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90_SB1020
New Act
35 ILCS 5/1501 from Ch. 120, par. 15-1501
805 ILCS 180 Art. 57 heading new
805 ILCS 180/57-1 new
805 ILCS 180/57-5 new
Creates the Uniform Limited Liability Company Act (1995).
Provides for the organization and operation of limited
liability companies. Applies, with certain exceptions, to
all limited liability companies formed after December 31,
1997. Provides that existing limited liability companies may
elect to be subject to this Act. Provides for the repeal of
the Limited Liability Company Act on January 1, 2003.
Effective January 1, 1998.
LRB9003480JSgc
LRB9003480JSgc
1 AN ACT concerning limited liability companies, amending
2 named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 ARTICLE 1
6 GENERAL PROVISIONS
7 Section 100. Short title. This Act may be cited as the
8 Uniform Limited Liability Company Act (1995).
9 Section 101. Definitions. In this Act:
10 (1) "Articles of organization" means initial, amended,
11 and restated articles of organization and articles of merger.
12 In the case of a foreign limited liability company, the term
13 includes all records serving a similar function required to
14 be filed in the office of the Secretary of State or
15 comparable office of the company's jurisdiction of
16 organization.
17 (2) "Business" includes every trade, occupation,
18 profession, and other lawful purpose, whether or not carried
19 on for profit.
20 (3) "Debtor in bankruptcy" means a person who is the
21 subject of an order for relief under Title 11 of the United
22 States Code or a comparable order under a successor statute
23 of general application or a comparable order under federal,
24 state, or foreign law governing insolvency.
25 (4) "Distribution" means a transfer of money, property,
26 or other benefit from a limited liability company to a member
27 in the member's capacity as a member or to a transferee of
28 the member's distributional interest.
29 (5) "Distributional interest" means all of a member's
30 interest in distributions by the limited liability company.
31 (6) "Entity" means a person other than an individual.
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1 (7) "Foreign limited liability company" means an
2 unincorporated entity organized under laws other than the
3 laws of this State which afford limited liability to its
4 owners comparable to the liability under Section 303 and is
5 not required to obtain a certificate of authority to transact
6 business under any law of this State other than this Act.
7 (8) "Limited liability company" means a limited
8 liability company organized under this Act.
9 (9) "Manager" means a person, whether or not a member of
10 a manager-managed limited liability company, who is vested
11 with authority under Section 301.
12 (10) "Manager-managed limited liability company" means a
13 limited liability company which is so designated in its
14 articles of organization.
15 (11) "Member-managed limited liability company" means a
16 limited liability company other than a manager-managed
17 company.
18 (12) "Operating agreement" means the agreement under
19 Section 103 concerning the relations among the members,
20 managers, and limited liability company. The term includes
21 amendments to the agreement.
22 (13) "Person" means an individual, corporation, business
23 trust, estate, trust, partnership, limited liability company,
24 association, joint venture, government, governmental
25 subdivision, agency, or instrumentality, or any other legal
26 or commercial entity.
27 (14) "Principal office" means the office, whether or not
28 in this State, where the principal executive office of a
29 domestic or foreign limited liability company is located.
30 (15) "Record" means information that is inscribed on a
31 tangible medium or that is stored in an electronic or other
32 medium and is retrievable in perceivable form.
33 (16) "Signed" includes any symbol executed or adopted by
34 a person with the present intention to authenticate a record.
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1 (17) "State" means a state of the United States, the
2 District of Columbia, the Commonwealth of Puerto Rico, or any
3 territory or insular possession subject to the jurisdiction
4 of the United States.
5 (18) "Transfer" includes an assignment, conveyance,
6 deed, bill of sale, lease, mortgage, security interest,
7 encumbrance, and gift.
8 Section 102. Knowledge and notice.
9 (a) A person knows a fact if the person has actual
10 knowledge of it.
11 (b) A person has notice of a fact if the person:
12 (1) knows the fact;
13 (2) has received a notification of the fact; or
14 (3) has reason to know the fact exists from all of
15 the facts known to the person at the time in question.
16 (c) A person notifies or gives a notification of a fact
17 to another by taking steps reasonably required to inform the
18 other person in ordinary course, whether or not the other
19 person knows the fact.
20 (d) A person receives a notification when the
21 notification:
22 (1) comes to the person's attention; or
23 (2) is duly delivered at the person's place of
24 business or at any other place held out by the person as
25 a place for receiving communications.
26 (e) An entity knows, has notice, or receives a
27 notification of a fact for purposes of a particular
28 transaction when the individual conducting the transaction
29 for the entity knows, has notice, or receives a notification
30 of the fact, or in any event when the fact would have been
31 brought to the individual's attention had the entity
32 exercised reasonable diligence. An entity exercises
33 reasonable diligence if it maintains reasonable routines for
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1 communicating significant information to the individual
2 conducting the transaction for the entity and there is
3 reasonable compliance with the routines. Reasonable
4 diligence does not require an individual acting for the
5 entity to communicate information unless the communication is
6 part of the individual's regular duties or the individual has
7 reason to know of the transaction and that the transaction
8 would be materially affected by the information.
9 Section 103. Effect of operating agreement; nonwaivable
10 provisions.
11 (a) Except as otherwise provided in subsection (b), all
12 members of a limited liability company may enter into an
13 operating agreement, which need not be in writing, to
14 regulate the affairs of the company and the conduct of its
15 business, and to govern relations among the members,
16 managers, and company. To the extent the operating agreement
17 does not otherwise provide, this Act governs relations among
18 the members, managers, and company.
19 (b) The operating agreement may not:
20 (1) unreasonably restrict a right to information or
21 access to records under Section 408;
22 (2) eliminate the duty of loyalty under Section
23 409(b) or 603(b)(3), but the agreement may:
24 (i) identify specific types or categories of
25 activities that do not violate the duty of loyalty,
26 if not manifestly unreasonable; and
27 (ii) specify the number or percentage of
28 members or disinterested managers that may authorize
29 or ratify, after full disclosure of all material
30 facts, a specific act or transaction that otherwise
31 would violate the duty of loyalty;
32 (3) unreasonably reduce the duty of care under
33 Section 409(c) or 603(b)(3);
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1 (4) eliminate the obligation of good faith and fair
2 dealing under Section 409(d), but the operating agreement
3 may determine the standards by which the performance of
4 the obligation is to be measured, if the standards are
5 not manifestly unreasonable;
6 (5) vary the right to expel a member in an event
7 specified in Section 601(5);
8 (6) vary the requirement to wind up the limited
9 liability company's business in a case specified in
10 Section 801(4) or (5); or
11 (7) restrict rights of third parties under this Act,
12 other than managers, members, or their transferees.
13 Section 104. Supplemental principles of law.
14 (a) Unless displaced by particular provisions of this
15 Act, the principles of law and equity supplement this Act.
16 (b) If an obligation to pay interest arises under this
17 Act and the rate is not specified, the rate is that specified
18 in the Interest Act.
19 Section 105. Name.
20 (a) The name of a limited liability company must contain
21 "limited liability company" or "limited company" or the
22 abbreviation "L.L.C.," "LLC," "L.C.," or "LC." "Limited" may
23 be abbreviated as "Ltd.," and "company" may be abbreviated as
24 "Co.".
25 (b) Except as authorized by subsections (c) and (d), the
26 name of a limited liability company must be distinguishable
27 upon the records of the Secretary of State from:
28 (1) the name of any corporation, limited
29 partnership, or company incorporated, organized or
30 authorized to transact business, in this State;
31 (2) a company name reserved or registered under
32 Section 106 or 107;
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1 (3) a fictitious name approved under Section 1005
2 for a foreign company authorized to transact business in
3 this State because its real name is unavailable.
4 (c) A limited liability company may apply to the
5 Secretary of State for authorization to use a name that is
6 not distinguishable upon the records of the Secretary of
7 State from one or more of the names described in subsection
8 (b). The Secretary of State shall authorize use of the name
9 applied for if:
10 (1) the present user, registrant, or owner of a
11 reserved name consents to the use in a record and submits
12 an undertaking in form satisfactory to the Secretary of
13 State to change the name to a name that is
14 distinguishable upon the records of the Secretary of
15 State from the name applied for; or
16 (2) the applicant delivers to the Secretary of State
17 a certified copy of the final judgment of a court of
18 competent jurisdiction establishing the applicant's right
19 to use the name applied for in this State.
20 (d) A limited liability company may use the name,
21 including a fictitious name, of another domestic or foreign
22 company which is used in this State if the other company is
23 organized or authorized to transact business in this State
24 and the company proposing to use the name has:
25 (1) merged with the other company;
26 (2) been formed by reorganization with the other
27 company; or
28 (3) acquired substantially all of the assets,
29 including the company name, of the other company.
30 Section 106. Reserved name.
31 (a) A person may reserve the exclusive use of the name
32 of a limited liability company, including a fictitious name
33 for a foreign company whose company name is not available, by
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1 delivering an application to the Secretary of State for
2 filing. The application must set forth the name and address
3 of the applicant and the name proposed to be reserved. If
4 the Secretary of State finds that the name applied for is
5 available, it must be reserved for the applicant's exclusive
6 use for a nonrenewable 120-day period.
7 (b) The owner of a name reserved for a limited liability
8 company may transfer the reservation to another person by
9 delivering to the Secretary of State a signed notice of the
10 transfer which states the name and address of the transferee.
11 Section 107. Registered name.
12 (a) A foreign limited liability company may register its
13 company name subject to the requirements of Section 1005, if
14 the name is distinguishable upon the records of the Secretary
15 of State from company names that are not available under
16 Section 105(b).
17 (b) A foreign limited liability company registers its
18 company name, or its company name with any addition required
19 by Section 1005, by delivering to the Secretary of State for
20 filing an application:
21 (1) setting forth its company name, or its company
22 name with any addition required by Section 1005, the
23 state or country and date of its organization, and a
24 brief description of the nature of the business in which
25 it is engaged; and
26 (2) accompanied by a certificate of existence, or a
27 record of similar import, from the state or country of
28 organization.
29 (c) A foreign limited liability company whose
30 registration is effective may renew it for successive years
31 by delivering for filing in the office of the Secretary of
32 State a renewal application complying with subsection (b)
33 between October 1 and December 31 of the preceding year. The
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1 renewal application renews the registration for the following
2 calendar year.
3 (d) A foreign limited liability company whose
4 registration is effective may qualify as a foreign company
5 under its company name or consent in writing to the use of
6 its name by a limited liability company later organized under
7 this Act or by another foreign company later authorized to
8 transact business in this State. The registered name
9 terminates when the limited liability company is organized or
10 the foreign company qualifies or consents to the
11 qualification of another foreign company under the registered
12 name.
13 Section 108. Designated office and agent for service of
14 process.
15 (a) A limited liability company and a foreign limited
16 liability company authorized to do business in this State
17 shall designate and continuously maintain in this State:
18 (1) an office, which need not be a place of its
19 business in this State; and
20 (2) an agent and street address of the agent for
21 service of process on the company.
22 (b) An agent must be an individual resident of this
23 State, a domestic corporation, another limited liability
24 company, or a foreign corporation or foreign company
25 authorized to do business in this State.
26 Section 109. Change of designated office of agent for
27 service of process. A limited liability company may change
28 its designated office or agent for service of process by
29 delivering to the Secretary of State for filing a statement
30 of change which sets forth:
31 (1) the name of the company;
32 (2) the street address of its current designated
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1 office;
2 (3) if the current designated office is to be
3 changed, the street address of the new designated office;
4 (4) the name and address of its current agent for
5 service of process; and
6 (5) if the current agent for service of process or
7 street address of that agent is to be changed, the new
8 address or the name and street address of the new agent
9 for service of process.
10 Section 110. Resignation of agent for service of
11 process.
12 (a) An agent for service of process of a limited
13 liability company may resign by delivering to the Secretary
14 of State for filing a record of the statement of resignation.
15 (b) After filing a statement of resignation, the
16 Secretary of State shall mail a copy to the designated office
17 and another copy to the limited liability company at its
18 principal office.
19 (c) An agency is terminated on the 31st day after the
20 statement is filed in the office of the Secretary of State.
21 Section 111. Service of process.
22 (a) An agent for service of process appointed by a
23 limited liability company or a foreign limited liability
24 company is an agent of the company for service of any
25 process, notice, or demand required or permitted by law to be
26 served upon the company.
27 (b) If a limited liability company or foreign limited
28 liability company fails to appoint or maintain an agent for
29 service of process in this State or the agent for service of
30 process cannot with reasonable diligence be found at the
31 agent's address, the Secretary of State is an agent of the
32 company upon whom process, notice, or demand may be served.
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1 (c) Service of any process, notice, or demand on the
2 Secretary of State may be made by delivering to and leaving
3 with the Secretary of State or clerk having charge of the
4 limited liability company department of the Secretary of
5 State's office duplicate copies of the process, notice, or
6 demand. If the process, notice, or demand is served on the
7 Secretary of State, the Secretary of State shall forward one
8 of the copies by registered or certified mail, return receipt
9 requested, to the company at its designated office. Service
10 is effected under this subsection at the earliest of:
11 (1) the date the company receives the process,
12 notice, or demand;
13 (2) the date shown on the return receipt, if signed
14 on behalf of the company; or
15 (3) five days after its deposit in the mail, if
16 mailed postpaid and correctly addressed.
