The LLC Rights

by Joe Stone

Every state has enacted laws for the creation of a limited liability company, or LLC. An LLC comes into existence as a separate legal entity when the appropriate documents and filing fee are filed with the state agency charged with overseeing LLCs, usually the secretary of state. The rights of an LLC to engage in business are generally coextensive with the rights of any individual or other legal business entities.

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Powers and Rights

The powers and rights of an LLC are specified in each state's LLC laws. For example, Nevada LLC laws enumerate 12 general powers of an LLC that include the right to own property, lend or borrow money, enter into contracts and to sue in court. These statutes typically include a general grant of power to the LLC to do what is necessary to effect the purpose for which the LLC was created.

Prohibited Business Activity

Although LLCs can generally be created to engage in any lawful business activity, some states prohibit LLC from certain businesses. For example, Delaware prohibits LLCs from engaging in banking; Washington prohibits LLCs from engaging in the business of insurance; and Nevada allows an LLC to engage in insurance if approval is received from the Commissioner of Insurance.

Good Standing

In order to maintain its rights, an LLC must be in good standing with the state. Each state has an annual or biennial filing requirement that every LLC must perform in a timely manner. For example, in Nevada, an LLC must file an Annual List with the secretary of state that provides information that includes, among other things, its principal place of business, and the names and addresses of company managers.

Suspension or Involuntary Dissolution

An LLC jeopardizes its rights if it fails to maintain its good standing by making the required state filings. The penalty can range from suspension to involuntary dissolution -- that is, it will cease to exist. For example, in Florida, there are several grounds for an LLC to be administratively dissolved, such as failing to have a registered agent for more than 30 days, or not responding within that time frame to inquires from the secretary of state.