreement this day of at .

CHAPTER 14

TERMINATION OF A LIMITED LIABILITY COMPANY

The ending of a LLC is generally called its termination, although it is also sometimes called a "dissolution" or a "winding down" of the LLC. Whatever the name, it represents the process by which the members cease to operate as an LLC. When an LLC is terminated, all business activities cease except to the extent necessary to complete LLC business that was instituted prior to the termination. An LLC unlike a corporation does not have perpetual existence. It is a fundamental precept of an LLC that one day it will end. Many states have under their LLC act a statement that an LLC cannot last more than 30 years. The date of termination is required by all states that permit LLC's to be stated in the articles of organization.

Unless the operating agreement of an LLC states otherwise, an LLC will terminate automatically upon the death or bankruptcy of any member; some states require this to be stated in the articles of organization also. In addition, the operating agreement can state that when the purpose for which the LLC was formed has been accomplished, the company will terminate even though the termination date in the articles of organization has not yet arrived.

An LLC agreement is permitted to have clauses stating on what conditions the LLC will terminate. Some of the most common LLC termination clauses are triggered when:

1.	The LLC purpose is accomplished. Example: An LLC is formed to buy, refurbish and sell an apartment house and to terminate upon the sale.

2.	The stated termination date in the LLC agreement arrives.

3.	A member becomes insolvent or bankrupt. Unless the operating agreement states otherwise, when a member files for personal bankruptcy, the LLC is automatically terminated even though the business may itself be solvent.

4.	A member dies or becomes disabled and is unable to assist the LLC in its business, or a member withdraws from the LLC. Without a clause in the LLC's operating agreement stating otherwise the law is that an LLC terminates on the death of a member or upon a member's resignation.

5.	Any one of the following events occur. All states permit a court to order dissolution of an LLC for the following reasons regardless of specific clauses in the LLC agreement stating otherwise:

a. A member has been found insane by a court.

b. A member is incapable of performing his duties under the LLC agreement.

c. A member's conduct has prejudicially affected the ability of the LLC to carry on its business.

d. A member has repeatedly breached the LLC operating

agreement.

e. The LLC can only do business at a loss.

f. Equitable reasons support the dissolution.

A lawsuit seeking termination on any of these grounds will be difficult and costly to prove. An alternative is for the LLC operating agreement to have an expulsion provision permitting expulsion of a member for any of the above reasons.

PROCEDURE

The termination of an LLC begins in one of two ways. The termination is instituted either by unanimous agreement of the members or by operation of law. An LLC is terminated by operation of law for one of two reasons:

1.	Its existence violates terms of the state's LLC law, such as being for an improper purpose, or more commonly,

2.	The terms of the LLC operating agreement call upon the LLC to be automatically terminated upon the happening of certain events such as described above.

Once the LLC has terminated, all business operations cease except to the extent necessary to complete outstanding business, pay LLC debts and fulfill outstanding LLC obligations. This process is generally called the winding down of the LLC. During the period of time for which an LLC is being wound down, each member remains liable for debts the LLC incurred during the "winding down" of LLC affairs in the same manner as when he was liable for LLC debts prior to the termination.

After the final cessation of business, the LLC will sell all of its assets and distribute the proceeds as follows:

1.	All federal and state taxes are paid.

2.	All employee wages and benefits are paid.

3.	All secured liabilities are paid.

4.	All unsecured liabilities are paid.

5.	Remaining funds are divided among the members based on their percentage of ownership interest in the LLC.

The proceeds received by a member in the dissolution of an LLC are a return of the member's investment. Any gain or loss in the dissolution is treated as a capital gain or loss. Example: A member paid $4,000 for his member interest and receives $3,000. The member has a $1,000 capital loss. Likewise, if the member receives $6,000, he has to recognize a $2,000 capital gain.

Depending on the complexity of the LLC's business, termination may be quick or it may be a long and involved process. Until the LLC is fully terminated, the individual liability of the members continues. If at the time of termination the LLC does not have enough assets to pay all of its debts and liabilities, the members must pay the remaining balance. Under state law, unless the operating agreement states otherwise, if the LLC is insolvent as are some of the members, the remaining solvent members must pay all of the outstanding debts and liabilities of the LLC.

After a dissolution an LLC is not required to pay interest on a member's share of proceeds under a dissolution except for a limited reasonable time after the date when repayment should have been made. In other words, if the LLC is late in making a distribution after the dissolution, it must pay interest for the time of the delay. The members can agree in the operating agreement not to have this provision apply. Likewise, the members may agree in the LLC operating agreement to have the LLC pay interest on a member's distributed share from the date the dissolution plan is adopted rather than the date the distribution could be made.

Once an LLC has been terminated, the members should publish a notice in the newspaper of the termination of the LLC. The members should also file a termination of the fictitious name statement. Both of these acts serve the important purpose of notifying the world of the termination of the LLC relationship. Under general agency law, if a member fails to inform a person of the termination of the LLC and that person, while reasonably believing the LLC to still be in effect, deals with a former member, the LLC relationship will still be found to exist. Publishing a notice of the termination of the LLC prevents such a third person from having a reasonable belief that the LLC is still in effect when dealing with a former member. Another reason for publishing the notice of termination of the LLC is so the creditors will be given notice to come forward and present their claims.

Following is a sample termination agreement for use when all of the members agree to terminate the LLC.

MEMBERS' TERMINATION AGREEMENT

Agreement made this day of by and between

being the Members of a Limited Liability Company created and existing under the laws of the State of with its principal place of business at hereinafter titled the Limited Liability Company.

WHEREAS it is the agreement of the parties that the Limited Liability Company as now in existence cannot and should not be continued in effect and should be terminated,

NOW THEREFORE in pursuance of this purpose and in consideration of the mutual agreements and covenants contained herein it is hereby mutually agreed as follows:

ARTICLE 1

TERMINATION OF LIMITED LIABILITY COMPANY

The Limited Liability Company as formed between the parties in accordance with the terms of the original Limited Liability Company operating agreement along with all subsequent amendments is by this agreement hereby terminated.

ARTICLE 2

DISCHARGE OF LIMITED LIABILITY COMPANY

All Limited Liability Company business operations will cease except to the extent necessary to complete outstanding business and the payment of the Limited Liability Company debts and fulfillment of outstanding Limited Liability Company obligations. The Limited Liability Company will sell all of its assets and distribute the proceeds in the following order:

1.	All federal and state taxes will be paid.

2.	All employee wages and benefits will be paid.

3.	All secured liabilities will be paid.

4.	All unsecured liabilities will be paid.

5.	Remaining funds are divided among the members based on their percentage of ownership interest in the Limited Liability Company.

ARTICLE 3

PERSON BOUND BY THIS AGREEMENT

All provisions of this Termination Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the respective heirs, administrators, personal representatives, executors, assigns and successors in interest of the Members.

ARTICLE 4

MISCELLANEOUS

4.A. SURVIVAL OF REPRESENTATIONS. The covenants, warranties, representations and other written statements set forth in this Agreement or in any exhibit hereto shall survive the termination of the Limited Liability Company. All of the same shall be deemed to be independently material and the party to whom they were made deemed to have relied upon them.

4.B. ATTORNEY FEES. If legal action is commenced over the terms of this Termination Agreement, it is agreed that the prevailing party shall be entitled to reasonable attorney fees and costs.

4.C. GOVERNING LAW. This Agreement and all of its terms and conditions shall be governed in accordance with the laws of the State of .

4.D. CONSTRUCTION. None of the provisions of this Termination Agreement shall be for the benefit of or enforceable by any creditors of the Limited Liability Company.

4.E. FURTHER ASSURANCES. Each of the Members hereafter shall execute and deliver such further instruments and do such further acts and things as may be required or useful to fulfill the intent and purposes of this Agreement that are not inconsistent with the terms hereof.

4.F. ENTIRE AGREEMENT AND AMENDMENT. This Termination Agreement incorporates the entire agreement and understanding among the Members with respect to the subject matter. This Agreement may not be modified or amended except with the written consent of all Members.