17 (d) The Secretary of State shall keep a record of all
18 processes, notices, and demands served pursuant to this
19 Section and record the time of and the action taken regarding
20 the service.
21 (e) This Section does not affect the right to serve
22 process, notice, or demand in any manner otherwise provided
23 by law.
24 Section 112. Nature of business and powers.
25 (a) A limited liability company may be organized under
26 this Act for any lawful purpose, subject to any law of this
27 State governing or regulating business.
28 (b) Unless its articles of organization provide
29 otherwise, a limited liability company has the same powers as
30 an individual to do all things necessary or convenient to
31 carry on its business or affairs, including power to:
32 (1) sue and be sued, and defend in its company name;
33 (2) purchase, receive, lease, or otherwise acquire,
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1 and own, hold, improve, use, and otherwise deal with real
2 or personal property, or any legal or equitable interest
3 in property, wherever located;
4 (3) sell, convey, mortgage, grant a security
5 interest in, lease, exchange, and otherwise encumber or
6 dispose of all or any part of its property;
7 (4) purchase, receive, subscribe for, or otherwise
8 acquire, own, hold, vote, use, sell, mortgage, lend,
9 grant a security interest in, or otherwise dispose of and
10 deal in and with, shares or other interests in or
11 obligations of any other entity;
12 (5) make contracts and guarantees, incur
13 liabilities, borrow money, issue its notes, bonds, and
14 other obligations, which may be convertible into or
15 include the option to purchase other securities of the
16 limited liability company, and secure any of its
17 obligations by a mortgage on or a security interest in
18 any of its property, franchises, or income;
19 (6) lend money, invest and reinvest its funds, and
20 receive and hold real and personal property as security
21 for repayment;
22 (7) be a promoter, partner, member, associate, or
23 manager of any partnership, joint venture, trust, or
24 other entity;
25 (8) conduct its business, locate offices, and
26 exercise the powers granted by this Act within or without
27 this State;
28 (9) elect managers and appoint officers, employees,
29 and agents of the limited liability company, define their
30 duties, fix their compensation, and lend them money and
31 credit;
32 (10) pay pensions and establish pension plans,
33 pension trusts, profit sharing plans, share bonus plans,
34 share option plans, and benefit or incentive plans for
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1 any or all of its current or former members, managers,
2 officers, employees, and agents;
3 (11) make donations for the public welfare or for
4 charitable, scientific, or educational purposes; and
5 (12) make payments or donations, or do any other
6 act, not inconsistent with law, that furthers the
7 business of the limited liability company.
8 ARTICLE 2
9 ORGANIZATION
10 Section 201. Limited liability company as legal entity.
11 A limited liability company is a legal entity distinct from
12 its members.
13 Section 202. Organization.
14 (a) One or more persons may organize a limited liability
15 company, consisting of one or more members, by delivering
16 articles of organization to the office of the Secretary of
17 State for filing.
18 (b) Unless a delayed effective date is specified, the
19 existence of a limited liability company begins when the
20 articles of organization are filed.
21 (c) The filing of the articles of organization by the
22 Secretary of State is conclusive proof that the organizers
23 satisfied all conditions precedent to the creation of the
24 organization.
25 Section 203. Articles of organization.
26 (a) Articles of organization of a limited liability
27 company must set forth:
28 (1) the name of the company;
29 (2) the address of the initial designated office;
30 (3) the name and street address of the initial agent
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1 for service of process;
2 (4) the name and address of each organizer;
3 (5) whether the duration of the company is for a
4 specified term and, if so, the period specified;
5 (6) whether the company is to be manager-managed,
6 and, if so, the name and address of each initial manager;
7 and
8 (7) whether the members of the company are to be
9 liable for its debts and obligations under Section
10 303(c).
11 (b) Articles of organization of a limited liability
12 company may set forth:
13 (1) provisions permitted to be set forth in an
14 operating agreement; or
15 (2) other matters not inconsistent with law.
16 (c) Articles of organization of a limited liability
17 company may not vary the nonwaivable provisions of Section
18 103(b). As to all other matters, if any provision of an
19 operating agreement is inconsistent with the articles of
20 organization:
21 (1) the operating agreement controls as to managers,
22 members, and members' transferees; and
23 (2) the articles of organization control as to
24 persons other than managers, members, and their
25 transferees who rely on the articles to their detriment.
26 (d) The duration of a limited liability company is
27 at-will unless a term for its duration is specified in its
28 articles of organization.
29 Section 204. Amendment of restatement of articles of
30 organization.
31 (a) Articles of organization of a limited liability
32 company may be amended at any time by delivering articles of
33 amendment to the Secretary of State for filing. The articles
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1 of amendment must set forth the:
2 (1) name of the limited liability company;
3 (2) date of filing of the articles of organization;
4 and
5 (3) amendment to the articles.
6 (b) A limited liability company may restate its articles
7 of organization at any time. Restated articles of
8 organization must be signed and filed in the same manner as
9 articles of amendment. Restated articles of organization
10 must be designated as such in the heading and state in the
11 heading or in an introductory paragraph the limited liability
12 company's present name and, if it has been changed, all of
13 its former names and the date of the filing of its initial
14 articles of organization.
15 Section 205. Signing of records.
16 (a) Except as otherwise provided in this Act, a record
17 to be filed by or on behalf of a limited liability company in
18 the office of the Secretary of State must be signed in the
19 name of the company by a:
20 (1) manager of a manager-managed company;
21 (2) member of a member-managed company;
22 (3) person organizing the company, if the company
23 has not been formed; or
24 (4) fiduciary, if the company is in the hands of a
25 receiver, trustee, or other court-appointed fiduciary.
26 (b) A record signed under subsection (a) must state
27 adjacent to the signature the name and capacity of the
28 signer.
29 (c) A person signing a record to be filed under
30 subsection (a) may do so as an attorney-in-fact without any
31 formality. An authorization, including a power of attorney,
32 to sign a record need not be in writing, sworn to, verified,
33 or acknowledged or filed in the office of the Secretary of
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1 State.
2 Section 206. Filing in office of Secretary of State.
3 (a) Articles of organization or any other record
4 authorized to be filed under this Act must be in a medium
5 permitted by the Secretary of State and must be delivered to
6 the office of the Secretary of State. Unless the Secretary
7 of State determines that a record fails to comply as to form
8 with the filing requirements of this Act, and if all filing
9 fees have been paid, the Secretary of State shall file the
10 record and send a receipt for the record and the fees to the
11 limited liability company or its representative.
12 (b) Upon request and payment of a fee, the Secretary of
13 State shall send to the requester a certified copy of the
14 requested record.
15 (c) A record accepted for filing by the Secretary of
16 State is effective:
17 (1) on the date it is filed, as evidenced by the
18 Secretary of State maintaining a record of the date and
19 time of the filing;
20 (2) at the time specified in the record as its
21 effective time; or
22 (3) on the date and at the time specified in the
23 record if the record specifies a delayed effective date
24 and time.
25 (d) If a delayed effective date for a record is
26 specified but no time is specified, the record is effective
27 at 12:01 a.m. on that date. A delayed effective date that is
28 later than the 90th day after the record is filed makes the
29 record effective as of the 90th day.
30 Section 207. Correcting filed record.
31 (a) A limited liability company or foreign limited
32 liability company may correct a record filed by the Secretary
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1 of State if the record contains a false or erroneous
2 statement or was defectively signed.
3 (b) A record is corrected:
4 (1) by preparing articles of correction that:
5 (i) describe the record, including its filing
6 date, or attach a copy of it to the articles of
7 correction;
8 (ii) specify the incorrect statement and the
9 reason it is incorrect or the manner in which the
10 signing was defective; and
11 (iii) correct the incorrect statement or
12 defective signing; and
13 (2) by delivering the corrected record to the
14 Secretary of State for filing.
15 (c) Articles of correction are effective retroactively
16 to the effective date of the record they correct. However, a
17 person who has relied on the uncorrected record and was
18 adversely affected by the correction is not bound by the
19 correction until the articles are filed.
20 Section 208. Certificate of existence of authorization.
21 (a) A person may request the Secretary of State to
22 furnish a certificate of existence for a limited liability
23 company or a certificate of authorization for a foreign
24 limited liability company.
25 (b) A certificate of existence for a limited liability
26 company must set forth:
27 (1) the company's name;
28 (2) that it is duly organized under the laws of this
29 State, the date of organization, whether its duration is
30 at-will or for a specified term, and, if the latter, the
31 period specified;
32 (3) if payment is reflected in the records of the
33 Secretary of State and nonpayment affects the existence
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1 of the company, that all fees, taxes, and penalties owed
2 to this State have been paid;
3 (4) whether its most recent annual report required
4 by Section 211 has been filed with the Secretary of
5 State;
6 (5) that articles of termination have not been
7 filed; and
8 (6) other facts of record in the office of the
9 Secretary of State which may be requested by the
10 applicant.
11 (c) A certificate of authorization for a foreign limited
12 liability company must set forth:
13 (1) the company's name used in this State;
14 (2) that it is authorized to transact business in
15 this State;
16 (3) if payment is reflected in the records of the
17 Secretary of State and nonpayment affects the
18 authorization of the company, that all fees, taxes, and
19 penalties owed to this State have been paid;
20 (4) whether its most recent annual report required
21 by Section 211 has been filed with the Secretary of
22 State;
23 (5) that a certificate of cancellation has not been
24 filed; and
25 (6) other facts of record in the office of the
26 Secretary of State which may be requested by the
27 applicant.
28 (d) Subject to any qualification stated in the
29 certificate, a certificate of existence or authorization
30 issued by the Secretary of State may be relied upon as
31 conclusive evidence that the domestic or foreign limited
32 liability company is in existence or is authorized to
33 transact business in this State.
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1 Section 209. Liability for false statement in filed
2 record. If a record authorized or required to be filed under
3 this Act contains a false statement, one who suffers loss by
4 reliance on the statement may recover damages for the loss
5 from a person who signed the record or caused another to sign
6 it on the person's behalf and knew the statement to be false
7 at the time the record was signed.
8 Section 210. Filing by judicial act. If a person
9 required by Section 205 to sign any record fails or refuses
10 to do so, any other person who is adversely affected by the
11 failure or refusal may petition the designate the appropriate
12 court to direct the signing of the record. If the court
13 finds that it is proper for the record to be signed and that
14 a person so designated has failed or refused to sign the
15 record, it shall order the Secretary of State to sign and
16 file an appropriate record.
17 Section 211. Annual report for Secretary of State.
18 (a) A limited liability company, and a foreign limited
19 liability company authorized to transact business in this
20 State, shall deliver to the Secretary of State for filing an
21 annual report that sets forth:
22 (1) the name of the company and the state or country
23 under whose law it is organized;
24 (2) the address of its designated office and the
25 name and address of its agent for service of process in
26 this State;
27 (3) the address of its principal office; and
28 (4) the names and business addresses of any
29 managers.
30 (b) Information in an annual report must be current as
31 of the date the annual report is signed on behalf of the
32 limited liability company.
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1 (c) The first annual report must be delivered to the
2 Secretary of State between January 1 and April 1 of the year
3 following the calendar year in which a limited liability
4 company was organized or a foreign company was authorized to
5 transact business. Subsequent annual reports must be
6 delivered to the Secretary of State between January 1 and
7 April 1 of the following calendar years.
8 (d) If an annual report does not contain the information
9 required in subsection (a), the Secretary of State shall
10 promptly notify the reporting limited liability company or
11 foreign limited liability company and return the report to it
12 for correction. If the report is corrected to contain the
13 information required in subsection (a) and delivered to the
14 Secretary of State within 30 days after the effective date of
15 the notice, it is timely filed.
16 ARTICLE 3
17 RELATIONS OF MEMBERS AND MANAGERS TO PERSONS
18 DEALING WITH LIMITED LIABILITY COMPANY
19 Section 301. Agency of members and managers.
20 (a) Subject to subsections (b) and (c):
21 (1) each member is an agent of the limited liability
22 company for the purpose of its business;
23 (2) an act of a member, including the signing of an
24 instrument in the company name, for apparently carrying
25 on in the ordinary course the company's business or
26 business of the kind carried on by the company binds the
27 company, unless the member had no authority to act for
28 the company in the particular matter and the person with
29 whom the member was dealing knew or had notice that the
30 member lacked authority; and
31 (3) an act of a member which is not apparently for
32 carrying on in the ordinary course the company's business
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1 or business of the kind carried on by the company binds
2 the company only if the act was authorized by the other
3 members.
