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Stock or shareholders cannot be found in a Limited Liability Company. LLC is known as an "unincorporated entity" in legal circles because it is a creature of contract, instead of a corporation that is a creature of statute.
But what does "creature of contract" mean? Doesn't the Delaware LLC Act authorize LLC? Does that not make them statutory?
The answer to these questions is that corporations have statutory formalities and hierarchies they should follow and cannot waive. Corporations have default rules, many of which cannot be changed by the owners.
Structure of an LLC
To develop an LLC in Delaware there are no fixed rules. Instead, the entire structure can be created for an LLC by its internal structure. This contract is called the Operating Agreement. The LLC private Operating Agreement takes over to set forth the ownership structure and management structure after a general notice filing with the formation jurisdiction, known as a Certificate of Formation in Delaware.
This is mainly used for broad or a single business purpose. This will give broad or narrow powers to the managers. This will limit member liability for capital calls and also for other obligations.
Who owns the LLC?
There is no stock and shareholder in an LLC. Instead, the Operating Agreement has membership interests, which are not certificated. It is about the rights set out in the Operating Agreement.
Delaware permits maximum flexibility of contract when negotiating an Operating Agreement. In extremely rare cases, LLC members use this opportunity to opt into the Delaware General Corporation Law and establish members to create rights of corporate stockholders who vote for directors and appoint officers.
Most Delaware LLCs have owners named as members and operators called managers whose power and duties are set out in the Operating Agreement. This structure is much less bureaucratic than the formalities of the corporation, making LLCs more popular.
