From the LLC Handbook
Within this glossary are law terms commonly used in connection with limited liability companies.
Administrative Dissolution — Dissolution of a limited liability company by an act of the state department in charge of business entities, caused by the LLC’s failure to comply with certain statutory requirements.
Agent for Service of Process — An agent, required to be appointed by a limited liability company, whose authority is limited to receiving process issued against the limited liability company. Also known as a registered agent or a resident agent.
Amendment — An addition to, deletion from, or a change of existing provisions of the articles of organization or operating agreement of a limited liability company.
Annual Report — A required annual filing in a state, giving information about the limited liability company.
Application for Certificate of Authority — The name of the form filed in many states to register a limited liability company to transact business as a foreign limited liability company. Known in some states as an application for registration.
Articles of Organization — The title of the document filed in many states to create a limited liability company.
Assumed Name — A name other than the true name, under which a limited liability company conducts business. Also referred to as a fictitious name or a trade name.
Cancellation — The statutory procedure whereby a foreign limited liability company obtains the consent of a state to terminate its authority to transact business there.
Certificate of Good Standing — Certificate issued by a state official as conclusive evidence that a limited liability company is in existence or authorized to transact business in the state. Also known as a certificate of existence.
Check-the-Box Rule — Federal tax regulation under which an unincorporated organization is taxed by default, like a partnership or sole proprietorship, but that allows the organization to elect to be taxed like a corporation.
Constituent — A party to a transaction; a limited liability company involved in a merger.
Conversion — A transaction in which one type of business entity becomes a different type of business entity.
Corporation — An artificial entity created under and governed by the laws of its state of incorporation.
Derivative Suit — A lawsuit brought by a member on behalf of a limited liability company to protect the limited liability company from wrongs committed against it.
Dissenters’ Rights — A right granted to members that entitles them to have their membership interest appraised and purchased by the limited liability company if it enters into certain transactions of which they do not approve. Also known as appraisal rights.
Distribution — A transfer of money or other property made by a limited liability company to a member.
Fictitious Name — A name a foreign limited liability company must register under if its true name is unavailable for use in a foreign state.
Fiduciary Relationship — Relationship in which one party (the fiduciary) must act in good faith and with due regard to the best interests of the other party or parties.
Franchise Tax — A privilege tax levied upon a limited liability company’s right to exist or do business as a limited liability company in a particular state.
Indemnification — Financial protection provided by a limited liability company to its members and managers against expenses and liabilities incurred by them in lawsuits alleging that they breached their duty in their service to or on behalf of the LLC.
Limited Liability Company — A statutory entity formed under the Limited Liability Company Act of one state, containing some of the features of a corporation and some of the features of a partnership.
Limited Liability Limited Partnership — A limited partnership in which the general partners do not have unlimited liability for the limited partnership’s debts and liabilities.
Limited Liability Partnership — A general partnership that registers with a state and whose partners do not have unlimited liability for the partnership’s debts and liabilities.
Limited Partnership — A statutory form of partnership consisting of general partners who manage the business and are liable for its debts, and limited partners who invest in the business and have limited liability.
Management — The members of a member-managed limited liability company or the managers of a manager-managed limited liability company.
Managers — The individuals appointed or elected to manage a manager-managed limited liability company.
Members — The holders of ownership interests in a limited liability company.
Merger — The statutory combination of two or more business entities in which one of the business entities survives and all others cease to exist.
Officers — Individuals appointed by the members or managers who are responsible for carrying out the members’ or managers’ policies and for making day-to-day decisions.
Operating Agreement — The regulations of a limited liability company that provide the basic rules for the conduct of the limited liability company’s business and affairs and the relationships among the members and managers.
Organization — The act of creating or organizing a limited liability company.
Organizers — The persons who perform the act of organizing a limited liability company.
Partnership — A non-statutory form of business organization in which two or more persons agree to do business together. Also known as a General Partnership.
Registration — The filing of required documents by a foreign limited liability company to secure a certificate of authority to conduct its business in a state other than the one in which it was organized. Also called qualification in some states.
Registration of Name — The filing of a document in a foreign state to protect the limited liability company’s name, often in anticipation of registration in the state.
Reinstatement — Returning a limited liability company that has been administratively dissolved or had its certificate of authority revoked, to good standing on a state’s records.
Reservation of Name — A procedure that allows a limited liability company to obtain exclusive use of a name for a specified period of time.
Restated Articles of Organization — A document that combines all currently operative provisions of the limited liability company’s articles of organization and amendments thereto.
Sole Proprietorship — An unincorporated business with a sole owner.
Voting Rights — Rights of members to vote their interests pursuant to provisions of the statute and operating agreement.
Winding Up — The discharging of a limited liability company’s liabilities and the distributing of its remaining assets to its members in connection with its dissolution.
For more information on LLCs, please see The LLC Handbook.