4 (b) Subject to subsection (c), in a manager-managed
5 limited liability company:
6 (1) a member is not an agent of the company for the
7 purpose of its business solely by reason of being a
8 member;
9 (2) each manager is an agent of the company for the
10 purpose of its business;
11 (3) an act of a manager, including the signing of an
12 instrument in the company name, for apparently carrying
13 on in the ordinary course the company's business or
14 business of the kind carried on by the company binds the
15 company, unless the manager had no authority to act for
16 the company in the particular matter and the person with
17 whom the manager was dealing knew or had notice that the
18 manager lacked authority; and
19 (4) an act of a manager which is not apparently for
20 carrying on in the ordinary course the company's business
21 or business of the kind carried on by the company binds
22 the company only if the act was authorized under Section
23 404(b)(2).
24 (c) Unless the articles of organization limit their
25 authority, any member of a member-managed limited liability
26 company, or any manager of a manager-managed company, may
27 sign and deliver any instrument transferring or affecting the
28 company's interest in real property. The instrument is
29 conclusive in favor of a person who gives value without
30 knowledge of the lack of the authority of the person signing
31 and delivering the instrument.
32 Section 302. Limited liability company liable for
33 member's or manager's actionable conduct. A limited
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1 liability company is liable for loss or injury caused to a
2 person, or for a penalty incurred, as a result of a wrongful
3 act or omission, or other actionable conduct, of a member or
4 manager acting in the ordinary course of business of the
5 company or with authority of the company.
6 Section 303. Liability of members and managers.
7 (a) Except as otherwise provided in subsection (c), the
8 debts, obligations, and liabilities of a limited liability
9 company, whether arising in contract, tort, or otherwise, are
10 solely the debts, obligations, and liabilities of the
11 company. A member or manager is not personally liable for a
12 debt, obligation, or liability of the company solely by
13 reason of being or acting as a member or manager.
14 (b) The failure of a limited liability company to
15 observe the usual company formalities or requirements
16 relating to the exercise of its company powers or management
17 of its business is not a ground for imposing personal
18 liability on the members or managers for liabilities of the
19 company.
20 (c) All or specified members of a limited liability
21 company are liable in their capacity as members for all or
22 specified debts, obligations, or liabilities of the company
23 if:
24 (1) a provision to that effect is contained in the
25 articles of organization; and
26 (2) a member so liable has consented in writing to
27 the adoption of the provision or to be bound by the
28 provision.
29 ARTICLE 4
30 RELATIONS OF MEMBERS TO EACH OTHER AND
31 TO LIMITED LIABILITY COMPANY
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1 Section 401. Form of contribution. A contribution of a
2 member of a limited liability company may consist of tangible
3 or intangible property or other benefit to the company,
4 including money, promissory notes, services performed, or
5 other obligations to contribute cash or property, or
6 contracts for services to be performed.
7 Section 402. Member's liability for contributions.
8 (a) A member's obligation to contribute money, property,
9 or other benefit to, or to perform services for, a limited
10 liability company is not excused by the member's death,
11 disability, or other inability to perform personally. If a
12 member does not make the required contribution of property or
13 services, the member is obligated at the option of the
14 company to contribute money equal to that portion of the
15 value of the stated contribution which has not been made.
16 (b) A creditor of a limited liability company who
17 extends credit or otherwise acts in reliance on an obligation
18 described in subsection (a), and without notice of any
19 compromise under Section 404(c)(5), may enforce the original
20 obligation.
21 Section 403. Member's and manager's rights to payments
22 and reimbursement.
23 (a) A limited liability company shall reimburse a member
24 or manager for payments made and indemnify a member or
25 manager for liabilities incurred by the member or manager in
26 the ordinary course of the business of the company or for the
27 preservation of its business or property.
28 (b) A limited liability company shall reimburse a member
29 for an advance to the company beyond the amount of
30 contribution the member agreed to make.
31 (c) A payment or advance made by a member which gives
32 rise to an obligation of a limited liability company under
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1 subsection (a) or (b) constitutes a loan to the company upon
2 which interest accrues from the date of the payment or
3 advance.
4 (d) A member is not entitled to remuneration for
5 services performed for a limited liability company, except
6 for reasonable compensation for services rendered in winding
7 up the business of the company.
8 Section 404. Management of limited liability company.
9 (a) In a member-managed limited liability company:
10 (1) each member has equal rights in the management
11 and conduct of the company's business; and
12 (2) except as otherwise provided in subsection (c)
13 or in Section 801(3)(i), any matter relating to the
14 business of the company may be decided by a majority of
15 the members.
16 (b) In a manager-managed limited liability company:
17 (1) the managers have the exclusive authority to
18 manage and conduct the company's business;
19 (2) except as specified in subsection (c) or in
20 Section 801(3)(i), any matter relating to the business of
21 the company may be exclusively decided by the manager or,
22 if there is more than one manager, by a majority of the
23 managers; and
24 (3) a manager:
25 (i) must be designated, appointed, elected,
26 removed, or replaced by a vote, approval, or consent
27 of a majority of the members; and
28 (ii) holds office until a successor has been
29 elected and qualified, unless sooner resigns or is
30 removed.
31 (c) The only matters of a limited liability company's
32 business requiring the consent of all of the members are:
33 (1) the amendment of the operating agreement under
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1 Section 103;
2 (2) the authorization or ratification of acts or
3 transactions under Section 103(b)(2)(ii) which would
4 otherwise violate the duty of loyalty;
5 (3) an amendment to the articles of organization
6 under Section 204;
7 (4) the compromise of an obligation to make a
8 contribution under Section 402(b);
9 (5) the compromise, as among members, of an
10 obligation of a member to make a contribution or return
11 money or other property paid or distributed in violation
12 of this Act;
13 (6) the making of interim distributions under
14 Section 405(a);
15 (7) the admission of a new member;
16 (8) the use of the company's property to redeem an
17 interest subject to a charging order;
18 (9) the consent to dissolve the company under
19 Section 801(2);
20 (10) a waiver of the right to have the company's
21 business wound up and the company terminated under
22 Section 802(b);
23 (11) the consent of members to merge with another
24 entity under Section 904(c)(1); and
25 (12) the sale, lease, exchange, or other disposal of
26 all, or substantially all, of the company's property with
27 or without goodwill.
28 (d) Action requiring the consent of members or managers
29 under this Act may be taken with or without a meeting. In
30 the event a meeting is otherwise required and a written
31 action in lieu thereof is not prohibited, the written action
32 must be evidenced by one or more consents reflected in a
33 record describing the action taken and signed by all of the
34 members or managers entitled to vote on the action.
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1 (e) A member or manager may appoint a proxy to vote or
2 otherwise act for the member or manager by signing an
3 appointment instrument, either personally or by the member's
4 or manager's attorney-in-fact. An appointment of a proxy is
5 valid for 11 months unless a different time is specified in
6 the appointment instrument. An appointment is revocable by
7 the member or manager unless the appointment form
8 conspicuously states that it is irrevocable and the
9 appointment is coupled with an interest, in which case the
10 appointment is revoked when the interest is extinguished.
11 Section 405. Sharing of and right to distributions.
12 (a) Any distributions made by a limited liability
13 company before its dissolution and winding up must be in
14 equal shares.
15 (b) A member has no right to receive, and may not be
16 required to accept, a distribution in kind.
17 (c) If a member becomes entitled to receive a
18 distribution, the member has the status of, and is entitled
19 to all remedies available to, a creditor of the limited
20 liability company with respect to the distribution.
21 Section 406. Limitations on distributions.
22 (a) A distribution may not be made if:
23 (1) the limited liability company would not be able
24 to pay its debts as they become due in the ordinary
25 course of business; or
26 (2) the company's total assets would be less than
27 the sum of its total liabilities plus the amount that
28 would be needed, if the company were to be dissolved,
29 wound up, and terminated at the time of the distribution,
30 to satisfy the preferential rights upon dissolution,
31 winding up, and termination of members whose preferential
32 rights are superior to those receiving the distribution.
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1 (b) A limited liability company may base a determination
2 that a distribution is not prohibited under subsection (a) on
3 financial statements prepared on the basis of accounting
4 practices and principles that are reasonable in the
5 circumstances or on a fair valuation or other method that is
6 reasonable in the circumstances.
7 (c) Except as otherwise provided in subsection (e), the
8 effect of a distribution under subsection (a) is measured:
9 (1) in the case of distribution by purchase,
10 redemption, or other acquisition of a distributional
11 interest in a limited liability company, as of the date
12 money or other property is transferred or debt incurred
13 by the company; and
14 (2) in all other cases, as of the date the:
15 (i) distribution is authorized if the payment
16 occurs within 120 days after the date of
17 authorization; or
18 (ii) payment is made if it occurs more than 120
19 days after the date of authorization.
20 (d) A limited liability company's indebtedness to a
21 member incurred by reason of a distribution made in
22 accordance with this Section is at parity with the company's
23 indebtedness to its general, unsecured creditors.
24 (e) Indebtedness of a limited liability company,
25 including indebtedness issued in connection with or as part
26 of a distribution, is not considered a liability for purposes
27 of determinations under subsection (a) if its terms provide
28 that payment of principal and interest are made only if and
29 to the extent that payment of a distribution to members could
30 then be made under this Section. If the indebtedness is
31 issued as a distribution, each payment of principal or
32 interest on the indebtedness is treated as a distribution,
33 the effect of which is measured on the date the payment is
34 made.
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1 Section 407. Liability for unlawful distributions.
2 (a) A member of a member-managed limited liability
3 company or a member or manager of a manager-managed company
4 who votes for or assents to a distribution made in violation
5 of Section 406, the articles of organization, a written
6 operating agreement, or a signed record is personally liable
7 to the company for the amount of the distribution which
8 exceeds the amount that could have been distributed without
9 violating Section 406, the articles of organization, a
10 written operating agreement, or a signed record if it is
11 established that the member or manager did not perform the
12 member's or manager's duties in compliance with Section 409.
13 (b) A member of a manager-managed limited liability
14 company who knew a distribution was made in violation of
15 Section 406 is personally liable to the limited liability
16 company, but only to the extent that the distribution
17 received by the member exceeded the amount that could
18 properly have been paid under Section 406.
19 (c) A member or manager against whom an action is
20 brought under this Section may implead in the action all:
21 (1) other members or managers who voted for or
22 assented to the distribution in violation of subsection
23 (a) and may compel contribution from them; and
24 (2) members who received a distribution in violation
25 of subsection (b) and may compel contribution from the
26 member in the amount received in violation of subsection
27 (b).
28 (d) A proceeding under this Section is barred unless it
29 is commenced within 2 years after the distribution.
30 Section 408. Member's right to information.
31 (a) A limited liability company shall provide members
32 and their agents and attorneys access to any of its records
33 at reasonable locations specified in the operating agreement.
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1 The company shall provide former members and their agents and
2 attorneys access for proper purposes to records pertaining to
3 the period during which they were members. The right of
4 access provides the opportunity to inspect and copy records
5 during ordinary business hours. The company may impose a
6 reasonable charge, limited to the costs of labor and
7 material, for copies of records furnished.
8 (b) A limited liability company shall furnish to a
9 member, and to the legal representative of a deceased member
10 or member under legal disability:
11 (1) without demand, information concerning the
12 company's business or affairs reasonably required for the
13 proper exercise of the member's rights and performance of
14 the member's duties under the operating agreement or this
15 Act; and
16 (2) on demand, other information concerning the
17 company's business or affairs, except to the extent the
18 demand or the information demanded is unreasonable or
19 otherwise improper under the circumstances.
20 (c) A member has the right upon a signed record given to
21 the limited liability company to obtain at the company's
22 expense a copy of any operating agreement in record form.
23 Section 409. General standards of member's and manager's
24 conduct.
25 (a) The only fiduciary duties a member owes to a
26 member-managed limited liability company and its other
27 members are the duty of loyalty and the duty of care imposed
28 by subsections (b) and (c).
29 (b) A member's duty of loyalty to a member-managed
30 limited liability company and its other members is limited to
31 the following:
32 (1) to account to the company and to hold as trustee
33 for it any property, profit, or benefit derived by the
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1 member in the conduct or winding up of the company's
2 business or derived from a use by the member of the
3 company's property, including the appropriation of a
4 company's opportunity;
5 (2) to refrain from dealing with the company in the
6 conduct or winding up of the company's business as or on
7 behalf of a party having an interest adverse to the
8 company; and
9 (3) to refrain from competing with the company in
10 the conduct of the company's business before the
11 dissolution of the company.
12 (c) A member's duty of care to a member-managed limited
13 liability company and its other members in the conduct of and
14 winding up of the company's business is limited to refraining
15 from engaging in grossly negligent or reckless conduct,
16 intentional misconduct, or a knowing violation of law.
17 (d) A member shall discharge the duties to a
18 member-managed limited liability company and its other
19 members under this Act or under the operating agreement and
20 exercise any rights consistently with the obligation of good
21 faith and fair dealing.
22 (e) A member of a member-managed limited liability
23 company does not violate a duty or obligation under this Act
24 or under the operating agreement merely because the member's
25 conduct furthers the member's own interest.
26 (f) A member of a member-managed limited liability
27 company may lend money to and transact other business with
28 the company. As to each loan or transaction, the rights and
29 obligations of the member are the same as those of a person
30 who is not a member, subject to other applicable law.
