Glossary of LLC Terms
This section provides definitions of terms commonly used in connection with limited liability companies. Some terms are “borrowed” from other entities and some are unique to limited liability companies. Many are specifically defined in LLC statutes but some simply represent common usage.
Articles of organization – the document which, in most states, is filed with the appropriate state office to form the limited liability company. In some states, such as Delaware, the similar document is called the “certificate of formation.”
Assumed limited liability company name – any limited liability company name other than the true limited liability company name, except that the identification by a limited liability company of its business with a trademark or service mark of which it is the owner or licensed user shall not constitute the use of an assumed name under this Act.
Certificate of formation – the document which, in some states such as Delaware, is filed with the Secretary of State to form the limited liability company. In most states, the similar document is called the “articles of organization.”
Charging order – an order obtained from a court or judge by a judgment creditor, by which the distributional interest of the judgment debtor in a limited liability company is charged with the payment of the amount of judgment (usually with interest and costs).
Check-the-box – the IRS procedure that permits a taxpayer to elect whether the LLC will be taxed as a partnership (or a disregarded entity) or a corporation.
Contribution – any cash, property, or services rendered or a promissory note or other binding obligation to contribute cash or property or to perform services, that a person contributes to the limited liability company in that person’s capacity as a member.
Disregarded entity – a single member LLC which, for federal tax purposes, is considered to be an undivided part of the person or entity who owns it.
Dissociate – withdraw from or cease to be a member of a limited liability company. A dissociated member may or may not continue to have an economic interest in the LLC, depending upon the operating agreement and the governing state’s law.
Distribution – a transfer of money, property, or other benefit from a limited liability company to a member in the member’s capacity as a member or to a transferee of the member’s distributional interest.
Distributional interest – all of a member’s interest in distributions by the limited liability company.
Domestic limited liability company – a limited liability company organized under the laws of the state which is using the term in connection with the llc. It is the opposite of a foreign limited liability company.
Federal employer identification number (FEIN) – a nine-digit the federal employer identification number assigned by the Internal Revenue Service to the limited liability company. A single member limited liability company without employees may use the member’s social security number in lieu of an FEIN.
Foreign limited liability company – a limited liability company organized under the laws of a state other than the state in which it is seeking authority to conduct business and which is using the term in connection with the llc. It is the opposite of a domestic limited liability company.
Limited liability company – a statutory entity formed or organized under a state’s limited liability company laws.
Limited liability company agreement – another name for an operating agreement.
Manager – a person, whether or not a member of a manager-managed company, who is vested with authority to manage the affairs of the limited liability company.
Manager-managed company – a limited liability company which is so designated in its articles of organization.
Member – a person who becomes a member of the limited liability company upon formation of the company or in the manner and at the time provided in the operating agreement or, if the operating agreement does not so provide, in the manner and at the time provided in the applicable statute.
Member-managed company – a limited liability company other than a manager-managed company.
Membership interest – a member’s rights in the limited liability company, including the member’s right to receive distributions of the limited liability company’s assets.
Operating agreement – the agreement concerning the relationship among the members, managers and limited liability company.
Organizer – one of the signers of the original articles of organization. This person may, but need not be, a member or a manager of the LLC.
Registered agent – a person who is an agent for service of process on the limited liability company who is appointed by the limited liability company and whose address is the registered office of the limited liability company.
Registered office – the office maintained by the limited liability company in a state at which any process, notice, or demand required or permitted by law may be served upon the registered agent of the limited liability company.
Series LLC – a limited liability company which permits the designation of separate series or “cells” which are essentially like separate LLCs, isolating the assets of one cell from the liabilities of another in the same LLC. Only a few states have enacted provisions allowing Series LLCs and the implementation of the concept varies significantly among those few adopting states.
Single member LLC – a limited liability company which is owned by a single person or entity. In the early years of LLCs, many states required that, like partnerships, LLCs could only be formed if there were two or more members. All states now permit some form of single member LLC.
SMLLC – an acronym for a single member limited liability company.