4.G. SEVERABILITY. If any part of this Agreement is void or otherwise invalid and hence unenforceable, such invalid or void portions of this Agreement, and the other portions shall be given full force and effect as though said void and invalid portions of provisions had never been part of the Agreement.

4.H. PARAGRAPH HEADINGS. The heading of each paragraph of this Agreement is solely for convenience, is not a part of this Agreement, and is not intended to govern, limit or aid in the construction of any term or provision of this Agreement.

4.I. INTERPRETATION. This Agreement is deemed to have been prepared equally by the parties hereto, and if any inconsistency or ambiguity exists herein, it shall not be interpreted against either party but according to the application of rules of interpretation of contracts.

4.J. WAIVER OF RIGHTS. Failure of any Member to insist on compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any rights or power hereunder at any time be deemed a waiver or relinquishment of such rights or powers at any other time.

4.K. CUMULATIVE REMEDIES. No right or remedy herein conferred on or reserved to any party is intended to be exclusive of any other remedy or right, and each and every right or remedy shall be cumulative and in addition to any right or remedy given hereunder or now or hereafter existing at law or in equity or by statute.

IN WITNESS WHEREOF the parties hereto have executed this Agreement this day of at .

It took many years for LLC's to become accepted as a legitimate business entity primarily because of the uncertainty of the taxing of the entity and its members. Once the IRS accepted that LLCs would be taxed as partnerships, the use of LLCs have expanded. Today, most newly small businesses are formed as LLCs because of their ease of formation, simplicity of operation and more flexible profit sharing.

Now that LLCs have become commonplace, the next evolutionary development may be the use of series LLCs. Conceptionally , a series LLC is just a single LLC which can have many divisions or series that operate as totally separate entities except for tax purposes. The closest comparable business arrangement would be that of a parent corporation with subsidiaries. In the parent-subsidiary corporation arrangement, a consolidated tax return is filed but the assets and liabilities are legally separate and the parent corporation is not liable for the debts of the subsidiary. The drawback in the parent subsidiary situation is that each corporation must pay the yearly registration fees and taxes.

In contrast to the traditional parent-subsidiary arrangement, Delaware has enacted legislation permitting the creation of series LLCs. A series LLC basically combines several LLCs into one LLC for tax purposes alone. A series LLC could best be described as an LLC with divisions and with each division possessing its own assets and liabilities which are not shared with the other LLCs under the same umbrella LLC.

In a series LLC, the total assets and liabilities are divided among the various divisions or "series," hence the name. Each series acts as a separate company with wide leeway as to how its assets and liabilities are incurred and pledged. The other series under an umbrella LLC are not automatically liable for the debts of the other series, just as a parent corporation is not automatically liable for the debts of its subsidiaries without some sort of guarantee agreement.

The advantage of a series LLC is obvious in that it allows the members to partition and segregate the liabilities, management or ownership within a single LLC rather than forming several LLCs to accomplish the same result. An example of this would be if the members owned several companies, say fast food franchises, the members would certainly wish to keep the businesses separate for liability purposes but would like the idea of having them all less than one umbrella for administration and tax purposes. That way they would have the best of all worlds, limitation of personal liability to just the business involved, yet consolidation of accounting and income for tax purposes and effective management.

Delaware permits, under its Series Limited Liability Company Act (6 Del Code §§18-101 - 18-1109) the creation and operation of a series LLC. The rest of the nation is waiting to see how the business and legal community deal with it before enacting such legislation of their own. Under the Delaware's LLC statutes, a LLC is permitted to hold assets in separate divisions or "series," which are treated for accounting purposes as sub-accounts within an overall LLC.

Each series in a Delaware umbrella LLC, operates like an independent and separate LLC. Each series could have its own separate businesses, separate members and separate liabilities exactly as though it was operating as a subsidiary of a parent corporation. The rights of the members of a particular series are best understood by analogy to a subsidiary corporation. Just as shareholders of a parent corporation, with many subsidiaries, would not have automatic shareholder rights in the other subsidiaries, likewise, members and managers of a particular series, absent a contrary agreement set forth in the umbrella LLCs operating agreement, would not have any rights or liabilities in the other series. It is this separation of assets and liabilities which is he most controversial aspect of a series LLC. Under a series LLC, the profits, losses, and liabilities of each series are separated from the other series. This means that the members of one series will not share in the profits or split the losses of the other series. It is as though each series is a separate company.

Section 18-215(a) of the Delaware Act reads as follows:

"A limited liability company agreement may establish
or provide for the establishment of one or more	designated series of members, managers or limited	liability company interests having separate rights,	powers or duties with respect to specified property	or obligations of the limited liability company or	profits and losses associated with specified property	or obligations, and any such series may have a	separate business purpose or investment objective."
A series LLC, properly formed under Delaware law, will, at least, in Delaware bestow the following benefits on its members:

1.	A consolidation of all of the business assets under one tax paying entity. This is analogous to	the parent-subsidiary corporate arrangement discussed above. Yet, while the total assets are attributed one umbrella LLC for tax and accounting purposes, the assets segregated to each division or series are not liable for the debts of the other series, which is again similar to how subsidiaries are not liable for the debts of other subsidiaries of a common parent.
2. Assets and liabilities can be segregated or partitioned in a series LLC which can allow greater flexibility in financial planning over the use of multiple LLCs.
3. It is very easy to add a series to an LLC by simply amending the LLC operating agreement. There are no additional filings with the secretary of state when a series is added to an umbrella LLC
4. Dissolution or termination of a series does not automatically dissolve the umbrella LLC. Just as with a basic LLC, under 6 Del. Code § 18-801(a), a series in an LLC is dissolved

(a) on a specified date within the LLC agreement,	(b) the happening of a certain event specified in the LLC agreement,

(c)	the affirmative vote or written consent of the LLC members associated with the series who own 2/3 interest, or

(d) by judicial decree.

Under 6 Del Code §18-215(j), it is specifically stated that the dissolution of a series does not automatically result in the termination or dissolution of the umbrella LLC.
5. There is sizable tax savings in forming a series LLC in that yearly registration fees for multiple companies are avoided. For example California imposes a minimum franchise fee of $800 per year for each LLC doing business in California. So if a LLC has five series it would save $3,200 per year as series if doing business in California. In addition the transfer of assets among series are tax free just as such transfers are among parents and subsidiary corporations

CREATION OF A DELAWARE SERIES LLC.

The creation of series LLC in Delaware is very similar to the normal steps of creating a basic LLC with a few simple, yet important differences, which are:

1. In addition to the certificate of organization, the members must also file a notice of the limitation on liabilities for each series to be formed, this will be kept on file in the office of the Secretary of State of Delaware. The Certificate of Formation must contain a statement that the liability of the LLC is limited by the series arrangement.
2. The operating agreement of the umbrella LLC states how many LLCs will be formed along with how they will ne managed and how the assets and liabilities are treated among the various series.

3. The accounting for series LLC is very important. Creditors of a series will try to get to the assets of the other series using the tactic of "piercing a corporate veil." If the umbrella LLC has not acted as though each series was a separate independent company then the series arrangement could be disregarded for liability purposes. As such, assets must be properly segregated and commingling avoided as such acts would violate the fiction of separate independent divisions under an umbrella LLC. This is basic asset management. It has always been the case that when parent and subsidiary corporate assets are commingled, the distinction between the two is lost. Such settled case law obviously would be applied as well in a series arrangement where assets are commingled to such an extent that their independent character is lost.

USE OF DELAWARE LLC IN OTHER STATES
While a Delaware LLC can be used in any state, including a series LLC, whether the series LLC will be able to segregate its assets in a foreign state to protect them from creditors, as it can in Delaware, is the open question. Time will tell but if the past case law and common sense is a guide the answer is probably no.

It seems improbable that a state, which does not permit its own citizens to operate as a series LLC under its own LLC Act, would allow a foreign series LLC to do so. While a state generally permits a foreign LLC operating in its borders to be governed internally by the operating agreement formed under its home state's law, that does not, in itself, automatically bestow on the LLC the ability to act externally with creditors in a manner inconsistent with its law. For example, the California Corporations Code Section 17450 reads as follows:

"17450. Subject to the provisions of Section 17453:

(a) The laws of the state or foreign	country under which a foreign limited liability company is organized shall govern its organization and internal affairs and the liability and authority of its managers and members.