31 (g) This Section applies to a person winding up the
32 limited liability company's business as the personal or legal
33 representative of the last surviving member as if the person
34 were a member.
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1 (h) In a manager-managed limited liability company:
2 (1) a member who is not also a manager owes no
3 duties to the company or to the other members solely by
4 reason of being a member;
5 (2) a manager is held to the same standards of
6 conduct prescribed for members in subsections (b) through
7 (f);
8 (3) a member who pursuant to the operating agreement
9 exercises some or all of the rights of a manager in the
10 management and conduct of the company's business is held
11 to the standards of conduct in subsections (b) through
12 (f) to the extent that the member exercises the
13 managerial authority vested in a manager by this Act; and
14 (4) a manager is relieved of liability imposed by
15 law for violation of the standards prescribed by
16 subsections (b) through (f) to the extent of the
17 managerial authority delegated to the members by the
18 operating agreement.
19 Section 410. Actions by members.
20 (a) A member may maintain an action against a limited
21 liability company or another member for legal or equitable
22 relief, with or without an accounting as to the company's
23 business, to enforce:
24 (1) the member's rights under the operating
25 agreement;
26 (2) the member's rights under this Act; and
27 (3) the rights and otherwise protect the interests
28 of the member, including rights and interests arising
29 independently of the member's relationship to the
30 company.
31 (b) The accrual, and any time limited for the assertion,
32 of a right of action for a remedy under this Section is
33 governed by other law. A right to an accounting upon a
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1 dissolution and winding up does not revive a claim barred by
2 law.
3 Section 411. Continuation of limited liability company
4 after expiration of specified term.
5 (a) If a limited liability company having a specified
6 term is continued after the expiration of the term, the
7 rights and duties of the members and managers remain the same
8 as they were at the expiration of the term except to the
9 extent inconsistent with rights and duties of members and
10 managers of an at-will company.
11 (b) If the members in a member-managed limited liability
12 company or the managers in a manager-managed company continue
13 the business without any winding up of the business of the
14 company, it continues as an at-will company.
15 ARTICLE 5
16 TRANSFEREES AND CREDITORS OF MEMBER
17 Section 501. Member's distributional interest.
18 (a) A member is not a co-owner of, and has no
19 transferable interest in, property of a limited liability
20 company.
21 (b) A distributional interest in a limited liability
22 company is personal property and, subject to Sections 502 and
23 503, may be transferred in whole or in part.
24 (c) An operating agreement may provide that a
25 distributional interest may be evidenced by a certificate of
26 the interest issued by the limited liability company and,
27 subject to Section 503, may also provide for the transfer of
28 any interest represented by the certificate.
29 Section 502. Transfer of distributional interest. A
30 transfer of a distributional interest does not entitle the
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1 transferee to become or to exercise any rights of a member.
2 A transfer entitles the transferee to receive, to the extent
3 transferred, only the distributions to which the transferor
4 would be entitled. A member ceases to be a member upon
5 transfer of all of the member's distributional interest,
6 other than a transfer for security purposes, or a court order
7 charging the member's distributional interest, which has not
8 been foreclosed.
9 Section 503. Rights of transferee.
10 (a) A transferee of a distributional interest may become
11 a member of a limited liability company if and to the extent
12 that the transferor gives the transferee the right in
13 accordance with authority described in the operating
14 agreement or all other members consent.
15 (b) A transferee who has become a member, to the extent
16 transferred, has the rights and powers, and is subject to the
17 restrictions and liabilities, of a member under the operating
18 agreement of a limited liability company and this Act. A
19 transferee who becomes a member also is liable for the
20 transferor member's obligations to make contributions under
21 Section 402 and for obligations under Section 407 to return
22 unlawful distributions, but the transferee is not obligated
23 for the transferor member's liabilities unknown to the
24 transferee at the time the transferee becomes a member and is
25 not personally liable for any obligation of the company
26 incurred before the transferee's admission as a member.
27 (c) Whether or not a transferee of a distributional
28 interest becomes a member under subsection (a), the
29 transferor is not released from liability to the limited
30 liability company under the operating agreement or this Act.
31 (d) A transferee who does not become a member is not
32 entitled to participate in the management or conduct of the
33 limited liability company's business, require access to
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1 information concerning the company's transactions, or inspect
2 or copy any of the company's records.
3 (e) A transferee who does not become a member is
4 entitled to:
5 (1) receive, in accordance with the transfer,
6 distributions to which the transferor would otherwise be
7 entitled;
8 (2) receive, upon dissolution and winding up of the
9 limited liability company's business:
10 (i) in accordance with the transfer, the net
11 amount otherwise distributable to the transferor;
12 (ii) a statement of account only from the date
13 of the latest statement of account agreed to by all
14 the members;
15 (3) seek under Section 801(6) a judicial
16 determination that it is equitable to dissolve and wind
17 up the company's business.
18 (f) A limited liability company need not give effect to
19 a transfer until it has notice of the transfer.
20 Section 504. Rights of creditor.
21 (a) On application by a judgment creditor of a member of
22 a limited liability company or of a member's transferee, a
23 court having jurisdiction may charge the distributional
24 interest of the judgment debtor to satisfy the judgment. The
25 court may appoint a receiver of the share of the
26 distributions due or to become due to the judgment debtor and
27 make all other orders, directions, accounts, and inquiries
28 the judgment debtor might have made or which the
29 circumstances may require to give effect to the charging
30 order.
31 (b) A charging order constitutes a lien on the judgment
32 debtor's distributional interest. The court may order a
33 foreclosure of a lien on a distributional interest subject to
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1 the charging order at any time. A purchaser at the
2 foreclosure sale has the rights of a transferee.
3 (c) At any time before foreclosure, a distributional
4 interest in a limited liability company which is charged may
5 be redeemed:
6 (1) by the judgment debtor;
7 (2) with property other than the company's property,
8 by one or more of the other members; or
9 (3) with the company's property, but only if
10 permitted by the operating agreement.
11 (d) This Act does not affect a member's right under
12 exemption laws with respect to the member's distributional
13 interest in a limited liability company.
14 (e) This Section provides the exclusive remedy by which
15 a judgment creditor of a member or a transferee may satisfy a
16 judgment out of the judgment debtor's distributional interest
17 in a limited liability company.
18 ARTICLE 6
19 MEMBER'S DISSOCIATION
20 Section 601. Events causing member's dissociation. A
21 member is dissociated from a limited liability company upon
22 the occurrence of any of the following events:
23 (1) the company's having notice of the member's express
24 will to withdraw upon the date of notice or on a later date
25 specified by the member;
26 (2) an event agreed to in the operating agreement as
27 causing the member's dissociation;
28 (3) the member's expulsion pursuant to the operating
29 agreement;
30 (4) the member's expulsion by unanimous vote of the other
31 members if:
32 (i) it is unlawful to carry on the company's
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1 business with the member;
2 (ii) there has been a transfer of substantially all
3 of the member's distributional interest, other than a
4 transfer for security purposes, or a court order charging
5 the member's distributional interest, which has not been
6 foreclosed;
7 (iii) within 90 days after the company notifies a
8 corporate member that it will be expelled because it has
9 filed a certificate of dissolution or the equivalent, its
10 charter has been revoked, or its right to conduct
11 business has been suspended by the jurisdiction of its
12 incorporation, the member fails to obtain a revocation of
13 the certificate of dissolution or a reinstatement of its
14 charter or its right to conduct business; or
15 (iv) a partnership or a limited liability company
16 that is a member has been dissolved and its business is
17 being wound up;
18 (5) on application by the company or another member, the
19 member's expulsion by judicial determination because the
20 member:
21 (i) engaged in wrongful conduct that adversely and
22 materially affected the company's business;
23 (ii) willfully or persistently committed a material
24 breach of the operating agreement or of a duty owed to
25 the company or the other members under Section 409; or
26 (iii) engaged in conduct relating to the company's
27 business which makes it not reasonably practicable to
28 carry on the business with the member;
29 (6) the member's:
30 (i) becoming a debtor in bankruptcy;
31 (ii) executing an assignment for the benefit of
32 creditors;
33 (iii) seeking, consenting to, or acquiescing in the
34 appointment of a trustee, receiver, or liquidator of the
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1 member or of all or substantially all of the member's
2 property; or
3 (iv) failing, within 90 days after the appointment,
4 to have vacated or stayed the appointment of a trustee,
5 receiver, or liquidator of the member or of all or
6 substantially all of the member's property obtained
7 without the member's consent or acquiescence, or failing
8 within 90 days after the expiration of a stay to have the
9 appointment vacated;
10 (7) in the case of a member who is an individual:
11 (i) the member's death;
12 (ii) the appointment of a guardian or general
13 conservator for the member; or
14 (iii) a judicial determination that the member has
15 otherwise become incapable of performing the member's
16 duties under the operating agreement;
17 (8) in the case of a member that is a trust or is acting
18 as a member by virtue of being a trustee of a trust,
19 distribution of the trust's entire rights to receive
20 distributions from the company, but not merely by reason of
21 the substitution of a successor trustee;
22 (9) in the case of a member that is an estate or is
23 acting as a member by virtue of being a personal
24 representative of an estate, distribution of the estate's
25 entire rights to receive distributions from the company, but
26 not merely the substitution of a successor personal
27 representative;
28 (10) termination of the existence of a member if the
29 member is not an individual, estate, or trust other than a
30 business trust; or
31 (11) a termination of a member's continued membership in
32 a limited liability company for any other reason.
33 Section 602. Member's power to dissociate; wrongful
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1 dissociation.
2 (a) A member has the power to dissociate from a limited
3 liability company at any time, rightfully or wrongfully, by
4 express will pursuant to Section 601(1).
5 (b) A member's dissociation from a limited liability
6 company is wrongful only if:
7 (1) it is in breach of an express provision of the
8 operating agreement; or
9 (2) before the expiration of the term of a company
10 having a specified term:
11 (i) the member withdraws by express will;
12 (ii) the member is expelled by judicial
13 determination under Section 601(5);
14 (iii) the member is dissociated by becoming a
15 debtor in bankruptcy; or
16 (iv) in the case of a member who is not an
17 individual, trust other than a business trust, or
18 estate, the member is expelled or otherwise
19 dissociated because it willfully dissolved or
20 terminated its existence.
21 (c) A member who wrongfully dissociates from a limited
22 liability company is liable to the company and to the other
23 members for damages caused by the dissociation. The
24 liability is in addition to any other obligation of the
25 member to the company or to the other members.
26 (d) If a limited liability company does not dissolve and
27 wind up its business as a result of a member's wrongful
28 dissociation under subsection (b), damages sustained by the
29 company for the wrongful dissociation must be offset against
30 distributions otherwise due the member after the
31 dissociation.
32 Section 603. Effect of member's dissociation.
33 (a) If under Section 801 a member's dissociation from a
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1 limited liability company results in a dissolution and
2 winding up of the company's business, Article 8 applies. If
3 a member's dissociation from the company does not result in a
4 dissolution and winding up of the company's business under
5 Section 801:
6 (1) in an at-will company, the company must cause
7 the dissociated member's distributional interest to be
8 purchased under Article 7; and
9 (2) in a company having a specified term:
10 (i) if the company dissolves and winds up its
11 business on or before the expiration of its
12 specified term, Article 8 applies to determine the
13 dissociated member's rights to distributions; and
14 (ii) if the company does not dissolve and wind
15 up its business on or before the expiration of its
16 specified term, the company must cause the
17 dissociated member's distributional interest to be
18 purchased under Article 7 on the date of the
19 expiration of the term specified at the time of the
20 member's dissociation.
21 (b) Upon a member's dissociation from a limited
22 liability company:
23 (1) the member's right to participate in the
24 management and conduct of the company's business
25 terminates, except as otherwise provided in Section 803,
26 and the member ceases to be a member and is treated the
27 same as a transferee of a member;
28 (2) the member's duty of loyalty under Section
29 409(b)(3) terminates; and
30 (3) the member's duty of loyalty under Section
31 409(b)(1) and (2) and duty of care under Section 409(c)
32 continue only with regard to matters arising and events
33 occurring before the member's dissociation, unless the
34 member participates in winding up the company's business
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1 pursuant to Section 803.
2 ARTICLE 7
3 MEMBER'S DISSOCIATION WHEN
4 BUSINESS NOT WOUND UP
5 Section 701. Company purchase of distributional
6 interest.
7 (a) A limited liability company shall purchase a
8 distributional interest of a:
9 (1) member of an at-will limited liability company
10 for its fair value determined as of the date of the
11 member's dissociation if the member's dissociation does
12 not result in a dissolution and winding up of the
13 company's business under Section 801; or
14 (2) member of a company having a specified term for
15 its fair value determined as of the date of the
16 expiration of the specified term that existed on the
17 member's dissociation if the expiration of the specified
18 term does not result in a dissolution and winding up of
19 the company's business under Section 801.
