Louisiana businesses have a variety of organizational forms that can be used, depending on the purpose of the business and its capital structure. Partnerships and corporations were once the principal forms used by most businesses, while certain real estate projects used limited partnerships. The major purpose of all of these entities was to attract capital and limit the risk of investments. Each form was useful, but each also had drawbacks. The corporate form proved too cumbersome, and partnerships could not be organized to limit investor liability. In 1992, the Louisiana legislature followed the lead of other states and passed a statute that allowed formation of limited liability companies.
Limited liability companies were intended to use the best features of both corporations and partnerships. A LLC is formed by filing articles of organization with the secretary of state. An LLC can virtually have an unlimited number of members, as long as one member is designated the manager. The articles of formation usually identify the first manager and the first board of managers. After the articles are filed, the members usually adopt a set of by-laws that remain confidential. The articles specify which individuals will actually manage the business of the LLC and specify the voting requirements for electing new managers. The by-laws also specify the method for adding new members, i.e., investors.
The LLC form works for almost any type of business, and it is often used when a group of investors wishes to remain largely passive while letting others run the business. The by-laws can prescribe multiple classes of investments and can limit membership on the board of managers to a handful of individuals who may or may not be actual investors. The by-laws can also establish other rights and obligations of members and managers to meet the special needs of the business.
LLCs can be easily created, but just as no two businesses are alike, no two LLCs are identical. Anyone who wishes to organize a business as an LLC may wish to consult an experienced business law attorney for advice on different management forms, distribution of income and other issues that will affect the management of the business.