(b) A foreign limited liability company may not be denied registration by reason of any difference between those laws and the laws of this state".

Under section 17450, a foreign umbrella LLC can quite legally register to do business California. There is no question of that. The question would be whether it can, as part of its business, engage in practices not permitted by California citizens. To that, case law has always answered no in many areas. The constitutional doctrine of full faith and credit has never been construed to mean that just because something is approved in one state that a resident of that state can expect to do the act in another state where it is prohibited. No one should expect automatically be allowed to come into a state and conduct business in a manner contrary to that state's law even if such act is permitted in the person's home state This is a constitutional argument beyond the scope of this course and there is no point in citing authorities both pro and con. The point, to be aware of, is that until a state either through legislation or court decision adopts a series LLC, use of one carries with it a very high risk.

It is more likely to believe that a Delaware umbrella LLC would not be able to operate as a series LLC in California, than it would be accepted. All of its series and divisions would, most likely, be disregarded and combined as one company for the purposes of personal liability for debts. This is consistent with the current state of law which permits both LLC and corporations to engage in any lawful business and to conduct their operations in any lawful means. Since California does not permit its citizens to do business in series LLCs, it would be an obvious denial of substantial due process and equal protection to permit a foreign LLC to do business in a form denied its own citizens. It does not seem reasonable that a court would permit it to be done.

Based upon the high likelihood that a series LLC would not be able to operate as such outside of Delaware, prudence seems to dictate that a Delaware formed series LLC not be used in other states until the law is more settled, at least, for that state. It would be disastrous for a client and possibly malpractice for an attorney to form a Delaware series LLC for use in another state. If the series form is disregarded under the other state's law, all of the assets of all of the series under the LLC would become liable for the debts of one series. This would have been avoided if separate LLC had been formed. An argument would then be made that the attorney should have foreseen the possibility of that result and could foreseeably be found liable for the losses incurred by the other series under the theory of malpractice. Such a result is definitely foreseeable given the current uncertain state of the law. As such, any attorney considering the creation of a Delaware LLC with series that would operate in other states should, as a matter of course, have the client sign an acknowledgment of the risk and the full understanding of the potential liability if the series arrangement is disregarded along with the fact that the separate LLCs would give relief from liability for the debts of the other LLCs.

APPENDIX

STATE LAWS

ALABAMA

CODE OF ALABAMA section 10-12-1

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company if it has
perpetual existence then so state,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by
managers, if so, their names and addresses,

6.	If management is retained by members their names and
addresses of the initial managers,

7.	The right, if any, to continue the business after the
dissociation from it of a member.

8.	The right of the members to admit new members,

9.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the probate judge of the county where the company will have its principal place of business. The judge will forward a certified copy along with a check for $40.00 to the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company but the company will not be given effect until it has at least two members.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

There is a filing fee of $40.00 for the Secretary of State and a fee of $35.00 for the probate judge of the county where the company will have its principal place of business.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Probate Judge.

ALASKA

ALASKA STATUTE 10.50.075

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which cannot exceed
30 years,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed

by the members or by a group of managers and if so, the
names and addresses of the initial managers,

6.	If management is reserved by the members, list names and
addresses of members,

7.	The names and addresses of the organizers,

8.	A statement that the company will have at least two
members upon formation, and

9.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the Articles with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

There is a filing fee set by the Secretary of State at $250.00

There is also a biennial fee of $100.00

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by a majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

ARIZONA

ARIZONA REVISED STATUTES ANNOTATED

SECTIONS 29-601 through 29-857

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	A statement that the company has or will have more than two members upon formation,

4.	The termination date of the company,

5.	The name and address of the registered agent,

6.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

7.	If management is reserved by the members, list names and addresses of members,

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles need not be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company", "ltd. liability company" or "limited company" or the initials "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.00.

OPERATING AGREEMENT

The operating agreement must be in writing and may contain provisions not inconsistent with state law or the Articles of Organization. The Operating Agreement may be amended by the managers if any otherwise by the members.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by one or more managers, if the company is managed by managers or one or more members if managed by members. The amendment must be filed in duplicate with the Secretary of State.

ARKANSAS

STATUTES 4-32-101 through 4-32-1316

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members, and

7.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company. However, there must always be at least two members for the company to remain in effect.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," "ltd. liability company" or "limited company" or the initials "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend the operating agreement is vested in the members.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be approved by a vote of all of members. The amendment must be filed in duplicate with the Secretary of State.

CALIFORNIA

CALIFORNIA CORPORATIONS CODE SECTIONS 17000 ET AL

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which may be
perpetual,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by the members or by a group of managers,

6.	The names and addresses of the organizers, and

7.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct. A Statement of Information must be filed within 90 days of the filing of the Articles. The filing fee for Statement of Information is $10.00.

NUMBER OF MEMBERS

Only one person is necessary to file the Articles of Organization for a limited liability company but the LLC must have at least two members Corporation Code Section 17001(t).

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the initials "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee is $80 plus another $800 as an annual minimum franchise fee.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

COLORADO

COLORADO REVISED STATUTES 7-80-101 through 7-80-913

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The names and addresses of the initial managers, and

6.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company", "ltd. liability company" or "limited company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company are set pursuant to Colorado Revised Statute 24-21-104(3) at $50.00

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by the company's manager. The amendment must be filed in duplicate with the Secretary of State.

CONNECTICUT

CONNECTICUT PA-93-267 Section 42

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by members their names and addresses of the initial managers,

7.	The right, if any, to continue the business after the dissociation from it of a member.

8.	The purpose of the company, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

FEE FOR FORMATION

The fee for filing the Articles of Organization is $60.00.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC"or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

DELAWARE

DELAWARE CODE ANNOTATED

Title 18, Sections 101 through 107

CERTIFICATE OF FORMATION

The Certificate of Formation (Articles) must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The name and address of the registered agent,

4.	The names and addresses of the initial managers, and

5.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct. Verification or acknowledgment is not required.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.00.

There is an annual fee of $100.00

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all the members. The amendment must be filed in duplicate with the Secretary of State.

DISTRICT OF COLUMBIA

DISTRICT OF COLUMBIA CODE ANNOTATED

SECTION 29-1301 ET SEQ.

CERTIFICATE OF FORMATION

The Articles of Organization must contain, at a minimum, the following information:

1.	The company name,

2.	The latest date on which the company will be dissolved,

2.	The principal place of business,

3.	The name and address of the registered agent,

4.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the duplicate Articles with the Mayor.

NUMBER OF MEMBERS

One person may form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name. A professional limited liability company uses the abbreviation PLLC.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.00.

There is an annual fee of $50.00

OPERATING AGREEMENT

The operating agreement need not be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all the members. The amendment must be filed in duplicate with the Mayor.

FLORIDA

FLORIDA STATUTES SECTIONS 608.401 through 608.471

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The total contributions made and agreed to be made,

6.	The right, if any , to admit new members,

7.	The right, if any, to continue the business after the dissociation from it of a member,

8.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

9.	If management is reserved by the members, list names and addresses of members, and

10.	Such other provisions as the members wish to include in the articles.

A limited liability company is formed on the filing of the articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

At least two persons are necessary to form a limited liability company. There must always be at least two members for the company to remain in effect.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.

There is an annual fee of $100.00

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all of the members. The amendment must be filed in duplicate with the Secretary of State.

GEORGIA

STATUTES 14-11-100 through 14-11-1109

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "limited company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $75.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend the operating agreement is vested in the members.

AMENDMENT

The articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be approved by a vote of all of members. The amendment must be filed in duplicate with the Secretary of State.

HAWAII

1995 HI HB 3819

HAWAII LIMITED LIABILITY COMPANY ACT

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, if not perpetual,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members, and

7.	The name and address of each organizer.

8.	A statement as to whether members are to be liable for

the company's debts under section 303(c) of the Act.