20 (b) A limited liability company must deliver a purchase
21 offer to the dissociated member whose distributional interest
22 is entitled to be purchased not later than 30 days after the
23 date determined under subsection (a). The purchase offer
24 must be accompanied by:
25 (1) a statement of the company's assets and
26 liabilities as of the date determined under subsection
27 (a);
28 (2) the latest available balance sheet and income
29 statement, if any; and
30 (3) an explanation of how the estimated amount of
31 the payment was calculated.
32 (c) If the price and other terms of a purchase of a
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1 distributional interest are fixed or are to be determined by
2 the operating agreement, the price and terms so fixed or
3 determined govern the purchase unless the purchaser defaults.
4 In that case the dissociated member is entitled to commence a
5 proceeding to have the company dissolved under Section
6 801(5)(iv).
7 (d) If an agreement to purchase the distributional
8 interest is not made within 120 days after the date
9 determined under subsection (a), the dissociated member,
10 within another 120 days, may commence a proceeding against
11 the limited liability company to enforce the purchase. The
12 company at its expense shall notify in writing all of the
13 remaining members, and any other person the court directs, of
14 the commencement of the proceeding. The jurisdiction of the
15 court in which the proceeding is commenced under this
16 subsection is plenary and exclusive.
17 (e) The court shall determine the fair value of the
18 distributional interest in accordance with the standards set
19 forth in Section 702 together with the terms for the
20 purchase. Upon making these determinations, the court shall
21 order the limited liability company to purchase or cause the
22 purchase of the interest.
23 (f) Damages for wrongful dissociation under Section
24 602(b), and all other amounts owing, whether or not currently
25 due, from the dissociated member to a limited liability
26 company, must be offset against the purchase price.
27 Section 702. Court action to determine fair value of
28 distributional interest.
29 (a) In an action brought to determine the fair value of
30 a distributional interest in a limited liability company, the
31 court shall:
32 (1) determine the fair value of the interest,
33 considering among other relevant evidence the going
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1 concern value of the company, any agreement among some or
2 all of the members fixing the price or specifying a
3 formula for determining value of distributional interests
4 for any purpose, the recommendations of any appraiser
5 appointed by the court, and any legal constraints on the
6 company's ability to purchase the interest;
7 (2) specify the terms of the purchase, including, if
8 appropriate, terms for installment payments,
9 subordination of the purchase obligation to the rights of
10 the company's other creditors, security for a deferred
11 purchase price, and a covenant not to compete or other
12 restriction on a dissociated member; and
13 (3) require the dissociated member to deliver an
14 assignment of the interest to the purchaser upon receipt
15 of the purchase price or the first installment of the
16 purchase price.
17 (b) After an order to purchase is entered, a party may
18 petition the court to modify the terms of the purchase and
19 the court may do so if it finds that changes in the financial
20 or legal ability of the limited liability company or other
21 purchaser to complete the purchase justify a modification.
22 (c) After the dissociated member delivers the
23 assignment, the dissociated member has no further claim
24 against the company, its members, officers, or managers, if
25 any, other than a claim to any unpaid balance of the purchase
26 price and a claim under any agreement with the company or the
27 remaining members that is not terminated by the court.
28 (d) If the purchase is not completed in accordance with
29 the specified terms, the company is to be dissolved upon
30 application under Section 801(5)(iv). If a limited liability
31 company is so dissolved, the dissociated member has the same
32 rights and priorities in the company's assets as if the sale
33 had not been ordered.
34 (e) If the court finds that a party to the proceeding
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1 acted arbitrarily, vexatiously, or not in good faith, it may
2 award one or more other parties their reasonable expenses,
3 including attorney's fees and the expenses of appraisers or
4 other experts, incurred in the proceeding. The finding may
5 be based on the company's failure to make an offer to pay or
6 to comply with Section 701(b).
7 (f) Interest must be paid on the amount awarded from the
8 determined under Section 701(a) to the date of payment.
9 Section 703. Dissociated member's power to bind limited
10 liability company. For 2 years after a member dissociates
11 without the dissociation resulting in a dissolution and
12 winding up of a limited liability company's business, the
13 company, including a surviving company under Article 9, is
14 bound by an act of the dissociated member which would have
15 bound the company under Section 301 before dissociation only
16 if at the time of entering into the transaction the other
17 party.
18 (1) reasonably believed that the dissociated member was
19 then a member;
20 (2) did not have notice of the member's dissociation; and
21 (3) is not deemed to have had notice under Section 704.
22 Section 704. Statement of dissociation.
23 (a) A dissociated member or a limited liability company
24 may file in the office of the Secretary of State a statement
25 of dissociation stating the name of the company and that the
26 member is dissociated from the company.
27 (b) For the purposes of Sections 301 and 703, a person
28 not a member is deemed to have notice of the dissociation 90
29 days after the statement of dissociation is filed.
30 ARTICLE 8
31 WINDING UP COMPANY'S BUSINESS
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1 Section 801. Events causing dissolution and winding up
2 of company's business. A limited liability company is
3 dissolved, and its business must be wound up, upon the
4 occurrence of any of the following events:
5 (1) an event specified in the operating agreement;
6 (2) consent of the number or percentage of members
7 specified in the operating agreement;
8 (3) dissociation of a member-manager or, if none, a
9 member of an at-will company, and dissociation of a
10 member-manager or, if none, a member of a company having a
11 specified term but only if the dissociation was for a reason
12 provided in Section 601(6) through (10) and occurred before
13 the expiration of the specified term, but the company is not
14 dissolved and required to be wound up by reason of the
15 dissociation:
16 (i) if, within 90 days after the dissociation, a
17 majority in interest of the remaining members agree to
18 continue the business of the company; or
19 (ii) the business of the company is continued under
20 a right to continue stated in the operating agreement;
21 (4) an event that makes it unlawful for all or
22 substantially all of the business of the company to be
23 continued, but any cure of illegality within 90 days after
24 notice to the company of the event is effective retroactively
25 to the date of the event for purposes of this Section;
26 (5) on application by a member or a dissociated member,
27 upon entry of a judicial decree that:
28 (i) the economic purpose of the company is likely to
29 be unreasonably frustrated;
30 (ii) another member has engaged in conduct relating
31 to the company's business that makes it not reasonably
32 practicable to carry on the company's business with that
33 member;
34 (iii) it is not otherwise reasonably practicable to
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1 carry on the company's business in conformity with the
2 articles of organization and the operating agreement;
3 (iv) the company failed to purchase the petitioner's
4 distributional interest as required by Section 701; or
5 (v) the managers or members in control of the
6 company have acted, are acting, or will act in a manner
7 that is illegal, oppressive, fraudulent, or unfairly
8 prejudicial to the petitioner;
9 (6) on application by a transferee of a member's
10 interest, a judicial determination that it is equitable to
11 wind up the company's business:
12 (i) after the expiration of the specified term, if
13 the company was for a specified term at the time the
14 applicant became a transferee by member dissociation,
15 transfer, or entry of a charging order that gave rise to
16 the transfer; or
17 (ii) at any time, if the company was at will at the
18 time the applicant became a transferee by member
19 dissociation, transfer, or entry of a charging order that
20 gave rise to the transfer; or
21 (7) the expiration of a specified term.
22 Section 802. Limited liability company continues after
23 dissolution.
24 (a) Subject to subsection (b), a limited liability
25 company continues after dissolution only for the purpose of
26 winding up its business.
27 (b) At any time after the dissolution of a limited
28 liability company and before the winding up of its business
29 is completed, the members, including a dissociated member
30 whose dissociation caused the dissolution, may unanimously
31 waive the right to have the company's business wound up and
32 the company terminated. In that case:
33 (1) the limited liability company resumes carrying
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1 on its business as if dissolution had never occurred and
2 any liability incurred by the company or a member after
3 the dissolution and before the waiver is determined as if
4 the dissolution had never occurred; and
5 (2) the rights of a third party accruing under
6 Section 804(a) or arising out of conduct in reliance on
7 the dissolution before the third party knew or received a
8 notification of the waiver are not adversely affected.
9 Section 803. Right to wind up limited liability
10 company's business.
11 (a) After dissolution, a member who has not wrongfully
12 dissociated may participate in winding up a limited liability
13 company's business, but on application of any member,
14 member's legal representative, or transferee, the designate
15 the appropriate court, for good cause shown, may order
16 judicial supervision of the winding up.
17 (b) A legal representative of the last surviving member
18 may wind up a limited liability company's business.
19 (c) A person winding up a limited liability company's
20 business may preserve the company's business or property as a
21 going concern for a reasonable time, prosecute and defend
22 actions and proceedings, whether civil, criminal, or
23 administrative, settle and close the company's business,
24 dispose of and transfer the company's property, discharge the
25 company's liabilities, distribute the assets of the company
26 pursuant to Section 806, settle disputes by mediation or
27 arbitration, and perform other necessary acts.
28 Section 804. Member's or manager's power and liability
29 as agent after dissolution.
30 (a) A limited liability company is bound by a member's
31 or manager's act after dissolution that:
32 (1) is appropriate for winding up the company's
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1 business; or
2 (2) would have bound the company under Section 301
3 before dissolution, if the other party to the transaction
4 did not have notice of the dissolution.
5 (b) A member or manager who, with knowledge of the
6 dissolution, subjects a limited liability company to
7 liability by an act that is not appropriate for winding up
8 the company's business is liable to the company for any
9 damage caused to the company arising from the liability.
10 Section 805. Articles of termination.
11 (a) At any time after dissolution and winding up, a
12 limited liability company may terminate its existence by
13 filing with the Secretary of State articles of termination
14 stating:
15 (1) the name of the company;
16 (2) the date of the dissolution; and
17 (3) that the company's business has been wound up
18 and the legal existence of the company has been
19 terminated.
20 (b) The existence of a limited liability company is
21 terminated upon the filing of the articles of termination, or
22 upon a later effective date, if specified in the articles of
23 termination.
24 Section 806. Distribution of assets in winding up
25 limited liability company's business.
26 (a) In winding up a limited liability company's
27 business, the assets of the company must be applied to
28 discharge its obligations to creditors, including members who
29 are creditors. Any surplus must be applied to pay in money
30 the net amount distributable to members in accordance with
31 their right to distributions under subsection (b).
32 (b) Each member is entitled to a distribution upon the
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1 winding up of the limited liability company's business
2 consisting of a return of all contributions which have not
3 previously been returned and a distribution of any remainder
4 in equal shares.
5 Section 807. Known claims against dissolved limited
6 liability company.
7 (a) A dissolved limited liability company may dispose of
8 the known claims against it by following the procedure
9 described in this Section.
10 (b) A dissolved limited liability company shall notify
11 its known claimants in writing of the dissolution. The
12 notice must:
13 (1) specify the information required to be included
14 in a claim;
15 (2) provide a mailing address where the claim is to
16 be sent;
17 (3) state the deadline for receipt of the claim,
18 which may not be less than 120 days after the date the
19 written notice is received by the claimant; and
20 (4) state that the claim will be barred if not
21 received by the deadline.
22 (c) A claim against a dissolved limited liability
23 company is barred if the requirements of subsection (b) are
24 met, and:
25 (1) the claim is not received by the specified
26 deadline; or
27 (2) in the case of a claim that is timely received
28 but rejected by the dissolved company, the claimant does
29 not commence a proceeding to enforce the claim within 90
30 days after the receipt of the notice of the rejection.
31 (d) For purposes of this Section, "claim" does not
32 include a contingent liability or a claim based on an event
33 occurring after the effective date of dissolution.
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1 Section 808. Other claims against dissolved limited
2 liability company.
3 (a) A dissolved limited liability company may publish
4 notice of its dissolution and request persons having claims
5 against the company to present them in accordance with the
6 notice.
7 (b) The notice must:
8 (1) be published at least once in a newspaper of
9 general circulation in the county in which the dissolved
10 limited liability company's principal office is located
11 or, if none in this State, in which its designated office
12 is or was last located;
13 (2) describe the information required to be
14 contained in a claim and provide a mailing address where
15 the claim is to be sent; and
16 (3) state that a claim against the limited liability
17 company is barred unless a proceeding to enforce the
18 claim is commenced within 5 years after publication of
19 the notice.
20 (c) If a dissolved limited liability company publishes a
21 notice in accordance with subsection (b), the claim of each
22 of the following claimants is barred unless the claimant
23 commences a proceeding to enforce the claim against the
24 dissolved company within 5 years after the publication date
25 of the notice:
26 (1) a claimant who did not receive written notice
27 under Section 807;
28 (2) a claimant whose claim was timely sent to the
29 dissolved company but not acted on; and
30 (3) a claimant whose claim is contingent or based on
31 an event occurring after the effective date of
32 dissolution.
33 (d) A claim not barred under this Section may be
34 enforced:
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1 (1) against the dissolved limited liability company,
2 to the extent of its undistributed assets; or
3 (2) if the assets have been distributed in
4 liquidation, against a member of the dissolved company to
5 the extent of the member's proportionate share of the
6 claim or the company's assets distributed to the member
7 in liquidation, whichever is less, but a member's total
8 liability for all claims under this Section may not
9 exceed the total amount of assets distributed to the
10 member.
