LLC Member & Manager Liability (ULLCA 2013) - Next Generation Bar Exam

1. Under ULLCA (2013), what effect does an LLC's failure to observe formalities have on members' personal liability?

   It is not a ground for imposing personal liability on members or managers. Informality is common in LLCs, so the statute removes it as a basis for liability.

2. Under ULLCA (2013), what liability does a member who receives an improper distribution have?

   Liability to the LLC for the amount received, if the member knew the distribution was improper. Innocent recipients are not liable for the improper distribution.

3. An LLC manager negligently causes a car accident while driving on company business. What is the manager's liability to the injured person?

   Personal liability for the manager's own negligence. The LLC may also be vicariously liable, but the shield does not protect the manager from liability for her own tort.

4. What liability does an LLC member or manager have for its own tortious conduct?

   Personal liability for that conduct. The liability shield protects against vicarious liability for LLC obligations, not against one's own wrongs.

5. Under ULLCA (2013), within what period must a proceeding to recover an improper distribution be brought?

   Within two years after the distribution. The limitation provides repose to members and managers.

6. Under ULLCA (2013), what liability does a member or manager have for consenting to an improper distribution?

   Personal liability to the LLC for the amount exceeding what could properly have been distributed. Liability requires that the consent breach the person's duties to the LLC.

7. Under ULLCA (2013), when is a distribution by an LLC prohibited?

   When afterward the LLC could not pay its debts as they come due or its assets would be less than its liabilities. Both the equity insolvency test and the balance sheet test apply.

8. Under ULLCA (2013), what is the effect of a member's death or disability on a promised contribution?

   It does not excuse the obligation to contribute. The LLC may enforce a written promise of contribution against the member or the estate.

9. Under ULLCA (2013), what is a member's or manager's personal liability for the LLC's debts and obligations?

   A member or manager is not personally liable solely by reason of that status. The LLC's obligations are solely its own.

10. By what doctrine may a court impose personal liability on LLC members for the LLC's obligations?

    Piercing the veil. Courts apply veil-piercing to LLCs, though without relying on a lack of formalities.

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