May 01, 2001

Title Insurance Issues in Limited Liability Company Transactions (2001, 15:03)

Title Insurance Issues in Limited Liability Company Transactions

Probate and Property, May/June 2001, Volume 15, Number 3

By John C. Murray

The principal purposes of limited liability company (LLC) formation are to obtain favorable tax benefits, to create and maintain contractual flexibility (including the freedom of members to contract among themselves with respect to financial aspects of the LLC and to establish the management and standards governing the internal affairs of the LLC), and to shield a member’s personal assets from claims of outsiders and other members. All 50 states and the District of Columbia have adopted LLC statutes. Many states have revised and updated their LLC legislation in the past few years. Because of the variation in statutes from state to state, transactions involving LLCs present unique issues for title insurers. These include questions concerning title, such as the legality of transfers and encumbrances involving LLCs, continuation of a title policy upon dissolution of an LLC or upon transfer of property into an LLC, and the effect of a bankruptcy filing by an LLC.

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