A limited liability company is formed on the filing of the articles by the organizer with the Director of Commerce and Consumer Affairs.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," or the initials "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.00. There is an annual report fee of $25.00. An annual report must be filed by June 30 of each year. The annual reports contains the same information as set forth in the Articles.

OPERATING AGREEMENT

The operating agreement, if adopted, must be in writing and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend the operating agreement is vested in the members.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be approved by a vote of all of members. The amendment must be filed in duplicate with the Director of Commerce and Consumer Affairs.

IDAHO

IDAHO LIMITED LIABILITY ACT, TITLE 53, CHAPTER 6

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which may be
perpetual,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members,

7.	The names and addresses of the organizers, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

ILLINOIS

ILLINOIS LEGISLATIVE SERVICE

CH 805 180 SECTIONS 1-1 to 55-10

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The total contributions made and agreed to be made,

6.	The right, if any, to admit new members,

7.	The right, if any, to continue the business after the dissociation from it of a member,

8.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

9.	If management is reserved by the members, list names and addresses of members,

10.	Occurrences agreed to by members which will terminate the company,

11.	Name and address of each organizer,

12.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles need not be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $500.00.

OPERATING AGREEMENT

The operating agreement can be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend operating agreement vested in members unless Articles vest the power in the managers.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be voted approved by 2/3's of the managers unless the Articles specify another number. The amendment must be filed in duplicate with the Secretary of State.

INDIANA

INDIANA STATUTES ANNOTATED sections 23-18-1-1

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company if it does not have a perpetual existence,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses, and

6.	If management is retained by members, their names and addresses, and

7.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The filing fee for the Articles of Organization is $90.00.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

IOWA

IOWA CODE SECTIONS 490A .100 through 490A .1601

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company", "ltd. liability company" or the term "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name. If the company uses a fictitious name it must file a certified copy of a members' resolution adopting the name.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.00.

OPERATING AGREEMENT

The operating agreement must be in writing and may contain provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by the company's manager. The amendment must be filed in duplicate with the Secretary of State.

KANSAS

KANSAS STATUTES ANNOTATED

SECTIONS 17-7601 through 17-7652

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The right, if any, to admit new members,

6.	The right, if any, to continue the business after the dissociation from it of a member,

7.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

8.	If management is reserved by the members, list names and addresses of members, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles are not required to be acknowledged.

NUMBER OF MEMBERS

At least two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $150.00

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must state the location and time of the annual meeting of members and managers.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all of the members. The amendment must be filed in duplicate with the Secretary of State.

KENTUCKY

KENTUCKY STATUTES 275.035 ET AL

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which may be
perpetual,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members,

7.	The names and addresses of the organizers,

8.	A statement that the company will have at least two members upon formation, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $40.00

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

LOUISIANA

LOUISIANA REVISE STATUTES ANNOTATED

Section 12:1301 through 1369

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The business purpose which may include any lawful activity, and

3.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

INITIAL REPORT

Louisiana requires the organizers to file along with the Articles an Initial Report which:

1.	States the location of the registered office,

2.	States the name and address of each registered agent,

3.	Contains a notarized statement of acceptance of each of the registered agents,

4.	States the names and addresses of the first managers, if any, and

5.	States the names and addresses of all the members if the management is reserved to the members.

If the managers or members are not named in the initial report, a supplementary report must be filed.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LC" or "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $60.00.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by the members. The amendment must be filed in duplicate with the Secretary of State.

MAINE

MAINE LIMITED LIABILITY COMPANY ACT, SECTION 622 ET AL

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members,

7.	The names and addresses of the organizers,

8.	The Agent must sign the Articles accepting appointment, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee is set by the Secretary of State at $250.00.

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

MARYLAND

MARYLAND CODE OF CORPORATIONS AND ASSOCIATIONS	SECTIONS 4A -101 through 4A -1103

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The purpose of the company,

3.	The principal place of business,

4.	The name and address of the registered agent, and

5.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name. If the company uses a fictitious name it must file a certified copy of a members' resolution adopting the name. To continue to use the name the company must file a form every five years to show that the company is still in business.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.00.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by unanimous consent of all members. The amendment must be filed in duplicate with the Secretary of State.

MASSACHUSETTS

GENERAL LAWS ANNOTATED 156C SEC. 1 ET AL

CERTIFICATE OF FORMATION

The Certificate must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company if not perpetual

4.	The name and address of the registered agent,

5.	The name and address of each organizer,

6.	Whether the company is to be managed by managers; if so, their names and addresses,

7.	If management is retained by members, their names and addresses,

8.	The general purpose of the company, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Certificate by the organizer with the Secretary of State. Execution of the Certificate constitutes an affirmation under penalty of perjury that the information in the Certificate is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

Both the filing fee and the annual report fee are $500. The information contained in the annual report is the covers the same information in the Certificate of Formation so as to keep the Secretary of State informed as to changes.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain any provisions not inconsistent with state law or the Certificate of Formation. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Certificate may be amended by an authorized manager or member or by the majority consent of all members.

MICHIGAN

Michigan Limited Liability Company Act

Sections 101 through 1103

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members,

7.	The purpose of the company, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company. However, there must always be at least two members for the company to remain in effect.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "limited company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend operating agreement vested in members.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be approved by a vote of all of members. The amendment must be filed in duplicate with the Secretary of State.

MINNESOTA

MINNESOTA REVISED STATUTES

SECTIONS 322B .01 through 322B95

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which cannot be over 30 years,

4.	The name and address of the registered agent,

5.	The name and address of each organizer,

6.	The right, if any, to continue the business after the dissociation from it of a member,

7.	Whether the members have a right to enter into a business continuation agreement,

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles need not be acknowledged.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC" or "professional limited liability company" or the term "PLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $135.00.

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all of the members. The amendment must be filed in duplicate with the Secretary of State.

MISSISSIPPI

MISSISSIPPI LIMITED LIABILITY COMPANY ACT

SECTION 79-29-101 ET SEQ

CERTIFICATE OF FORMATION

The Certificate must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The name and address of each organizer,

6.	Whether the company is to be managed by managers; if so, their names and addresses,

7.	If management is retained by members, their names and addresses, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Certificate by the organizer with the Secretary of State. Execution of the Certificate constitutes an affirmation under penalty of perjury that the information in the Certificate is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee is set by the Secretary of State at $50.00.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain

any provisions not inconsistent with state law or the Certificate of Formation. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Certificate may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

MISSOURI

MISSOURI CODE selection 359.710

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company if it has perpetual existence then so state,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by the members, their names and addresses,

7.	The right, if any, to continue the business after the dissociation from it of a member,

8.	The right of the members to admit new members,

9.	The purpose of the company,

10.	The name and address of the organizers, and

11.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "limited company" or the terms "LC" or "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

There is a filing fee of $100.00 for the Secretary of State.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

MONTANA

Statutes 35-8-101-through 35-8-1307

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members,

7.	If a professional limited liability company is formed then the profession must be stated,

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "limited company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $70.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend the operating agreement is vested in members by a majority vote.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be approved by a vote of all of the members. The amendment must be filed in duplicate with the Secretary of State.

NEBRASKA

NEBRASKA LIMITED LIABILITY COMPANY ACT

LB 121, 1993, Sec. 1-45

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination (cannot exceed 30 years),

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by members, their names and addresses,

7.	The purpose of the company,

8.	The name and address of the organizers,

9.	The total contributions made and agreed to be made,

10.	The right, if any, to admit new members,

11.	The right, if any, to continue the business after the dissolution from it of any member, and

12.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

The company must have at least two members.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by a majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

FILING FEE

The filing fee is based on the amount of capital raised. Under $50,000, the filing fee is $100. Between $50,000 and $100,000, the filing fee is $200. For capital over $100,000, the fee is $200 plus $2 for each $1,000 raised.

NEVADA

NEVADA REVISED STATUTES 86.011 through 86.571

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	As of October 1997, an LLC may have perpetual existence,

4.	The name and address of the registered agent,

5.	The rights and terms of adding new members,

6.	The right, if any, to continue the business after the dissociation from it of a member,

7.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

8.	If management is reserved by the members, list names and addresses of members, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

As of October 1997, a LLC needs only one member to be validly formed.

