Maryland LLC Laws/Cases
June 14, 2008
Last Revised: May 23, 2012 4:50 PM
The actual Maryland Statutes regarding LLCs are HERE.
General information about LLCs HERE.
Restructuring Vibrant Life into an LLC is HERE.
This page mostly provides data and links to resources for changes and case law relative to Maryland LLCs.
The attorney General of Maryland maintains a web site and posts there various legal items, including his written opinions on various subjects.
His web site is HERE.
Here is an example of a question and answer by the Maryland Attorney General:
Question: May a business organized as a foreign general partnership change its form to a Maryland limited liability company ("LLC") without paying recordation and transfer taxes related to the consequent transfer of real property from the partnership to the LLC?
Answer: A foreign partnership that converts to a Maryland LLC by certain methods may claim the exemption set forth in Tax Property Article, §12-108(y), if the conditions of the exemption are satisfied. However, a foreign partnership may not transform itself into a Maryland LLC under a special conversion provision in the Maryland LLC law that avoids the obligation to pay recordation and transfer taxes.
Opinion No. 99-015
October 12, 1999
Here is another official source for Maryland Laws and Cases that Relate to various laws:
Searching for Maryland Statutes When You Don’t Have a Citation
Many public libraries in Maryland subscribe to the Annotated Code of Maryland in print. This print version of the Code is the version you should use if possible for two reasons: (1) It is the official version, the one most accepted by Maryland's courts; and (2) at the end of each statute section, the Code's editors list, summarize, and provide citations to cases that have interpreted that statute section. These case annotations will give you a head start on finding cases related to your problem. Here are the steps for using the Annotated Code of Maryland in print:
1. Look up words related to your problem in the subject index.
2. Look up the code sections cited after each of the words you looked up.
3. Each of those code sections will appear in a hardbound volume. The hardbound volume may be several years old, so you need to update it. The first step in updating a statute is to look for a soft pamphlet in the back of the hardbound volume. This soft pamphlet is called a pocket part.
4. If you find a pocket part, look for your section number in it. If you find your section in the pocket part, read for changes made to the section since the hardbound volume was published.
5. If you don’t find a pocket part, look for a soft supplemental pamphlet sitting next to the hard volume on the shelf. If you find a supplemental pamphlet, check it for changes to your section.
6. After you check the pocket part or supplemental pamphlet, you still have to look for pamphlets at the end of the code called “Advance Sheets” or “Advanced Legislative Service.” These pamphlets are published monthly to show any changes made since the pocket parts to each code volume were published. The advance sheets update the entire code, not just one volume. They are usually shelved right before the index volumes.
The unannotated Maryland statutory code is available free on the web through the Maryland State Law Library website . Unfortunately, because it is "unannotated" it will not give you any summaries of or citations to cases that discuss the statutes you find. If you don't have access to a public library or your local branch library doesn't subscribe to the Annotated Code of Maryland, however, it is better than nothing. To search this free, unannotated version of the Maryland Code, first click in the box to the left of “Maryland Code” to select that database, then type words related to your legal problem in the box next to “Search,” and click the “Go” button. A new screen will appear that shows you a linked list of Code sections that have your search terms in them. You can click on any linked item in the list to go to that Code section.
Limited Liability Companies
Membership and Activities
Since enactment of the Maryland Limited Liability Company Act of 1992, the limited liability company (LLC) has grown in popularity and has been used for a wider range of purposes than was originally anticipated. One new area of use is in the not-for-profit arena. In other states, LLCs are used as the vehicle through which tax-exempt organizations can conduct activities related to or supporting their purposes. In Maryland, however, it is not clear that an LLC can be used for not-for-profit purposes.
House Bill 379 (passed) alters Maryland's Limited Liability Company Act to modernize the law and facilitate the use of LLCs for not-for-profit purposes. The bill broadens the purposes for which an LLC may be organized by authorizing an LLC to conduct activities related to any lawful activity, whether or not for profit, except the business of acting as an insurer. The bill also changes the current law requirement that a member must hold an economic interest in the LLC by expanding the current definition of a "member" to include a person who is admitted as a member, and allowing a person to be admitted as a member without making a contribution or acquiring an interest in the LLC. These changes are intended to ensure that a nonprofit LLC can qualify for tax-exempt status under the Internal Revenue Code, which prohibits the inurement to a member of any economic benefit derived from a tax-exempt organization. House Bill 379 also alters the method for dissolving or winding up the affairs of an LLC, and establishes a mechanism for continuation of an LLC after it ceases to have any members.
The bill also allows commercial lenders who lend money to an LLC to take a noneconomic voting interest in the LLC and protects the lender's lien by ensuring that the LLC will continue in existence even if all the economic owners withdraw from the entity. The bill brings Maryland's LLC statute into conformity with the neighboring states of Delaware, Virginia, and North Carolina.Source
Who may form a Limited Liability Company in Delaware?
The Statute on LLCs defines these words:
§ 18-101. Definitions.
(12) "Person" means a natural person, partnership (whether general or limited), limited liability company, trust, estate, association (including any group, organization, co-tenancy, plan, board, council or committee), corporation, government (including a country, state, county or any other governmental subdivision, agency or instrumentality), custodian, nominee or any other individual or entity (or series thereof) in its own or any representative capacity, in each case, whether domestic or foreign.
(13) "Personal representative" means, as to a natural person, the executor, administrator, guardian, conservator or other legal representative thereof and, as to a person other than a natural person, the legal representative or successor thereof.
§ 18-301. Admission of members.
(a) In connection with the formation of a limited liability company, a person is admitted as a member of the limited liability company upon the later to occur of:
The actual Certificate of Formation for Vibrant Life LLC, starts with the words: "The names and addresses of the members are .... Karl Loren ...."
One question might be whether it is OK for "Karl Loren" to be the "name" of a "member" of this LLC. Or, put another way, is "Karl Loren" a "person" as defined above, who can be admitted as a member of an LLC?
The term "natural person" is not defined within the Delaware Statute, but here is a usual definition:
A living, breathing human being, as opposed to a legal entity such as a corporation. Different rules and protections apply to natural persons and corporations, such as the Fifth Amendment right against self-incrimination, which applies only to natural persons.
The two sections of the Delaware Statute on LLCs, quoted above, and the web source for a definition of "natural person" seem to make it clear that "Loren C. Troescher," a "natural person," is included within the Delaware definition of "person" and also included within that Delaware definition is the phrase:
any other . . . nominee or any other individual or entity . . .in its own or any representative capacity
The conclusion here is that "Karl Loren" can properly be a "member" of the Delaware LLC, as can "Jean Ross" or "Bet Operational."
Quotes from L. Ron Hubbard are copyright 1994 © by the L. Ron Hubbard Library. All rights reserved.