Discuss with your counsel how best to address the events and con- sequences of a member's disassociation while ensuring maintenance of partnership tax treatment. Early indications are that in order to ensure the lack of con- tinuity of life and help avoid characterization as a corporation, your LLC's organizational documents should specify both an expiration date and the authority for members to dissolve the business before this date in specified circumstances. Without such authority, the mere designation of an expiration date may be insufficient to avoid a finding of continuity of life. This chapter explores the planning options available for LLCs to structure firm management. Before drafting your LLC's operating agreement to address the management responsibilities of members and, if applicable, managers, consider the default provision of your state's LLC law.
Some states say little on the subject while other states painstakingly detail such responsibilities.
Experience suggests that the smaller the business, the easier it is to share management responsibility, while the bigger the business, the more important centralized management becomes. Although you will want to avoid having a majority of corporate characteristics in order to preserve your LLC's partnership tax treatment, consider providing cen- tralized management to help run your business effectively. Check the applicable voting standards in your state. If the de- fault provisions are unacceptable, it may be possible to vary them in your operating agreement. Specify in your operating agreement such housekeeping matters as how much notice must be given to members before a meeting, whether participation by telephone or other communication equipment is acceptable and what constitutes a quorum to permit the transaction of business.