Powers and rights of members and managers of limited liability companies - Next Generation Bar Exam

1. Under ULLCA (2013), what vote is required to act outside the ordinary course or to amend the operating agreement?

   The consent of all members. This default applies in both member-managed and manager-managed LLCs.

2. Under ULLCA (2013), how are ordinary matters decided in a manager-managed LLC?

   Exclusively by the manager, or by a majority of the managers if there is more than one. Members have no management rights solely by reason of membership.

3. Under ULLCA (2013), what agency power does a member have solely by reason of being a member?

   Membership alone does not make a member an agent of the LLC. Whether a member can bind the LLC depends on ordinary agency principles or a filed statement of authority.

4. In a manager-managed LLC, a member who holds no manager role signs a supply contract in the company's name. On what basis, if any, is the LLC bound?

   Only if the member had actual or apparent authority under agency principles. Membership alone confers no power to bind the company.

5. Under ULLCA (2013), how may an LLC publicly grant or limit a person's authority to act for it?

   By filing a statement of authority. A filed limitation on authority to transfer real property is effective against third parties once recorded.

6. Under ULLCA (2013), how are managers of a manager-managed LLC chosen and removed by default?

   By the consent of a majority of the members. A manager may be removed at any time, with or without cause.

7. Under ULLCA (2013), how are ordinary matters decided in a member-managed LLC?

   By a majority of the members. Each member has equal rights in management and conduct of the company's activities.

8. In a three-member member-managed LLC, two members vote to buy routine office supplies over the third member's objection. What is the effect of the vote?

   The purchase is validly approved, because ordinary matters are decided by a majority of the members. Unanimity is needed only for matters outside the ordinary course.

9. Under ULLCA (2013), when is a member entitled to a distribution before the LLC dissolves?

   Only when the LLC decides to make the distribution. A member has no right to demand an interim distribution, and none may be made if it would be improper.

10. Under ULLCA (2013), what information right does a member of a member-managed LLC have?

    To inspect and copy records about the company's activities, financial condition, and other circumstances. Members of manager-managed LLCs have more limited rights tied to a proper purpose.

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