NAME OF THE COMPANY

The name of the company must contain the words "limited company." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $125.00

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all of the members. The amendment must be filed in duplicate with the Secretary of State.

NEW HAMPSHIRE

NEW HAMPSHIRE REVISED STATUTES ANNOTATED

SECTION 304C:1

CERTIFICATE OF FORMATION

The Certificate of Formation must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company,

4.	The name and address of the registered agent,

5.	The purpose of the company, and

6.	Such other provisions as the members wish to include in the Certificate of Formation.

A limited liability company is formed on the filing of the Certificate of Formation with the Secretary of State. Execution of the Certificate of Formations constitutes an affirmation under penalty of perjury that the information in the Certificate of Formation is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a Certificate of Formation is $35.00.

There is an annual fee of $100.00.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Certificates of Formation may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

NEW JERSEY

NEW JERSEY LIMITED LIABILITY COMPANY ACT

1992 N.J. S.B. 890 CH. 210

CERTIFICATE OF FORMATION

The Certificate of Formation must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company,

4.	The name and address of the registered agent,

5.	A statement that the company will have at least two members upon formation, and,

6.	Such other provisions as the members wish to include in the Certificate of Formation.

A limited liability company is formed on the filing of the Certificate of Formation with the Secretary of State. Execution of the Certificate of Formations constitutes an affirmation under penalty of perjury that the information in the Certificate of Formation is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a Certificate of Formation is $100.00.

OPERATING AGREEMENT

The operating agreement must be written and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Certificates of Formation may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

NEW MEXICO

NEW MEXICO STATUTES ANNOTATED SECTION 53-19-1

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company if it has perpetual existence then so state,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by the members, their names and addresses of the initial managers,

7.	The name and address of the organizers, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," "limited company" or "ltd. liability company." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The filing fee for the Articles of Organization is $50.00.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

NEW YORK

CHAPTER 34 CONSOLIDATED LAWS, SECTION 206 ET AL

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company, which may be perpetual,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by the members, their names and addresses of the initial managers,

7.	The name and address of the organizers,

8.	The Secretary of State must be named as Agent for Service of Process, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The filing fee is set by the Secretary of State at $200.00

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

NORTH CAROLINA

NORTH CAROLINA CODE SECTION 57C -1-01

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by members, their names and addresses,

7.	The purpose of the company,

8.	The names and address of the organizers, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

FEE FOR FORMATION

The fee for forming an Limited Liability Company is $100.00.

There is an annual fee of $100.00.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," "ltd. liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members. An annual report must be filed with the Secretary of State.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

NORTH DAKOTA

NORTH DAKOTA CODE SECTION 10-32-04

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company which cannot exceed 30 years,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by the members, their names and addresses,

7.	The name and address of the organizers,

8.	The right of the members to continue the company on the death, resignation or withdrawal of a member,

9.	The right of the members to enter into a business continuation agreement,

10.	A statement that the company will have at least two
members upon formation, and

11.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company. If the number of members falls below two, then the company terminates.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC" or "PLC" for a professional limited liability company. The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The filing fee for the Articles of Organization is $125.00.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

OHIO

OHIO LIMITED LIABILITY COMPANY ACT S.B. 74

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company, which may be perpetual,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by members, their names and addresses,

7.	The names and address of the organizers, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," or the terms "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FILING FEE

The fee is set by the Secretary of State at $85.00. There is an annual fee of $30.00.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members. An annual report must be filed with the Secretary of State.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

OKLAHOMA

OKLAHOMA STATUTES Title 18, Sections 2000 through 2060

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The purpose of the company,

3.	The principal place of business,

4.	The date of termination of the company,

5.	The name and address of the registered agent, and

6.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC"or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

OREGON

OREGON REVISED STATUTES SECTION 63.001

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination for the company; if perpetual then so state,

4.	The name and address of the registered agent,

5.	Statement whether the company is to be managed by managers, if so, their names and addresses,

6.	If management is retained by members, their names and addresses,

7.	The names and address of the organizers, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

FEES OF FORMATION

The filing fee for the Articles of Organization is $40.00.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members. An annual report must be filed with the Secretary of State.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

PENNSYLVANIA

15 PA. CSA Section 8901 ET SEQ.

CERTIFICATE OF ORGANIZATION

The Certificate must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	Id a members's interest is to be evidenced by a certificate of membership, a statement to that effect.

4.	If the effective date of the company is other than
immediately, the hour and day the Certificate of
Organization will become effective.

5.	If the company is to be a restricted professional
company, a statement to that effect, including a brief	description of the professional service or services to	be rendered.

6.	The name and address of the registered agent,

7.	Statement whether the company is to be managed by managers, if so, their names and addresses,

8.	The names and address of the organizers, and

9.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

FEES OF FORMATION

The fee for forming a limited liability company is $100.00.

There is an annual fee of $300.00.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members. An annual report must be filed with the Secretary of State.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

RHODE ISLAND

RHODE ISLAND GENERAL LAWS

SECTIONS 7-16-1 through 7-16-75

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	A statement that there will be at least two members after formation,

3.	The principal place of business,

4.	The date of termination of the company,

5.	The name and address of the registered agent, and

6.	Whether the members intend to have the company taxed as a corporation or partnership, and

7.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Two persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $150.00.

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

SOUTH CAROLINA

SOUTH CAROLINA CODE 33-43-101 ET SEQ.

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which may be

perpetual,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	The names and addresses of the organizers,

7.	A statement that the company will have at least two members upon formation,

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC" or "LC". The name of the company may not be deceptively similar to that of another limited liability company or any registered name. A professional LLC is permitted.

FEES FOR FORMATION

The fee for filing the Articles is $110.00

OPERATING AGREEMENT

The operating agreement may be oral or in writing and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

SOUTH DAKOTA

Statutes 47-34-1 through 47-34-59

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The total contributions made and agreed to be made,

6.	The right, if any , to admit new members,

7.	The right, if any, to continue the business after the dissociation from it of a member,

8.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

9.	If management is reserved by the members, list names and addresses of members, and

10.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

At least two persons are necessary to form a limited liability company. There must always be at least two members for the company to remain in effect.

NAME OF THE COMPANY

The name of the company must contain the words "limited company." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $50.

There is an annual fee of $50.00.

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all of the members. The amendment must be filed in duplicate with the Secretary of State.

TENNESSEE

TENNESSEE LIMITED LIABILITY COMPANY ACT

48A -1-101 ET SEQ

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, which may be
perpetual,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is retained by the members, their names and addresses,

7.	The names and addresses of the organizers,

8.	A statement that the company will have at least two members upon formation,

9.	The number of members upon formation,

10.	What power, if any, to expel members,

11.	Whether there are preemptive rights in a contribution or allowance agreement, and

12.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

At least two persons are necessary to form a limited liability company. There must always be at least two members for the company to remain in effect.

NAME OF THE COMPANY

The name of the company must contain the words "limited company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee is set by the Secretary of State at the rate of $50.00 per member with a minimum fee of $300 and a maximum fee of $3,000.

OPERATING AGREEMENT

The operating agreement may be oral or in writing and may contain any provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted by the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or by the majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

TEXAS

TEXAS REVISED CIVIL STATUTES ANNOTATED

ART. 1528n , arts. 1.01 through 9.02

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The purpose of the company,

3.	The principal place of business,

4.	The date of termination of the company which may be perpetual,

5.	The name and address of the registered agent,

6.	Statement whether the company is to be managed by managers, if so, their names and addresses, and

7.	If management is reserved by the members, list names and addresses of members, and

8.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct. There is no requirement that the Articles be acknowledged.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company. There is no requirement that the company maintain more than one member to stay in existence.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "limited" or the terms, "Ltd" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $200.00.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

UTAH

UTAH CODE ANNOTATED

Sections 48 -2B -101 through 48 -2B -157

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The purpose of the company,

3.	The principal place of business,

4.	The date of termination of the company,

5.	The name and address of the registered agent,

6.	The signed acceptance by the registered agent,

7.	A statement that the Division of Corporation will be the substituted registered agent in the event that the registered agent cannot be found or served,

8.	Statement whether the company is to be managed by managers, if so, their names and addresses, and

9.	If management is retained by the members, their names and addresses, and

10.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct. There is no requirement that the Articles be acknowledged.

