Owners of an LLC Corporation, also known as members, are typically independent from the actions of the corporation, meaning, they have limited personal liability for the debts, actions, and obligations of the corporation. Most states do not restrict who can be a member, so members of an LLC can be individuals, corporations, other LLCs, and even foreign entities. Some states also allow LLCs to have just one owner. LLC Corporations in Minnesota are governed by Minn. Stat. § 322B.
LLC Member Duties, Responsibilities & Expectations: The Member Control Agreement
Duties, responsibilities, and expectations of LLC members are thoroughly documented during the creation of the LLC. This document is often referred to as the Member Control Agreement. It explains management, sharing of profits and losses, election of governors or managers, what happens on dissolution, termination, or liquidation of the LLC, as well measures for dispute resolution.
Much like a contract, the Member Control Agreement attempts to set out all the rules and procedures beforehand in an LLC, so that when something out of the ordinary happens, there is already procedure set up to deal with that matter. Oftentimes there can be problems between members, where one member does not quite hold up his end of the bargain. Members of an LLC are like partners, much like a marriage. If one member were to do whatever he wanted, such as give away all of his membership interest without telling the other members, it would be problematic. Without stipulated consequences or ways of dealing with such actions, there would be no way to prevent such a member from doing so, or to adequately address the situation.
Fully documenting the Member Control Agreement is a way of preventing such defection or inconsistent behavior within the agreed upon members, and if it does not prevent those actions, it determines ways in which to deal with those situations when they arise. There are also options regarding expulsion of members of an LLC pending conduct considered worthy of expulsion, however, that result is only allowed if it is an option under the Member Control Agreement.
Members of LLCs can vary in their individual duties relating to the corporation. It is often times the operating agreement, also known as the bylaws, which include the provisions about management of the business and the involvement of the members. Again, this is stipulated at the creation of the LLC and is typically discussed in full by the members beforehand. Creation, organization, and responsibilities are typically all established when the LLC is being formed, and the rules dictating the formation process vary from state to state. Minnesota Statute § 322B, is the primary resource for LLC formation in Minnesota.