11 Section 809. Grounds for administrative dissolution.
12 The Secretary of State may commence a proceeding to dissolve
13 a limited liability company administratively if the company
14 does not:
15 (1) pay any franchise taxes or penalties imposed by this
16 Act or other law within 60 days after they are due;
17 (2) deliver its annual report to the Secretary of State
18 within 60 days after it is due; or
19 (3) file articles of termination under Section 805
20 following the expiration of the specified term designated in
21 its articles of organization.
22 Section 810. Procedure for and effect of administrative
23 dissolution.
24 (a) If the Secretary of State determines that a ground
25 exists for administratively dissolving a limited liability
26 company, the Secretary of State shall enter a record of the
27 determination and serve the company with a copy of the
28 record.
29 (b) If the company does not correct each ground for
30 dissolution or demonstrate to the reasonable satisfaction of
31 the Secretary of State that each ground determined by the
32 Secretary of State does not exist within 60 days after
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1 service of the notice, the Secretary of State shall
2 administratively dissolve the company by signing a
3 certification of the dissolution that recites the ground for
4 dissolution and its effective date. The Secretary of State
5 shall file the original of the certificate and serve the
6 company with a copy of the certificate.
7 (c) A company administratively dissolved continues its
8 existence but may carry on only business necessary to wind up
9 and liquidate its business and affairs under Section 802 and
10 to notify claimants under Sections 807 and 808.
11 (d) The administrative dissolution of a company does not
12 terminate the authority of its agent for service of process.
13 Section 811. Reinstatement following administrative
14 dissolution.
15 (a) A limited liability company administratively
16 dissolved may apply to the Secretary of State for
17 reinstatement within 2 years after the effective date of
18 dissolution. The application must:
19 (1) recite the name of the company and the effective
20 date of its administrative dissolution;
21 (2) state that the ground for dissolution either did
22 not exist or have been eliminated;
23 (3) state that the company's name satisfies the
24 requirements of Section 105; and
25 (4) contain a certificate from the taxing authority
26 reciting that all taxes owed by the company have been
27 paid.
28 (b) If the Secretary of State determines that the
29 application contains the information required by subsection
30 (a) and that the information is correct, the Secretary of
31 State shall cancel the certificate of dissolution and prepare
32 a certificate of reinstatement that recites this
33 determination and the effective date of reinstatement, file
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1 the original of the certificate, and serve the company with a
2 copy of the certificate.
3 (c) When reinstatement is effective, it relates back to
4 and takes effect as of the effective date of the
5 administrative dissolution and the company may resume its
6 business as if the administrative dissolution had never
7 occurred.
8 Section 812. Appeal from denial of reinstatement.
9 (a) If the Secretary of State denies a limited liability
10 company's application for reinstatement following
11 administrative dissolution, the Secretary of State shall
12 serve the company with a record that explains the reason or
13 reasons for denial.
14 (b) The company may appeal the denial of reinstatement
15 to the name appropriate court within 30 days after service of
16 the notice of denial is perfected. The company appeals by
17 petitioning the court to set aside the dissolution and
18 attaching to the petition copies of the Secretary of State's
19 certificate of dissolution, the company's application for
20 reinstatement, and the Secretary of State's notice of denial.
21 (c) The court may summarily order the Secretary of State
22 to reinstate the dissolved company or may take other action
23 the court considers appropriate.
24 (d) The court's final decision may be appealed as in
25 other civil proceedings.
26 ARTICLE 9
27 CONVERSIONS AND MERGERS
28 Section 901. Definitions. In this article:
29 (1) "Corporation" means a corporation under the Business
30 Corporation Act of 1983, a predecessor law, or comparable law
31 of another jurisdiction.
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1 (2) "General partner" means a partner in a partnership
2 and a general partner in a limited partnership.
3 (3) "Limited partner" means a limited partner in a
4 limited partnership.
5 (4) "Limited partnership" means a limited partnership
6 created under the Revised Uniform Limited Partnership Act, a
7 predecessor law, or comparable law of another jurisdiction.
8 (5) "Partner" includes a general partner and a limited
9 partner.
10 (6) "Partnership" means a general partnership under the
11 Uniform Partnership Act, a predecessor law, or comparable law
12 of another jurisdiction.
13 (7) "Partnership agreement" means an agreement among the
14 partners concerning the partnership or limited partnership.
15 (8) "Shareholder" means a shareholder in a corporation.
16 Section 902. Conversion of partnership of limited
17 partnership to limited liability company.
18 (a) A partnership or limited partnership may be
19 converted to a limited liability company pursuant to this
20 Section.
21 (b) The terms and conditions of a conversion of a
22 partnership or limited partnership to a limited liability
23 company must be approved by all of the partners or by a
24 number or percentage of the partners required for conversion
25 in the partnership agreement.
26 (c) An agreement of conversion must set forth the terms
27 and conditions of the conversion of the interests of partners
28 of a partnership or of a limited partnership, as the case may
29 be, into interests in the converted limited liability company
30 or the cash or other consideration to be paid or delivered as
31 a result of the conversion of the interests of the partners,
32 or a combination thereof.
33 (d) After a conversion is approved under subsection (b),
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1 the partnership or limited partnership shall file articles of
2 organization in the office of the Secretary of State which
3 satisfy the requirements of Section 203 and contain:
4 (1) a statement that the partnership or limited
5 partnership was converted to a limited liability company
6 from a partnership or limited partnership, as the case
7 may be;
8 (2) its former name;
9 (3) a statement of the number of votes cast by the
10 partners entitled to vote for and against the conversion
11 and, if the vote is less than unanimous, the number or
12 percentage required to approve the conversion under
13 subsection (b); and
14 (4) in the case of a limited partnership, a
15 statement that the certificate of limited partnership is
16 to be canceled as of the date the conversion took effect.
17 (e) In the case of a limited partnership, the filing of
18 articles of organization under subsection (d) cancels its
19 certificate of limited partnership as of the date the
20 conversion took effect.
21 (f) A conversion takes effect when the articles of
22 organization are filed in the office of the Secretary of
23 State or at any later date specified in the articles of
24 organization.
25 (g) A general partner who becomes a member of a limited
26 liability company as a result of a conversion remains liable
27 as a partner for an obligation incurred by the partnership or
28 limited partnership before the conversion takes effect.
29 (h) A general partner's liability for all obligations of
30 the limited liability company incurred after the conversion
31 takes effect is that of a member of the company. A limited
32 partner who becomes a member as a result of a conversion
33 remains liable only to the extent the limited partner was
34 liable for an obligation incurred by the limited partnership
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1 before the conversion takes effect.
2 Section 903. Effect of conversion; entity unchanged.
3 (a) A partnership or limited partnership that has been
4 converted pursuant to this article is for all purposes the
5 same entity that existed before the conversion.
6 (b) When a conversion takes effect:
7 (1) all property owned by the converting partnership
8 or limited partnership is vested in the limited liability
9 company;
10 (2) all debts, liabilities, and other obligations of
11 the converting partnership or limited partnership
12 continue as obligations of the limited liability company;
13 (3) an action or proceeding pending by or against
14 the converting partnership or limited partnership may be
15 continued as if the conversion had not occurred;
16 (4) except as prohibited by other law, all of the
17 rights, privileges, immunities, powers, and purposes of
18 the converting partnership or limited partnership are
19 vested in the limited liability company; and
20 (5) except as otherwise provided in the agreement of
21 conversion under Section 902(c), all of the partners of
22 the converting partnership continue as members of the
23 limited liability company.
24 Section 904. Merger of entities.
25 (a) Pursuant to a plan of merger approved under
26 subsection (c), a limited liability company may be merged
27 with or into one or more limited liability companies, foreign
28 limited liability companies, corporations, foreign
29 corporations, partnerships, foreign partnerships, limited
30 partnerships, foreign limited partnerships, or other domestic
31 or foreign entities.
32 (b) A plan of merger must set forth:
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1 (1) the name of each entity that is a party to the
2 merger;
3 (2) the name of the surviving entity into which the
4 other entities will merge;
5 (3) the type of organization of the surviving
6 entity;
7 (4) the terms and conditions of the merger;
8 (5) the manner and basis for converting the
9 interests of each party to the merger into interests or
10 obligations of the surviving entity, or into money or
11 other property in whole or in part; and
12 (6) the street address of the surviving entity's
13 principal place of business.
14 (c) A plan of merger must be approved:
15 (1) in the case of a limited liability company that
16 is a party to the merger, by the members representing the
17 percentage of ownership specified in the operating
18 agreement, but not fewer than the members holding a
19 majority of the ownership or, if provision is not made in
20 the operating agreement, by all the members;
21 (2) in the case of a foreign limited liability
22 company that is a party to the merger, by the vote
23 required for approval of a merger by the law of the state
24 or foreign jurisdiction in which the foreign limited
25 liability company is organized;
26 (3) in the case of a partnership or domestic limited
27 partnership that is a party to the merger, by the vote
28 required for approval of a conversion under Section
29 902(b); and
30 (4) in the case of any other entities that are
31 parties to the merger, by the vote required for approval
32 of a merger by the law of this State or of the state or
33 foreign jurisdiction in which the entity is organized
34 and, in the absence of such a requirement, by all the
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1 owners of interests in the entity.
2 (d) After a plan of merger is approved and before the
3 merger takes effect, the plan may be amended or abandoned as
4 provided in the plan.
5 (e) The merger is effective upon the filing of the
6 articles of merger with the Secretary of State, or at such
7 later date as the articles may provide.
8 Section 905. Articles of merger.
9 (a) After approval of the plan of merger under Section
10 904(c), unless the merger is abandoned under Section 904(d),
11 articles of merger must be signed on behalf of each limited
12 liability company and other entity that is a party to the
13 merger and delivered to the Secretary of State for filing.
14 The articles must set forth:
15 (1) the name and jurisdiction of formation or
16 organization of each of the limited liability companies
17 and other entities that are parties to the merger;
18 (2) for each limited liability company that is to
19 merge, the date its articles of organization were filed
20 with the Secretary of State;
21 (3) that a plan of merger has been approved and
22 signed by each limited liability company and other entity
23 that is to merge;
24 (4) the name and address of the surviving limited
25 liability company or other surviving entity;
26 (5) the effective date of the merger;
27 (6) if a limited liability company is the surviving
28 entity, such changes in its articles of organization as
29 are necessary by reason of the merger;
30 (7) if a party to a merger is a foreign limited
31 liability company, the jurisdiction and date of filing of
32 its initial articles of organization and the date when
33 its application for authority was filed by the Secretary
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1 of State or, if an application has not been filed, a
2 statement to that effect; and
3 (8) if the surviving entity is not a limited
4 liability company, an agreement that the surviving entity
5 may be served with process in this State in any action or
6 proceeding for the enforcement of any liability or
7 obligation of any limited liability company previously
8 subject to suit in this State which is to merge, and for
9 the enforcement, as provided in this Act, of the right of
10 members of any limited liability company to receive
11 payment for their interest against the surviving entity.
12 (b) If a foreign limited liability company is the
13 surviving entity of a merger, it may not do business in this
14 State until an application for that authority is filed with
15 the Secretary of State.
16 (c) The surviving limited liability company or other
17 entity shall furnish a copy of the plan of merger, on request
18 and without cost, to any member of any limited liability
19 company or any person holding an interest in any other entity
20 that is to merge.
21 (d) Articles of merger operate as an amendment to the
22 limited liability company's articles of organization.
23 Section 906. Effect of merger.
24 (a) When a merger takes effect:
25 (1) the separate existence of each limited liability
26 company and other entity that is a party to the merger,
27 other than the surviving entity, terminates;
28 (2) all property owned by each of the limited
29 liability companies and other entities that are party to
30 the merger vests in the surviving entity;
31 (3) all debts, liabilities, and other obligations of
32 each limited liability company and other entity that is
33 party to the merger become the obligations of the
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1 surviving entity;
2 (4) an action or proceeding pending by or against a
3 limited liability company or other party to a merger may
4 be continued as if the merger had not occurred or the
5 surviving entity may be substituted as a party to the
6 action or proceeding; and
7 (5) except as prohibited by other law, all the
8 rights, privileges, immunities, powers, and purposes of
9 every limited liability company and other entity that is
10 a party to a merger become vested in the surviving
11 entity.
12 (b) The Secretary of State is an agent for service of
13 process in an action or proceeding against the surviving
14 foreign entity to enforce an obligation of any party to a
15 merger if the surviving foreign entity fails to appoint or
16 maintain an agent designated for service of process in this
17 State or the agent for service of process cannot with
18 reasonable diligence be found at the designated office. Upon
19 receipt of process, the Secretary of State shall send a copy
20 of the process by registered or certified mail, return
21 receipt requested, to the surviving entity at the address set
22 forth in the articles of merger. Service is effected under
23 this subsection at the earliest of:
24 (1) the date the company receives the process,
25 notice, or demand;
26 (2) the date shown on the return receipt, if signed
27 on behalf of the company; or
28 (3) five days after its deposit in the mail, if
29 mailed postpaid and correctly addressed.
