Ultimate LLC Compliance Guide. Michael Spadaccini
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whether the name of the surviving entity will change when the merger becomes effective, whether a new registered agent or office will be appointed, whether there are any contingencies that must occur before the merger is effective)
A sample plan of merger for two fictitious LLCs, providing for a one-for-one ownership exchange, is located at the end of this chapter.
Once the plan of merger has been approved by the managers and owners of both entities, articles of merger must be prepared and submitted to the secretary of state. This is a document separate from the plan of merger. Generally, articles of merger are very brief. Like articles of organization, many secretary of state offices will provide form articles of merger for your use. In some states, you must attach a plan of merger to the articles of merger; in other states, you simply indicate in the articles of merger that the plan of merger is on file. If the merger involves a foreign entity, articles of merger must be sent to the secretary of state in both states.
Articles of merger should include:
• A copy of the plan of merger (if required by the state; if not, an indication that the plan is on file at company headquarters)
• The percentage interest or number of shares voted for and against the plan of merger
• An undertaking on the part of the surviving entity to assume the debts and liabilities of the disappearing entity or entities, if not already included in the plan of merger
• The signature of authorized officers of each entity
The following is a sample plan of merger. The first two paragraphs identify the merging LLCs. The merger is intended to qualify as a tax-free reorganization. Aluminum and Bituminous Coal, LLC (ABC) will be the survivor, assuming all the rights, properties, and liabilities of Dutch Everlight Foundry, LLC (DEF). Ownership shares will be exchanged on a one-for-one basis.
▼ Expert Tip
When you contact the secretary of state’s office to obtain articles of merger, specify whether or not a parent/subsidiary merger is involved. Different forms of articles of merger are used depending on the type of merger. Some states have short, fill-in-the-blank merger forms. The secretary of state will also tell you the fee for filing articles of merger. Don’t forget to consult with your business attorney as well.
ABC’s articles will govern, as amended, to change the name of the entity to ABC/DEF, LLC. ABC’s managers will continue as the managers of the surviving LLC. Both ABC and DEF will continue to operate in their ordinary course of business until the merger. The members of both LLCs must approve the plan.
Sample Plan of Merger
Agreement and Plan of Merger
This Agreement and Plan of Merger is made this February 14, 20__ between Aluminum and Bituminous Coal, LLC, a Washington LLC (ABC), and Dutch Everlight Foundry, LLC, an Oregon LLC (DEF).
Recitals
ABC is a Washington LLC with its principal place of business located in Spokane, Washington.
DEF is an Oregon LLC with its principal place of business located in Portland, Oregon.
Both ABC and DEF are manager-managed LLCs. The elected managers of ABC and DEF agree that it is in the best business interests of the LLCs and their owners that DEF be merged into ABC, in accordance with the terms and conditions of this Agreement and Plan of Merger, in such manner that this transaction qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1954, as amended.
Therefore, in consideration of the mutual covenants set forth in this Agreement and subject to the terms and conditions of this Agreement, the parties agree as follows:
1. DEF shall merge with and into ABC, which shall be the surviving LLC.
2. On the effective date of the merger, the separate existence of DEF shall cease and ABC shall succeed to all the rights, privileges, immunities, and franchises, and all the property, real, personal, or mixed of DEF, without the necessity for any separate transfer. ABC shall thereafter be responsible and liable for all liabilities and obligations of DEF, and neither the rights of creditors nor any liens on the property of the absorbed LLC shall be impaired by the merger.
3. The resulting ownership of the surviving LLC shall be computed as follows.
a. Concurrently with and immediately following the merger, the owners of DEF shall relinquish their ownership interest in DEF in exchange for an ownership in the surviving LLC (ABC) in accordance with and in the amount dictated by this Plan of Merger.
b. The ownership of the surviving LLC following the merger shall be apportioned such that the existing owners of ABC shall hold fifty percent (50%) of the ownership interest in the surviving LLC; such owners of ABC shall bear this reduction in overall ownership interest pro rata.
c. The ownership of the surviving LLC following the merger shall be apportioned such that the existing owners of DEF, in exchange for their relinquishment of ownership in DEF, shall hold fifty percent (50%) of the ownership interest in the surviving LLC; such owners of DEF shall be granted this ownership interest pro rata.
4. The articles of organization of ABC shall continue to be its articles of organization following the effective date of the merger, subject to the following amendment:
Article I of the articles of organization shall be amended to read as follows:
The name of the LLC is ABC/DEF, LLC.
5. The operating agreement of ABC shall continue to be its operating agreement following the effective date of merger.
6. The managers of ABC on the effective date of the merger shall continue as the managers of ABC for the full unexpired terms of their offices and until their successors have been elected or appointed and qualified.
7. Neither ABC nor DEF shall, prior to the effective date of the merger, engage in any activity or transaction other than in the ordinary course of business, except that each LLC may take all action necessary or appropriate under federal or state law to consummate this merger.
8. This Agreement and Plan of Merger shall be submitted for the approval of the owners of ABC and DEF, such approval to be obtained on or before December 31, 20__.
9. The effective date of this merger shall be the date when a certificate of merger is issued by the Secretary of State of the State of Washington.
In witness whereof, the parties have executed this Agreement and Plan of Merger as of the date set forth above.
| Aluminum and | Dutch Everlight |
| Bituminous Coal, LLC | Foundry, LLC |
| by ________________________ | by________________________ |
| President | President |
Sale of Assets
An LLC has the power to buy, sell, and dispose of its property by virtue of powers granted in the limited liability company act. Without this power, the LLC would be hard-pressed to conduct business. No member or manager approval is required to approve purchases or sales of LLC property in the ordinary conduct of the LLC’s business. If the LLC proposes to sell all or most of its assets or make an unusual sale outside of its ordinary course of business, manager approval is required. Member approval may be