NUMBER OF MEMBERS

Two or more persons are necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or "limited" or the term "LC." The company cannot use the terms association, corporation, limited partnership or limited in its name. The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $75.00.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

VERMONT

VERMONT STATUTES ANNOTATED

TITLE 21 SECTIONS 3001-3162

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company, if not perpetual,

4.	The name and address of the registered agent,

5.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

6.	If management is reserved by the members, list names and addresses of members, and

7.	The name and address of each organizer.

8.	A statement as to whether members are to be liable for

the company's debts under section 3043 of the Act.

A limited liability company is formed on the filing of the articles by the organizer with the Secretary of State.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company," or the initials "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $75.00.

OPERATING AGREEMENT

An operating agreement may be adopted by the members and may contain provisions not inconsistent with state law or the Articles of Organization. Power to amend the operating agreement is vested in the members.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by the managers. Amendments must be approved by a vote of all of members. The amendment must be filed in duplicate with the Secretary of State.

VIRGINIA

CODE OF VIRGINIA ANNOTATED

SECTIONS 13.1-1000 through 13.1-1093

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company,

4.	The name and address of the registered agent, and

5.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct. No verification or acknowledgment is required.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name cannot contain the words corporation, incorporated, partnership or limited partnership or any abbreviation thereof. The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by a majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

WASHINGTON

WASHINGTON LIMITED LIABILITY ACT

CH 211, ET SEQ, TITLE 25 RCW

CERTIFICATE OF FORMATION

The Certificate must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The date of termination of the company,

4.	The name and address of the registered agent, and

5.	Statement whether the company is to be managed by managers, if so, their names and addresses, and

6.	If management is retained by the members, their names and addresses,

7.	The names and addresses of the organizers, and

8.	Such other provisions as the members wish to include in the Certificate.

A limited liability company is formed on the filing of the Certificate by the organizer with the Secretary of State. Execution of the Certificate constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the term "LLC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee is set by the Secretary of State is $75.00. There is an annual fee of $10.00.

OPERATING AGREEMENT

The operating agreement may be either oral or written and may contain provisions not inconsistent with state law or the Certificate of Formation. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Certificate may be amended by an authorized manager or member or by a majority consent of all members. The amendment must be filed in duplicate with the Secretary of State.

WEST VIRGINIA

WEST VIRGINIA CODE SECTIONS 31 -1A -1 through 31 -1A -69

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The purpose of the business,

4.	The date of termination of the company,

5.	The name and address of the registered agent, and

6.	Such other provisions as the members wish to include in the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. An acknowledgment of the Articles is required. West Virginia is the only state which requires the company to record the articles in the county where the company has its principal office. (Maryland also has a recordation requirement but the Secretary of State does the filing there). The fine for not recording is $1,000.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company." The name cannot contain the words corporation, incorporated, partnership or limited partnership or any abbreviation thereof. The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.00

OPERATING AGREEMENT

The operating agreement can be either oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

WISCONSIN

WISCONSIN LIMITED LIABILITY COMPANY ACT 112, CH. 183

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The name and address of the registered agent,

4.	Statement whether the company is to be managed by managers,

5.	The names and address of the organizers,

6.	A statement that the company is formed under Ch. 183 of the Wisconsin Limited Liability Company Act, and

7.	Other provisions that the members may wish to include in
the Articles must go instead in the Operating Agreement.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. Execution of the Articles constitutes an affirmation under penalty of perjury that the information in the Articles is true and correct.

NUMBER OF MEMBERS

Only one person is necessary to form a limited liability company.

FEES FOR FORMATION

The fee for forming a limited liability company is $130.00.

NAME OF THE COMPANY

The name of the company must contain the words "limited liability company" or the terms "LLC" or "LC." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

OPERATING AGREEMENT

The operating agreement may be oral or written and may contain provisions not inconsistent with state law or the Articles of Organization. The operating agreement must be adopted with the unanimous consent of all members.

AMENDMENT

The Articles may be amended by an authorized manager or member or with the majority consent of all the members. The amendment must be filed in duplicate with the Secretary of State.

WYOMING

WYOMING STATUTES Sections 17-15-101 through 17-15-136

ARTICLES OF ORGANIZATION

The Articles must contain, as a minimum, the following information:

1.	The company name,

2.	The principal place of business,

3.	The termination date of the company,

4.	The name and address of the registered agent,

5.	The total contributions made and agreed to be made,

6.	The right, if any, to admit new members,

7.	The right, if any, to continue the business after the dissociation from it of a member,

8.	Whether the company is to be managed by the members or by a group of managers and if so, the names and addresses of the initial managers,

9.	If management is reserved by the members, list names and addresses of members, and

10.	Such other provisions as the members wish to include in
the Articles.

A limited liability company is formed on the filing of the Articles by the organizer with the Secretary of State. The articles must be acknowledged.

NUMBER OF MEMBERS

At least two persons are necessary to form a limited liability company. There must always be at least two members for the company to remain in effect.

NAME OF THE COMPANY

The name of the company must contain the words "limited company." The name of the company may not be deceptively similar to that of another limited liability company or any registered name.

FEES FOR FORMATION

The fee for forming a limited liability company is $100.00. There is an annual fee of $100.00.

OPERATING AGREEMENT

The operating agreement must be in writing and may contain any provisions not inconsistent with state law or the Articles of Organization.

AMENDMENT

The Articles may be amended by filing an amendment signed and acknowledged by all of the members. The amendment must be filed in duplicate with the Secretary of State.

LIMITED LIABILITY COMPANY

INDEX

AFTERWARDS	315

Amendment of the Articles . . . . . . . . . . . . . . . . .322

Annual Statement	.318

Employer identification number	316

Estimated tax	327

Fictitious name filing	321

Personal property taxes	318
Sales and Use taxes	. . . . . . . . . . . . . . . . . . .318

State and business licenses	315,316

Unemployment Insurance	321

Unemployment tax	322

Workers Compensation	321

Withholding	319

ARTICLES OF ORGANIZATION	6,8,40,63

Agent for Service	161

Basic articles for GEORGIA, IOWA, MARYLAND,

OKLAHOMA, VIRGINIA, and WEST VIRGINIA	175

Basic articles for ALASKA, ARIZONA, ARKANSAS,

DISTRICT OF COLUMBIA, HAWAII, INDIANA,

KENTUCKY, MAINE, MICHIGAN, MONTANA, NEW MEXICO,

N. CAROLINA, OHIO, OREGON, S. CAROLINA, TEXAS

VERMONT and UTAH	180

Basic Articles for NEBRASKA,

SOUTH DAKOTA, WYOMING	192

Basic Articles for DELAWARE, LOUISIANA, MASSACHUSETTS,
MISSISSIPPI, NEW HAMPSHIRE, NEW JERSEY, PENNSYLVANIA,

RHODE ISLAND and WASHINGTON	207

Basic Articles for ALABAMA, CONNECTICUT,

ILLINOIS, KANSAS, MINNESOTA, MISSOURI,

NEVADA, NORTH DAKOTA and WISCONSIN	245

Basic Articles for CALIFORNIA and IDAHO	275

Basic Articles for COLORADO	262

Basic Articles for FLORIDA	264

Basic Articles for NEW YORK	266

Basic Articles for TENNESSEE	269

Generic Set of Articles . . . . . . . . . . . . . . . . . 167

CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .158

NAME . . . . . . . . . . . . . . . . . . . . . . . . . . .158

NUMBER OF MEMBERS	46, 160

ORGANIZERS	158

PURPOSE	159

TERM	161

WHERE TO FILE	161

BULK SALES	113

CAPITAL CONTRIBUTIONS	103

Amount	105

Form	106

Share in profits and losses	103

COMMON QUESTIONS	4

Alter-Ego	15
Annual Statement	31

Articles of Organization	8

Amendment	33

Bulk Sale	22

Definition . . . . . . . . . . . . . . . . . . . . . . . . .4	Differences from corporations and partnerships
16

