Hello and thank you for your question. I think I have all the answers for you:
Q. I read that in New York there is only one class of members
A. That's not so. According to the New York LLC statute,
§ 102(q) "'Member' means a person who has been admitted as a
member of a limited liability company in accordance with the terms and
provisions of this chapter and the operating agreement and has a
membership interest in a limited liability company with the rights,
obligations, preferences and limitations specified under this
chapter and the operating agreement."
[Use the following links to zero in on the New York LLC statute: some
of these are Java links, which means they may not work by clicking on
them; whatever link does work you'll want to narrow down to the New
York LLC statute]
http://public.leginfo.state.ny.us/menuf.cgi
--and from there, "Laws of New York"
http://public.leginfo.state.ny.us/menugetf.cgi
-- and from there, "LLC"
-- and from there, "Article 1)
So you can, under New York law, use the operating agreement to create
whatever rights, obligations, preferences and limitations you might
desire.
Q. I also read that in CT members can only receive cash as distributions.
A. Not exactly. Here's what the Connecticut statute says:
Chap. 613, Sec. 34-160. "Distribution in kind. Except as provided in
the operating agreement: (1) A member, regardless of the nature of the
member's contribution, has no right to demand and receive any
distribution from a limited liability company in any form other than
cash, and (2) no member may be compelled to accept from a limited
liability company a distribution of any asset in kind to the extent
that the percentage of the asset distributed to the member exceeds a
percentage of that asset which is equal to the percentage in which the
member shares in distributions from the limited liability company.
http://search.cga.state.ct.us/dtsearch_pub_statutes.html"
[here again you may need to "drill down" through the above link to
get to Chapter 613 and the above section]
So first of all, you can put whatever provisions in the operating
agreement as are desired to override this provision, and second, the
only special rule for cash is that unless you put a contrary provision
in the operating agreement, the member can more easily demand a cash
distribution than he or she can demand property.
Q. How do the two states' rules for allocating interest compare?
A. In both states, the operating agreement will describe what the
rights of each class of members are, and what distributions if any
they can expect to receive. So there really is no difference between
them.
Q. Are there managers in a CT LLC
A. Yes, in both New York and Connecticut you can specify whether
management is by the members, or by some other manager, again in the
operating agreement.
Q. I want our LLC to be considered a partnership for tax purposes by the
IRS.
A. The tax law now requires the IRS to respect a "check the box
election" so you can easily get the partnership treatment that you
want.
" 8.19.1.4.2 (04-01-2004)
Determining Classification of Limited Liability Companies
Treasury Reg. sections 301.7701-1 through 301.7701-3 explain the
multi-step process for determining classification.
....
Any business entity that is not required to be treated as a
corporation [and that's certainly not an LLC (my note)]is an eligible
entity and may choose its classification under the rules of Treasury
Reg. section 301.7701-3.
http://www.irs.gov/irm/part8/ch19s01.html#d0e62125
So which to choose? There is one problem with a New York LLC - - to
organize it you will need to publish a legal notice in the New York
Law Journal or similar paper, and that can be very expensive (as much
as $3,500!).
http://www.pillsburywinthrop.com/topics/sample.asp?id=000068428741
Search terms used:
"New York" "limited liability company" statute
"check the box" site:irs.gov
Thanks again for bringing us your question. If you find any of the
above unclear, please hold off on rating my answer until I have a
chance to clarify.
Sincerely,
Richard-ga |
