Delaware Limited Liability Company Also Protects Directors

2007-03-08 10:33:40

( Business )



Delaware has long been regarded as a state whose laws are friendly to corporations, especially to managements of corporations. These principles may also apply to a Delaware limited liability company or limited partnership. If you are in the process of forming a limited liability company, it would be good to consider some of these principles.

The tax advantages the state offers to owners of a Delaware corporation or a Delaware limited liability company are well known. You should also try to become more familiar with the state's liberal provisions regarding directors and their duties to the limited liability corporation.

While you are undergoing limited liability company formation, bear in mind that Delaware general corporation law allows a Delaware limited liability company to include a limitation of liability statement in its articles of incorporation that tend to protect its directors from personal liability. This statement essentially eliminates or limits a director's personal liability for breaches of fiduciary duty. You should consider writing such a statement into the articles of your Delaware limited liability company.

In case, however, your limited liability corporation has already been registered and you omitted putting a limitation of liability provision, you still have some recourse. Delaware law still gives directors some protection from personal liability through their business judgment rule. It protects against liability when directors act in good faith and with appropriate care. Note that officers of the limited liability corporation are not covered by these provisions.

It may interest you to know that Nevada law now provides that a director or officer is not individually liable for damages resulting from acts performed in official capacity, with certain limitations. Before this law was passed, the state merely allowed a Nevada limited liability company to write such provisions into their articles. Now there is express grant of such protections in a separate law.


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