30 (c) A member of the surviving limited liability company
31 is liable for all obligations of a party to the merger for
32 which the member was personally liable before the merger.
33 (d) Unless otherwise agreed, a merger of a limited
34 liability company that is not the surviving entity in the
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1 merger does not require the limited liability company to wind
2 up its business under this Act or pay its liabilities and
3 distribute its assets pursuant to this Act.
4 (e) Articles of merger serve as articles of dissolution
5 for a limited liability company that is not the surviving
6 entity in the merger.
7 Section 907. Article not exclusive. This article does
8 not preclude an entity from being converted or merged under
9 other law.
10 ARTICLE 10
11 FOREIGN LIMITED LIABILITY COMPANIES
12 Section 1001. Law governing foreign limited liability
13 companies.
14 (a) The laws of the state or other jurisdiction under
15 which a foreign limited liability company is organized govern
16 its organization and internal affairs and the liability of
17 its managers, members, and their transferees.
18 (b) A foreign limited liability company may not be
19 denied a certificate of authority by reason of any difference
20 between the laws of another jurisdiction under which the
21 foreign company is organized and the laws of this State.
22 (c) A certificate of authority does not authorize a
23 foreign limited liability company to engage in any business
24 or exercise any power that a limited liability company may
25 not engage in or exercise in this State.
26 Section 1002. Application for certificate of authority.
27 (a) A foreign limited liability company may apply for a
28 certificate of authority to transact business in this State
29 by delivering an application to the Secretary of State for
30 filing. The application must set forth:
31 (1) the name of the foreign company or, if its name
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1 is unavailable for use in this State, a name that
2 satisfies the requirements of Section 1005;
3 (2) the name of the state or country under whose law
4 it is organized;
5 (3) the street address of its principal office;
6 (4) the address of its initial designated office in
7 this State;
8 (5) the name and street address of its initial agent
9 for service of process in this State;
10 (6) whether the duration of the company is for a
11 specified term and, if so, the period specified;
12 (7) whether the company is manager-managed, and, if
13 so, the name and address of each initial manager; and
14 (8) whether the members of the company are to be
15 liable for its debts and obligations under a provision
16 similar to Section 303(c).
17 (b) A foreign limited liability company shall deliver
18 with the completed application a certificate of existence or
19 a record of similar import authenticated by the Secretary of
20 State or other official having custody of company records in
21 the state or country under whose law it is organized.
22 Section 1003. Activities not constituting transacting
23 business.
24 (a) Activities of a foreign limited liability company
25 that do not constitute transacting business within the
26 meaning of this article include:
27 (1) maintaining, defending, or settling an action or
28 proceeding;
29 (2) holding meetings of its members or managers or
30 carrying on any other activity concerning its internal
31 affairs;
32 (3) maintaining bank accounts;
33 (4) maintaining offices or agencies for the
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1 transfer, exchange, and registration of the foreign
2 company's own securities or maintaining trustees or
3 depositories with respect to those securities;
4 (5) selling through independent contractors;
5 (6) soliciting or obtaining orders, whether by mail
6 or through employees or agents or otherwise, if the
7 orders require acceptance outside this State before they
8 become contracts;
9 (7) creating or acquiring indebtedness, mortgages,
10 or security interests in real or personal property;
11 (8) securing or collecting debts or enforcing
12 mortgages or other security interests in property
13 securing the debts, and holding, protecting, and
14 maintaining property so acquired;
15 (9) conducting an isolated transaction that is
16 completed within 30 days and is not one in the course of
17 similar transactions of a like manner; and
18 (10) transacting business in interstate commerce.
19 (b) For purposes of this article, the ownership in this
20 State of income-producing real property or tangible personal
21 property, other than property excluded under subsection (a),
22 constitutes transacting business in this State.
23 (c) This Section does not apply in determining the
24 contacts or activities that may subject a foreign limited
25 liability company to service of process, taxation, or
26 regulation under any other law of this State.
27 Section 1004. Issuance of certificate of authority.
28 Unless the Secretary of State determines that an application
29 for a certificate of authority fails to comply as to form
30 with the filing requirements of this Act, the Secretary of
31 State, upon payment of all filing fees, shall file the
32 application and send a receipt for it and the fees to the
33 limited liability company or its representative.
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1 Section 1005. Name of foreign limited liability company.
2 (a) If the name of a foreign limited liability company
3 does not satisfy the requirements of Section 105, the
4 company, to obtain or maintain a certificate of authority to
5 transact business in this State, must use a fictitious name
6 to transact business in this State if its real name is
7 unavailable and it delivers to the Secretary of State for
8 filing a copy of the resolution of its managers, in the case
9 of a manager-managed company, or of its members, in the case
10 of a member-managed company, adopting the fictitious name.
11 (b) Except as authorized by subsections (c) and (d), the
12 name, including a fictitious name, of a foreign limited
13 liability company must be distinguishable upon the records of
14 the Secretary of State from:
15 (1) the name of any corporation, limited
16 partnership, or company incorporated, organized, or
17 authorized to transact business in this State;
18 (2) a company name reserved or registered under
19 Section 106 or 107; and
20 (3) the fictitious name of another foreign limited
21 liability company authorized to transact business in this
22 State.
23 (c) A foreign limited liability company may apply to the
24 Secretary of State for authority to use in this State a name
25 that is not distinguishable upon the records of the Secretary
26 of State from a name described in subsection (b). The
27 Secretary of State shall authorize use of the name applied
28 for if:
29 (1) the present user, registrant, or owner of a
30 reserved name consents to the use in a record and submits
31 an undertaking in form satisfactory to the Secretary of
32 State to change its name to a name that is
33 distinguishable upon the records of the Secretary of
34 State from the name of the foreign applying limited
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1 liability company; or
2 (2) the applicant delivers to the Secretary of State
3 a certified copy of a final judgment of a court
4 establishing the applicant's right to use the name
5 applied for in this State.
6 (d) A foreign limited liability company may use in this
7 State the name, including the fictitious name, of another
8 domestic or foreign entity that is used in this State if the
9 other entity is incorporated, organized, or authorized to
10 transact business in this State and the foreign limited
11 liability company:
12 (1) has merged with the other entity;
13 (2) has been formed by reorganization of the other
14 entity; or
15 (3) has acquired all or substantially all of the
16 assets, including the name, of the other entity.
17 (e) If a foreign limited liability company authorized to
18 transact business in this State changes its name to one that
19 does not satisfy the requirements of Section 105, it may not
20 transact business in this State under the name as changed
21 until it adopts a name satisfying the requirements of Section
22 105 and obtains an amended certificate of authority.
23 Section 1006. Revocation of certificate of authority.
24 (a) A certificate of authority of a foreign limited
25 liability company to transact business in this State may be
26 revoked by the Secretary of State in the manner provided in
27 subsection (b) if:
28 (1) the company fails to:
29 (i) pay any fees prescribed by law;
30 (ii) appoint and maintain an agent for service
31 of process as required by this article; or
32 (iii) file a statement of a change in the name
33 or business address of the agent as required by this
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1 article; or
2 (2) a misrepresentation has been made of any
3 material matter in any application, report, affidavit, or
4 other record submitted by the company pursuant to this
5 article.
6 (b) The Secretary of State may not revoke a certificate
7 of authority of a foreign limited liability company unless
8 the Secretary of State sends the company notice of the
9 revocation, at least 60 days before its effective date, by a
10 record addressed to its agent for service of process in this
11 State, or if the company fails to appoint and maintain a
12 proper agent in this State, addressed to the office required
13 to be maintained by Section 108. The notice must identify
14 the cause for the revocation of the certificate of authority.
15 The authority of the company to transact business in this
16 State ceases on the effective date of the revocation unless
17 the foreign limited liability company cures the failure
18 before that date.
19 Section 1007. Cancellation of authority. A foreign
20 limited liability company may cancel its authority to
21 transact business in this State by filing in the office of
22 the Secretary of State a certificate of cancellation.
23 Cancellation does not terminate the authority of the
24 Secretary of State to accept service of process on the
25 company for claims for relief arising out of the transactions
26 of business in this State.
27 Section 1008. Effect of failure to obtain certificate of
28 authority.
29 (a) A foreign limited liability company transacting
30 business in this State may not maintain an action or
31 proceeding in this State unless it has a certificate of
32 authority to transact business in this State.
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1 (b) The failure of a foreign limited liability company
2 to have a certificate of authority to transact business in
3 this State does not impair the validity of a contract or act
4 of the company or prevent the foreign limited liability
5 company from defending an action or proceeding in this State.
6 (c) Limitations on personal liability of managers,
7 members, and their transferees are not waived solely by
8 transacting business in this State without a certificate of
9 authority.
10 (d) If a foreign limited liability company transacts
11 business in this State without a certificate of authority, it
12 appoints the Secretary of State as its agent for service of
13 process for claims for relief arising out of the transaction
14 of business in this State.
15 Section 1009. Action by Attorney General. The Attorney
16 General may maintain an action to restrain a foreign limited
17 liability company from transacting business in this State in
18 violation of this article.
19 ARTICLE 11
20 DERIVATIVE ACTIONS
21 Section 1101. Right of action. A member of a limited
22 liability company may maintain an action in the right of the
23 company if the members or managers having authority to do so
24 have refused to commence the action or an effort to cause
25 those members or managers to commence the action is not
26 likely to succeed.
27 Section 1102. Proper plaintiff. In a derivative action
28 for a limited liability company, the plaintiff must be a
29 member of the company when the action is commenced; and:
30 (1) must have been a member at the time of the
31 transaction of which the plaintiff complains; or
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1 (2) the plaintiff's status as a member must have devolved
2 upon the plaintiff by operation of law or pursuant to the
3 terms of the operating agreement from a person who was a
4 member at the time of the transaction.
5 Section 1103. Pleading. In a derivative action for a
6 limited liability company, the complaint must set forth with
7 particularity the effort of the plaintiff to secure
8 initiation of the action by a member or manager or the
9 reasons for not making the effort.
10 Section 1104. Expenses. If a derivative action for a
11 limited liability company is successful, in whole or in part,
12 or if anything is received by the plaintiff as a result of a
13 judgment, compromise, or settlement of an action or claim,
14 the court may award the plaintiff reasonable expenses,
15 including reasonable attorney's fees, and shall direct the
16 plaintiff to remit to the limited liability company the
17 remainder of the proceeds received.
18 ARTICLE 12
19 MISCELLANEOUS PROVISIONS
20 Section 1201. Uniformity of application and
21 construction. This Act shall be applied and construed to
22 effectuate its general purpose to make uniform the law with
23 respect to the subject of this Act among states enacting it.
24 Section 1202. Short title. See Section 100.
25 Section 1203. Severability clause. The provisions of
26 this Act are severable under Section 1.31 of the Statute on
27 Statutes.
28 Section 1204. Effective date. See Section 1299.
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1 Section 1205. Transitional provisions.
2 (a) Before January 1, 2003, this Act governs only a
3 limited liability company organized:
4 (1) after December 31, 1997, unless the company is
5 continuing the business of a dissolved limited liability
6 company under Article 35 of the Limited Liability Company
7 Act; and
8 (2) before January 1, 1998 that elects, as provided
9 by subsection (c), to be governed by this Act.
10 (b) After December 31, 2002, this Act governs all
11 limited liability companies.
12 (c) Before January 1, 2003, a limited liability company
13 voluntarily may elect, in the manner provided in its
14 operating agreement or by law for amending the operating
15 agreement, to be governed by this Act.
16 Section 1206. Savings clause. This Act does not affect
17 an action or proceeding commenced or right accrued before the
18 effective date of this Act.
19 Section 1297. The Illinois Income Tax Act is amended by
20 changing Section 1501 as follows:
21 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
22 Sec. 1501. Definitions.
23 (a) In general. When used in this Act, where not
24 otherwise distinctly expressed or manifestly incompatible
25 with the intent thereof:
26 (1) Business income. The term "business income"
27 means income arising from transactions and activity in
28 the regular course of the taxpayer's trade or business,
29 net of the deductions allocable thereto, and includes
30 income from tangible and intangible property if the
31 acquisition, management, and disposition of the property
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1 constitute integral parts of the taxpayer's regular trade
2 or business operations. Such term does not include
3 compensation or the deductions allocable thereto.
4 (2) Commercial domicile. The term "commercial
5 domicile" means the principal place from which the trade
6 or business of the taxpayer is directed or managed.
7 (3) Compensation. The term "compensation" means
8 wages, salaries, commissions and any other form of
9 remuneration paid to employees for personal services.
10 (4) Corporation. The term "corporation" includes
11 associations, joint-stock companies, insurance companies
12 and cooperatives. Any entity, including a limited
13 liability company formed under the Illinois Limited
14 Liability Company Act or Uniform Limited Liability
15 Company Act (1995), shall be treated as a corporation if
16 it is so classified for federal income tax purposes.
17 (5) Department. The term "Department" means the
18 Department of Revenue of this State.
19 (6) Director. The term "Director" means the
20 Director of Revenue of this State.
21 (7) Fiduciary. The term "fiduciary" means a
22 guardian, trustee, executor, administrator, receiver, or
23 any person acting in any fiduciary capacity for any
24 person.
