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Question & Answer
Question:"We've seen an increase of accounts opening as LLC (Limited Liability Corporations). How do we treat them as far as documentation is concerned? What should we require to open an account?"
Answer: Limited Liability Corporations (LLCs) are "hot" items right now. They're corporations that are treated as partnerships. (As opposed to LLPs-which are partnerships treated as corporations!) Basically, the LLC was invented so that several or many individuals could form a corporation, but if one of the partners commits a fraud, the other partners can't be sued. Only the wrongdoer can be held liable and accountable for the crime.
As far as documentation is concerned, to open an account, you'll want to have on file with your signature cards a properly completed resolution, with a seal, telling you who can sign on the account.
If you open an LLP (Limited Liability Partnership) you will need a partnership resolution or agreement, at the very least, with your signature cards.
The big problems with LLCs and LLPs will be in the loan area. An LLC, for instance, is run more flexibly than a regular corporation. You may have to ask for an operations agreement to show how the corporation is going to be managed, with a list of operating officers. Each state is putting together their requirements, which should be in place shortly, and will probably be communicated to the financial industry by the state. At the moment, the whole arrangement is under constant change. We'll update as we are able.
Copyright © 1995 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 6, 2/95
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