Taxation	17
Dissolution	23

Proceeds	24

Formation	6,12

Cost	14

Limited Liability	13

Members	9

Duties	11

Managers	10

Meetings	8

Membership Certificates	13,26

Name	6,63

Fictitious Name	32

Operating Agreements	26

Registered Agent and Office	7

Security Registration	25

State licenses	28

Taxation	20

Accumulated earnings credit	21

Estimated tax	29

Liability of Members	14,27

Personal Property Tax	30

Property	20

Sales and Use Tax	31

DEBTS OF PRIOR BUSINESS	22,53

DEFINITION	34

DISSOLUTION	54,349

Procedure	351

Termination Agreement	354

DISTRIBUTION	107

Form and Share	108

Wrongful	109

FILING FEES	64

FORM 8832	48.70, 421

FORMATION	38,59

LAWSUITS	57

LIMITED LIABILITY	97

Alter-Ego	100

In states not having limited liability companies	102

Liability imposed by law	98

MEMBERS	28,45,324

Agreements	324,326

Buy-Sell	324,327

Life Insurance	342,344

Medical Reimbursement Plan	332,339

Membership Certificates	47,65, 426

NAME	32,61

OPERATING AGREEMENT	281

Adoption	282

Construction	284

Definition	281

Location	285

Waiver	285

OTHER STATES	110

Foreign limited liability companies	110

REGISTERED AGENT AND OFFICE	162,319

SECURITY LAWS	48,119

Federal Exemption	120

Intra-state	120

Regulation D	121

State Exemption	135

Subscription Agreement	141

TAXATION	50,68

As either corporation or partnership	68

As partnership	79
Basis for property	92

Capital gains and losses	90

Casualty Losses	93

Debt cancellation	89

Depreciation	87

Like-Kind Exchange	92

Membership interest	83

Not for profit activities	88

Passive activity losses	85

Rental Income	84

State Taxation	95

Test for treatment	73

Theft losses	94

Treatment of property	82

448 1-97	3997-25-43

Form 8832

(December 1996)

Department of the Treasury

Internal Revenue Service

Entity Classification Election

OMB No. 1545-1576

Name of entity	Employer Identification number ( EIN )
Please

Type	Number, street, and room or suite no. If a P.O. Box, see instructions

or

Print	City or town, state, and ZIP code. If a foreign address, enter city, province or state, postal code and country.
1	Type of election (see instructions):
a	Initial classification by a newly-formed entity (or change in current classification of an existing entity to take effect on

January 1, 1997)
b	Change in current classification (to take effect later than January 1, 1997)
2	Form of entity (see instructions):
a	A domestic eligible entity electing to be classified as an association taxable as a corporation.
b	A domestic eligible entity electing to be classified as a partnership.
c	A domestic eligible entity with a single owner electing to be disregarded as a separate entity.
d	A foreign eligible entity electing to be classified as an association taxable as a corporation.
e	A foreign eligible entity electing to be classified as a partnership.
f	A foreign eligible entity with a single owner electing to be disregarded as a separate entity.
3.	Election is to be effective beginning (month, day, year) (see instructions) . . . . . . . . . . . . .	/ /
4.	Name and title of persom whom the IRS may call for more information	5.	That person's telephone number

Consent Statement and Signature(s) (see instructions)
Under penalties of perjury, I (we) declare that I (we) consent to the election of the above-named entity to be classified as indicated above, and that

I (we) have examined this consent statement, and to the best of my (our) knowledge and belief, it is true, correct, and complete. If I am an officer,

manager, or member signing for all members of the entity, I further declare that I am authorized to execute this consent statement on their behalf.
Signature(s)	Date	Title

For Paperwork Reduction Act Notice, see page 2.	Cat. No. 22598R	Form 8832 (12-96)

3997-25-44	448 1-97

Form 8832 (12-96)	Page 2

General Instructions

Section references are to the

Internal Revenue Code unless

otherwise noted.

Paperwork Reduction Act

Notice

We ask for the information on this

form to carry out the Internal

Revenue laws of the United States.

You are required to give us the

information. We need it to ensure

that you are complying with these

laws and to allow us to figure and

collect the right amount of tax.

You are not required to provide

the information requested on a form

that is subject to the Paperwork

Reduction Act unless the form

displays a valid OMB control

number. Books or records relating to

a form or its instructions must be

retained as long as their contents

may become material in the

administration of any Internal

Revenue law. General, tax returns

and return information are

confidential, as required by section

6103.

The time needed to complete and

file this form will vary depending on

individual circumstances. The

estimated average time is:

Recordkeeping . . . .1 hr., 20 min.

Learning about the

law or the form . . . .1 hr., 41 min.

Preparing and sending

the form to the IRS . . . . .17 min.

If you have comments concerning

the accuracy of these time

estimates or suggestions for making

this form simpler, we would be

happy to hear from you. You can

write to the Tax Forms committee,

Western Area Distribution Center,

Rancho Cordova, CA 95473-0001.

DO NOT send the form to this

address. Instead, see Where To File

on page 3.

Purpose of Form

For Federal tax purposes, certain

business entities automatically are

classified as corporations. See items

1 and 3 through 8 under the

definition of corporation on this

page. Other business entities may

choose how they are classified for Federal tax purposes. Except for a

business entity automatically

classified as a corporation, a

business entity with at least two

members can choose to

be classified as either an association

taxable as a corporation or a

partnership, and a business entity

with a single member can choose to

be classified as either an association

taxable as a corporation or

disregarded as an entity separate

from its owner.

Generally, an eligible entity that

does not fit this form will be

classified under the default rules

described below. An eligible entity

that chooses not to be classified

under the default rules or that

wishes to change its current

classification must file Form 8832 to

elect a classification. The IRS will

use the information entered on this

form to establish the entity's filing

and reporting requirements for

Federal tax purposes.

Default Rules

Existing entity default rule.--

Certain domestic and foreign entities

that are already in existence before

January 1, 1997, and have an

established Federal tax

classification, generally do not need

to make an election to continue that

classification. However, for an

eligible entity with a single owner

that claimed to be a partnership

under the law in effect before

January 1, 1997, that entity will now

be disregarded as an entity separate

from its owner. If an existing entity

decides to change its classification,

it may do so subject to the rules in

Regulations section 301.7701- 3(c)(1)(iv). A foreign eligible entity is

treated as being in existence prior to

the effective date of this section only

if the entity's classification is

relevant at any time during the 60

months prior to January 1, 1997.

Domestic default rule.--Unless an

election is made on Form 8832, a

domestic eligible entity is:

1. A partnership if it has two or

more members.

2. Disregarded as an entity

separate from its owner if it has a

single owner.

Foreign default rule.--Unless an

election is made on Form 8832, a

foreign eligible entity is:

1. A partnership if it has two or

more members and at least one

member does not have limited

liability.

2. An association if all members

have limited liability.

3. Disregarded as an entity

separate from its owner if it has a

single owner that does not have

limited liability.

Definitions

Business entity.--A business entity

is any entity recognized for Federal

tax purposes that is not properly

classified as a trust under

Regulations section 301.7701-4 or

otherwise subject to special

treatment under the Code. See

Regulations section 301.7701-2(a).

Corporation.--For Federal tax

purposes, a corporation is any of the

following:

1. A business entity organized

under a Federal or state statute, or

under a statute of a federally

recognized Indian tribe. If the statute

describes or refers to the entity as

incorporated or as a corporation,

body corporate, or body politic.

2. An association (as determined

under Regulations section

301.7701-3).

3. A business entity organized

under a state statute. If the statute

describes or refers to the entity as a

joint-stock company or joint-stock

association.

4. An insurance company.

5. A state-chartered business

entity conducting banking activities.

If any of its deposits are insured

under the Federal Deposit Insurance

Act, as amended, 12 U.S.C. 1811 et

seq., or a similar Federal statute.

6. A business entity wholly owned

by a state or any political

subdivision thereof.