25 (8) Financial organization. The term "financial
26 organization" means any bank, bank holding company, trust
27 company, savings bank, industrial bank, land bank, safe
28 deposit company, private banker, savings and loan
29 association, building and loan association, credit union,
30 currency exchange, cooperative bank, small loan company,
31 sales finance company, investment company, or any person
32 which is owned by a bank or bank holding company. For
33 the purpose of this Section a "person" will include only
34 those persons which a bank holding company may acquire
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1 and hold an interest in, directly or indirectly, under
2 the provisions of the Bank Holding Company Act of 1956
3 (12 U.S.C. 1841, et seq.), except where interests in any
4 person must be disposed of within certain required time
5 limits under the Bank Holding Company Act of 1956.
6 (9) Fiscal year. The term "fiscal year" means an
7 accounting period of 12 months ending on the last day of
8 any month other than December.
9 (10) Includes and including. The terms "includes"
10 and "including" when used in a definition contained in
11 this Act shall not be deemed to exclude other things
12 otherwise within the meaning of the term defined.
13 (11) Internal Revenue Code. The term "Internal
14 Revenue Code" means the United States Internal Revenue
15 Code of 1954 or any successor law or laws relating to
16 federal income taxes in effect for the taxable year.
17 (12) Mathematical error. The term "mathematical
18 error" includes the following types of errors, omissions,
19 or defects in a return filed by a taxpayer which prevents
20 acceptance of the return as filed for processing:
21 (A) arithmetic errors or incorrect
22 computations on the return or supporting schedules;
23 (B) entries on the wrong lines;
24 (C) omission of required supporting forms or
25 schedules or the omission of the information in
26 whole or in part called for thereon; and
27 (D) an attempt to claim, exclude, deduct, or
28 improperly report, in a manner directly contrary to
29 the provisions of the Act and regulations thereunder
30 any item of income, exemption, deduction, or credit.
31 (13) Nonbusiness income. The term "nonbusiness
32 income" means all income other than business income or
33 compensation.
34 (14) Nonresident. The term "nonresident" means a
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1 person who is not a resident.
2 (15) Paid, incurred and accrued. The terms "paid",
3 "incurred" and "accrued" shall be construed according to
4 the method of accounting upon the basis of which the
5 person's base income is computed under this Act.
6 (16) Partnership and partner. The term
7 "partnership" includes a syndicate, group, pool, joint
8 venture or other unincorporated organization, through or
9 by means of which any business, financial operation, or
10 venture is carried on, and which is not, within the
11 meaning of this Act, a trust or estate or a corporation;
12 and the term "partner" includes a member in such
13 syndicate, group, pool, joint venture or organization.
14 Any entity, including a limited liability company
15 formed under the Illinois Limited Liability Company Act
16 or Uniform Limited Liability Company Act (1995), shall be
17 treated as a partnership if it is so classified for
18 federal income tax purposes.
19 For purposes of the tax imposed at subsection (c) of
20 Section 201 of this Act, the term "partnership" does not
21 include a syndicate, group, pool, joint venture or other
22 unincorporated organization established for the sole
23 purpose of playing the Illinois State Lottery.
24 (17) Part-year resident. The term "part-year
25 resident" means an individual who became a resident
26 during the taxable year or ceased to be a resident during
27 the taxable year. Under Section 1501 (a) (20) (A) (i)
28 residence commences with presence in this State for other
29 than a temporary or transitory purpose and ceases with
30 absence from this State for other than a temporary or
31 transitory purpose. Under Section 1501 (a) (20) (A) (ii)
32 residence commences with the establishment of domicile in
33 this State and ceases with the establishment of domicile
34 in another State.
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1 (18) Person. The term "person" shall be construed
2 to mean and include an individual, a trust, estate,
3 partnership, association, firm, company, corporation,
4 limited liability company, or fiduciary. For purposes of
5 Section 1301 and 1302 of this Act, a "person" means (i)
6 an individual, (ii) a corporation, (iii) an officer,
7 agent, or employee of a corporation, (iv) a member, agent
8 or employee of a partnership, or (v) a member, manager,
9 employee, officer, director, or agent of a limited
10 liability company who in such capacity commits an offense
11 specified in Section 1301 and 1302.
12 (18A) Records. The term "records" includes all
13 data maintained by the taxpayer, whether on paper,
14 microfilm, microfiche, or any type of machine-sensible
15 data compilation.
16 (19) Regulations. The term "regulations" includes
17 rules promulgated and forms prescribed by the Department.
18 (20) Resident. The term "resident" means:
19 (A) an individual (i) who is in this State for
20 other than a temporary or transitory purpose during
21 the taxable year; or (ii) who is domiciled in this
22 State but is absent from the State for a temporary
23 or transitory purpose during the taxable year;
24 (B) The estate of a decedent who at his or her
25 death was domiciled in this State;
26 (C) A trust created by a will of a decedent
27 who at his death was domiciled in this State; and
28 (D) An irrevocable trust, the grantor of which
29 was domiciled in this State at the time such trust
30 became irrevocable. For purpose of this
31 subparagraph, a trust shall be considered
32 irrevocable to the extent that the grantor is not
33 treated as the owner thereof under Sections 671
34 through 678 of the Internal Revenue Code.
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1 (21) Sales. The term "sales" means all gross
2 receipts of the taxpayer not allocated under Sections
3 301, 302 and 303.
4 (22) State. The term "state" when applied to a
5 jurisdiction other than this State means any state of the
6 United States, the District of Columbia, the Commonwealth
7 of Puerto Rico, any Territory or Possession of the United
8 States, and any foreign country, or any political
9 subdivision of any of the foregoing. For purposes of the
10 foreign tax credit under Section 601, the term "state"
11 means any state of the United States, the District of
12 Columbia, the Commonwealth of Puerto Rico, and any
13 territory or possession of the United States, or any
14 political subdivision of any of the foregoing, effective
15 for tax years ending on or after December 31, 1989.
16 (23) Taxable year. The term "taxable year" means
17 the calendar year, or the fiscal year ending during such
18 calendar year, upon the basis of which the base income is
19 computed under this Act. "Taxable year" means, in the
20 case of a return made for a fractional part of a year
21 under the provisions of this Act, the period for which
22 such return is made.
23 (24) Taxpayer. The term "taxpayer" means any person
24 subject to the tax imposed by this Act.
25 (25) International banking facility. The term
26 international banking facility shall have the same
27 meaning as is set forth in the Illinois Banking Act or as
28 is set forth in the laws of the United States or
29 regulations of the Board of Governors of the Federal
30 Reserve System.
31 (26) Income Tax Return Preparer.
32 (A) The term "income tax return preparer"
33 means any person who prepares for compensation, or
34 who employs one or more persons to prepare for
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1 compensation, any return of tax imposed by this Act
2 or any claim for refund of tax imposed by this Act.
3 The preparation of a substantial portion of a return
4 or claim for refund shall be treated as the
5 preparation of that return or claim for refund.
6 (B) A person is not an income tax return
7 preparer if all he or she does is
8 (i) furnish typing, reproducing, or other
9 mechanical assistance;
10 (ii) prepare returns or claims for
11 refunds for the employer by whom he or she is
12 regularly and continuously employed;
13 (iii) prepare as a fiduciary returns or
14 claims for refunds for any person; or
15 (iv) prepare claims for refunds for a
16 taxpayer in response to any notice of
17 deficiency issued to that taxpayer or in
18 response to any waiver of restriction after the
19 commencement of an audit of that taxpayer or of
20 another taxpayer if a determination in the
21 audit of the other taxpayer directly or
22 indirectly affects the tax liability of the
23 taxpayer whose claims he or she is preparing.
24 (27) Unitary business group. The term "unitary
25 business group" means a group of persons related through
26 common ownership whose business activities are integrated
27 with, dependent upon and contribute to each other. The
28 group will not include those members whose business
29 activity outside the United States is 80% or more of any
30 such member's total business activity; for purposes of
31 this paragraph and clause (a) (3) (B) (ii) of Section
32 304, business activity within the United States shall be
33 measured by means of the factors ordinarily applicable
34 under subsections (a), (b), (c), and (d) of Section 304
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1 except that, in the case of members ordinarily required
2 to apportion business income by means of the 3 factor
3 formula of property, payroll and sales specified in
4 subsection (a) of Section 304, such members shall not use
5 the sales factor in the computation and the results of
6 the property and payroll factor computations shall be
7 divided by 2 (by one if either the property or payroll
8 factor has a denominator of zero). The computation
9 required by the preceding sentence shall, in each case,
10 involve the division of the member's property, payroll,
11 or revenue miles in the United States, insurance premiums
12 on property or risk in the United States, or financial
13 organization business income from sources within the
14 United States, as the case may be, by the respective
15 worldwide figures for such items. Common ownership in
16 the case of corporations is the direct or indirect
17 control or ownership of more than 50% of the outstanding
18 voting stock of the persons carrying on unitary business
19 activity. Unitary business activity can ordinarily be
20 illustrated where the activities of the members are: (1)
21 in the same general line (such as manufacturing,
22 wholesaling, retailing of tangible personal property,
23 insurance, transportation or finance); or (2) are steps
24 in a vertically structured enterprise or process (such as
25 the steps involved in the production of natural
26 resources, which might include exploration, mining,
27 refining, and marketing); and, in either instance, the
28 members are functionally integrated through the exercise
29 of strong centralized management (where, for example,
30 authority over such matters as purchasing, financing, tax
31 compliance, product line, personnel, marketing and
32 capital investment is not left to each member). In no
33 event, however, will any unitary business group include
34 members which are ordinarily required to apportion
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1 business income under different subsections of Section
2 304 except that for tax years ending on or after December
3 31, 1987 this prohibition shall not apply to a unitary
4 business group composed of one or more taxpayers all of
5 which apportion business income pursuant to subsection
6 (b) of Section 304, or all of which apportion business
7 income pursuant to subsection (d) of Section 304, and a
8 holding company of such single-factor taxpayers (see
9 definition of "financial organization" for rule regarding
10 holding companies of financial organizations). If a
11 unitary business group would, but for the preceding
12 sentence, include members that are ordinarily required to
13 apportion business income under different subsections of
14 Section 304, then for each subsection of Section 304 for
15 which there are two or more members, there shall be a
16 separate unitary business group composed of such members.
17 For purposes of the preceding two sentences, a member is
18 "ordinarily required to apportion business income" under
19 a particular subsection of Section 304 if it would be
20 required to use the apportionment method prescribed by
21 such subsection except for the fact that it derives
22 business income solely from Illinois.
23 (28) Subchapter S corporation. The term
24 "Subchapter S corporation" means a corporation for which
25 there is in effect an election under Section 1362 of the
26 Internal Revenue Code, or for which there is a federal
27 election to opt out of the provisions of the Subchapter S
28 Revision Act of 1982 and have applied instead the prior
29 federal Subchapter S rules as in effect on July 1, 1982.
30 (b) Other definitions.
31 (1) Words denoting number, gender, and so forth,
32 when used in this Act, where not otherwise distinctly
33 expressed or manifestly incompatible with the intent
34 thereof:
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1 (A) Words importing the singular include and
2 apply to several persons, parties or things;
3 (B) Words importing the plural include the
4 singular; and
5 (C) Words importing the masculine gender
6 include the feminine as well.
7 (2) "Company" or "association" as including
8 successors and assigns. The word "company" or
9 "association", when used in reference to a corporation,
10 shall be deemed to embrace the words "successors and
11 assigns of such company or association", and in like
12 manner as if these last-named words, or words of similar
13 import, were expressed.
14 (3) Other terms. Any term used in any Section of
15 this Act with respect to the application of, or in
16 connection with, the provisions of any other Section of
17 this Act shall have the same meaning as in such other
18 Section.
19 (Source: P.A. 88-480; 89-399, eff. 8-20-95.)
20 Section 1298. The Limited Liability Company Act is
21 amended by adding Article 57 as follows:
22 (805 ILCS 180/Art. 57 heading new)
23 ARTICLE 57. APPLICABILITY; REPEAL
24 (805 ILCS 180/57-1 new)
25 Sec. 57-1. Applicability of Act.
26 (a) Except as provided in subsection (b), this Act
27 governs a limited liability company formed before January 1,
28 1998. This Act governs a limited liability company formed
29 after December 31, 1997 and before January 1, 2003 only if
30 that limited liability company is continuing the business of
31 a dissolved limited liability company under Article 35. A
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1 limited liability company may not be formed under this Act
2 after December 31, 1997 unless it is continuing the business
3 of a dissolved limited liability company under Article 35.
4 (b) A limited liability company formed before January 1,
5 1998 may voluntarily elect to be governed, before January 1,
6 2003, by Uniform Limited Liability Company Act (1995) as
7 provided in Section 1205 of that Act.
8 (805 ILCS 180/57-5 new)
9 Sec. 57-5. Repeal. This Act is repealed on January 1,
10 2003.
11 Section 99. Effective date. This Act takes effect
12 January 1, 1998.