A Curious Louisiana Statute on the Formation of LLCs
It is axiomatic, or least we
thought it to be, that an LLC cannot enter into an agreement prior to the LLC’s
formation. It is also taken as
axiomatic, or at least it was, that the existence of an LLC cannot commence
prior to the filing of the Articles of Organization (however denominated) by
the appropriate Secretary of State. To
that end, a contract entered into on behalf of a not yet formed LLC (a) binds
the purported agents of the LLC as principals in that the purported principal
did not yet exist; (b) the LLC will have any interest in that contract only if
assigned by the purported agents; and (c) the LLC lacks the capacity to ratify,
as contemplated by § 4.02(1) of the Restatement
(Third) of Agency, the transaction.
It turns out there is at least
one exception to these rules. Louisiana
has a most curious statute, L.S.A. § 12:1310.1, which provides:
Retroactivity of company's existence;
acquisition of immovable property prior to limited liability company's
existence
Whenever
any immovable property is acquired by one or more persons acting in any
capacity for and in the name of any limited liability company which has not
been issued a certificate of organization as provided by law, and the limited
liability company is subsequently issued a certificate of organization in
accordance with the provisions of R.S. 12:1304, the limited liability company's
existence shall be retroactive to the date of acquisition of an interest in
such immovable property, but such retroactive effect shall be without prejudice
to rights validly acquired by third persons in the interim between the date of
acquisition and the date that the limited liability company was issued the
certificate of organization.
By my reading of the statute,
but not having engaged in any other investigation, it is not required that the
real property by in Louisiana, something to think about if ever caught in this
situation.
Still, this is a circumstance
that should avoided.
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