The Alpha Arizona Limited Liability Kit
By Kermit Burton, Alpha Publications
Description:
Modern day entrepreneurs have for a long time sought to combine
the simplicity of a partnership with the liability protection
accorded a corporation or even a limited partnership.
This issue was seemingly addressed when Subchapter S of the
Internal Revenue Code was adopted; however, the restrictions
so imposed on Subchapter S corporations left many of these entrepreneurs
wholly distressed and avowing to seek a better way of doing
business which would encompass a combination of both a partnership
and corporation.
It was not until the year 1988 that the Internal Revenue
Service issued 'Letter Ruling No. 9147017' which granted partnership
status, for income tax purposes, to limited liability companies
organized under the Wyoming Limited Liability Company Act.
This was of course notable since Wyoming had enacted its
limited liability company laws in 1977, even though the core
advantage of such laws did not have the approval of the Internal
Revenue Service. Thus, from 1977 to 1988, the Wyoming Limited
Liability Company Laws were not effective to the extent that
it allowed a limited liability company to be a non-taxable entity.
The Internal Revenue Service had long opposed the concept
of a partnership tax treatment for a limited liability company
on the grounds that Subchapter S of the Internal Revenue Code
addressed the relief advocated under the limited liability company
laws, since it allowed a corporation the right to elect to be
taxed as a partnership.
The inherent problem with Subchapter S is that it imposes
some very restrictive requirements on both the number and type
of stockholders, the division of profits and the type of corporate
income, to name a few. None of these restrictions are present
under the limited liability company rules adopted by the Internal
Revenue Service.
In 1992, Arizona became the seventeenth state to adopt limited
liability company laws, which have been revised several times
during the ensuing years. The most recent revision was during
1997 when the laws were revised to the extent that one person
could be a limited liability company.
The effect of this revision is that a sole proprietorship
can now enjoy the same liability protection as a corporation
while being taxed as an individual taxpayer. In other words,
the one person limited liability company is not a tax paying
entity, but a pass-through entity.
The great news is that this Alpha Arizona Limited Liability
Company Kit is the entrepreneurs ultimate working tool since
it provides all of the documents, forms and instruments necessary
to organize and operate either a regular or professional Arizona
Limited Liability Company, including certificates of membership
that evidence both each member's interest and percentage of
ownership.
A cursory review of the Check List that precedes the Table
of Contents shows that this Kit includes, among other things,
articles of organization which are similar in many respects
to articles of incorporation. And while the governing instrument
that formalizes the limited liability company with the State
of Arizona is the articles of organization, it is the operating
agreement that legally binds the members together as a legally
viable business organization.
The Operating Agreement is the singularly most important
document in a limited liability company, since it incorporates
every agreement, authority, power, privilege and understanding
between the members.
The Operating Agreement is a ten page document that includes
twenty-seven separate Articles that provide the complete contractual
rights and obligations between the members of the limited liability
company.
It will however be mentioned here that if the limited liability
company is a one person limited liability company, then the
operating agreement is not applicable since there are no partnership
characteristics present. All of the authorities, privileges
and powers are inclusive in the articles of organization and
the state limited liability company statutes.
This Kit also includes minutes of the organizational meeting
of the members, where the managers are appointed, if management
will be vested with managers, and the Operating Agreement is
adopted.
Additional minutes included in this kit are:
- (1) The monthly meeting of the managers;
- (2) The monthly meeting of the members;
- (3) The special meeting of the managers;
- (4) The special meeting of the members;
- (5) The annual meeting of the members; and
- (6) The annual meeting of the managers.
Each of these documents and forms are fully described as
to their legal and operational purposes in Chapter Five, starting
on page 15.
Since the capitalization of a limited liability company is
funded with the capital contributions made, or promised to be
made, by its members, this kit also includes a legally binding
Capital Contribution Agreement, which obligates each member
to contribute the amount and kind of agreed upon capital.
In each of the chapters that follow this Introduction, important
information is provided regarding not only limited liability
companies, but also, sole proprietorships, general partnerships,
limited partnerships, "C" corporations and "S" corporations.
This text includes an Appendix A, Pages 31-34 (Yellow Pages),
which is a directory of the addresses and phone numbers of the
incorporating departments in all 50 states. This information
may be helpful if you plan to pursue your business objectives
outside of Arizona.
This text also includes an Appendix B, starting on page 35
(Blue Pages), which includes illustrated examples of each of
the documents, forms and instruments in this kit. These examples
are real life examples that closely resemble the apparent facts
in many business situations.
Since this text is briefly written without legal phraseology,
every effort should be made to read this material before selecting
and preparing the forms."
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