7. A business entity that is taxable

as a corporation under a provision of

the Code other than section

7701(a)(3).

8. A foreign business entity listed

in Regulations section

301.7701-2(b)(8). However, a foreign business entity listed in those

regulations generally will not be

treated as a corporation if all of the following apply:

a. The entity was in existence on

May 8, 1996.

448 1-97	3997-25-45

Form 8832 (12-96)	Page 3

b. The entity's classification was

relevant (as defined below) on May

8, 1996.

c. No person (including the entity)

for whom the entity's classification

was relevant on May 8, 1996, treats

the entity as a corporation for

purposes of filing that person's

Federal income tax returns,

information returns, and withholding

documents for the tax year including

May 8, 1996.

d. Any change in the entity's

claimed classification within the 60

months prior to May 8, 1996, was a

result of a change in the

organizational documents of the

entity, and the entity and all

members of the entity recognized

the Federal tax consequences of

any change in the entity's

classification within the 60 months

prior to May 8, 1996.

e. The entity had a reasonable

basis (within the meaning of section

6662) for treating the entity as other

than a corporation on May 8, 1996.

f. Neither the entity nor any

member was notified in writing on or

before May 8, 1996, that the

classification of the entity was under

examination (in which case the

entity's classification will be

determined in the examination).

Binding contract rule.--If a

foreign business entity described in

Regulations section

301.7701-2(b)(8)( i ) is formed after

May 8, 1996, under a written binding

contract (including an accepted bid

to develop a project) in effect on

May 8, 1996, and all times

thereafter, in which the parties

agreed to engage (directly or

indirectly) in an active and

substantial business operation in the

jurisdiction in which the entity is

formed. 8 on page 2 is applied by

substituting the date of the entity's

formation for May 8, 1996.

Eligible entity.--An eligible entity is

a business entity that is not included in items 1 or 3 through 8 under the

definition of corporation on page 2.

Limited liability.--A member of a

foreign eligible entity has limited

liability if the member has no

personal liability for any debts of or

claims against the entity by reason

of being a member. This

determination is based solely on the

statute or law under which the entity

is organized (and, if relevant, the

entity's organizational documents). A

member has personal liability if the

creditors of the entity may seek

satisfaction of all or any part of the

debts or claims against the entity

from the member as such. A

member has personal liability even if

the member makes an agreement

under which another person

(whether or not a member of the

entity) assumes that liability or

agrees to indemnify that member for

that liability.

Partnership.--A partnership is a

business entity that has at least two

members and is not a corporation

as defined on page 2.

Relevant.--A foreign eligible entity's

classification is relevant when its

classification affects the liability of

any person for Federal tax or

information purposes. The date the

classification of a foreign eligible

entity is relevant is the date an event

occurs that creates an obligation to

file a Federal tax return, information

return, or statement for which the

classification of the entity must be

determined.

Effect of Election

The resulting tax consequences of a

change in classification remain the

same no matter how a change in

entity classification is achieved. For

example, if an organization classified

as an association elects to be

classified as a partnership, the

organization and its owners must

recognize gain, if any, under the

rules applicable to liquidators of

corporations.

Who Must File

File this form for an eligible entity

that is one of the following:

• A domestic entity electing to be

classified as an association taxable

as a corporation.

• A domestic entity electing to

change its current classification

(even if it is currently classified

under the default rule).

• A foreign entity that has more than

one owner, all owners have limited

liability, and it elects to be classified

as a partnership.

• A foreign entity that has at least

one owner without limited liability,

and it elects to be classified as an

association taxable as a corporation.

• A foreign entity with a single

owner having limited liability, and it

elects to have the entity disregarded

as an entity separate from its owner.

• A foreign entity electing to change

its current classification (even if it is

currently classified under the default

rule).

Do not file this form for an eligible

entity that is:

• Tax-exempt under section 501(a).

or

• A real estate investment trust

(REIT), as defined in section 856.

When to File

See the instructions for line 3.

Where to File

File Form 8832 with the Internal

Revenue Service Center,

Philadelphia, PA 19255. Also attach

a copy of Form 8832 to the entity's

Federal income tax or information

return for the tax year of the

election. If the entity is not required

to file a return for that year, a copy

of its Form 8832 must be attached

to the Federal income tax or

information returns of all direct or

indirect owners of the entity for the

tax year of the owner that includes

the date on which the election took

effect. Although failure to attach a

copy will not invalidate an otherwise

valid election, each member of the

entity is required to file returns that

are consistent with the entity's

election. In addition, penalties may

be assessed against persons who

are required to, but who do not,

attach Form 8832 to their returns.

Other penalties may apply for filing

Federal income tax or information

returns inconsistent with the entity's

election.

3997-25-46	448 1-97

Form 8832 (12-96)	Page 4

Specific Instructions

Employer Identification

Number (EIN)

Show the correct EIN on Form 8832.

If the entity does not have an EIN, it

generally must apply for one on

Form SS-4, Application for

Employer Identification Number. If

the filing of Form 8832 is the only

reason the entity is applying for an

EIN, check the "Other" box on line 9

of Form SS-4 and write "Form

8832" to the right of that box. If the

entity has not received an EIN by

the time Form 8832 is due, write

"Applied for" in the space for the

EIN. Do not apply for a new EIN for

an existing entity that is changing its

classification. If you are electing to

disregard an entity as separate from

its owner, enter the owner's EIN.

Address

Include the suite, room, or other unit

number after the street address. If

the Post Office does not deliver mail

to the street address and the entity

has a P.O. box, show the box

number instead of the street

address.

Line 1

Check box 1a if the entity is

choosing a classification for the first

time and the entity does not want to

be classified under the applicable

default classification. Do not file this

form if the entity wants to be

classified under the default rules.

Check box 1b if the entity is

changing its current classification to

take effect later than January 1,

1997, whether or not the entity's

current classification is the default

classification. However, once an

eligible entity makes an election to

change its classification (other than

an election made by an existing

entity to change its classification as

of January 1, 1997), the entity

cannot change its classification by

election again during the 60 months

after the effective date of the

election. However, the IRS may

permit (by private letter ruling) the

entity to change its classification by

election within the 60-month period

if more than 50% of the ownership

interests in the entity as of the

effective date of the election are

owned by persons that did not own

any interests in the entity on the

effective date of the entity's prior

election.

Line 2

Check the appropriate box if you are

changing a current classification (no

matter how achieved), or are

electing out of a default

classification. Do not file this form if

you fall within a default classification

that is the desired classification for

the new entity.

Line 3

Generally, the election will take

effect on the date you enter on line

3 of this form or on the date filed if

no date is entered on line 3.

However, an election specifying an

entity's classification for Federal tax

purposes can take effect no more

than 75 days prior to the date the

election is filed, nor can it take

effect later than 12 months after the

date on which the election is filed. If

line 3 shows a date more than 75

days prior to the date on which the

election is filed, the election will take

effect 75 days before the date it is

filed. If line 3 shows an effective

date more than 12 months from the

filing date, the election will take

effect 12 months after the date the

election was filed.

Regardless of the date filed, an

election will in no event take effect

before January 1, 1997.

Consent Statement and

Signatures

Form 8832 must be signed by:

1. Each member of the electing

entity who is an owner at the time

the election is filed; or

2. Any officer, manager, or

member of the electing entity who is

authorized (under local law or the

organizational documents) to make

the election and who represents to

having such authorization under

penalties of perjury.

If an election is to be effective for

any period prior to the time it is

filed, each person who was an

owner between the date the election

is to be effective and the date the

election is filed, and who is not an

owner at the time the election is

filed, must also sign.

If you need a continuation sheet

or use a separate consent

statement, attach it to Form 8832.

The separate consent statement

must contain the same information

as shown on Form 8832.

MEMBERSHIP CERTIFICATE

OF

A LIMITED LIABILITY COMPANY

THIS MEMBERSHIP CERTIFICATE acknowledges that

Owns a

Percent ( ) MEMBERSHIP INTEREST in

a Limited Liability

Company formed under the laws of the State of

.

DATED: MANAGING MEMBERS

________________________