Hi, this is Lee Phillips.
I'm an attorney.
I want to comment on one of the elements of a corporation
and maybe or maybe not an element of an LLC.
And that is continuity of life.
Now, that doesn't mean that the company goes on forever.
That's perpetuality of life of the company.
You get to answer the question, do you want my company
to be perpetual?
Or do you want it to be a 20 year long company,
and then it ends at the end of 20 years?
That's on the state forms.
That's on lots of forms that you fill out
when you create a corporation or an LLC.
Continuity of life is different.
What it means is does the company continue
after the death of a stockholder in a corporation or a member
in an LLC?
Stockholders, members, same guys, remember that?
So the question is does the company continue?
The answer with a corporation is absolutely, positively yes.
By law, a corporation has the element of continuity of life.
And that means if one of the stockholders dies,
then we don't have to worry about the company dying.
It just goes on.
LLCs are different.
They get choose a limited number of these elements that
are associated with a corporation, continuity
of life, transferability, limited liability,
centralized management.
They get to choose these elements.
And they can choose so many in order to have an LLC,
limited liability company, otherwise, not
a limited liability company.
Corporation?
Well, if you don't have all the elements of a corporation,
and you don't have any more elements
that are required in the LLC, probably a partnership.
So discussion of this is important
when you're creating the LLC.
If you choose continuity of life,
there will be something in the operating agreement that
says that upon the death of a member,
this company will continue.
I just chose continuity of life.
That means I can't choose maybe transferability
or centralized management or limited liability.
So I get to choose two of these four elements to be an LLC.
Continuity of life, well, we had a big case a while back,
dad was dying, patriarch of the family.
The kids are all members.
Everybody's members of the LLC.
And these people are some of the best known people in our state,
They're nationally known people.
And they came to me and they said,
Lee, we have the best lawyers in the state.
We have the best counsel in the state.
Dad's dying.
We just want you to look this stuff over and make
sure it's OK.
So we got the operating agreement.
We couldn't find it.
Dad was dying in a matter days.
The accountant had the operating agreement.
And by the way, the accountants have
to read the operating agreement.
The lawyer never reads the operating agreement.
Well, the accountants do.
They had the operating agreement.
We found the operating agreement.
And we started to read it.
One of the specifics that I was looking
for was continuity of life-- is this
going to die when dad dies?
And the answer is yes.
They did not have continuity of life.
It said, in the document, when the member dies,
the company dies.
Dad dies two weeks later-- actually,
it was about four days later.
That's OK.
We can reconstitute the company.
We can go on.
But we went further than that.
We got a list of the members.
I went down the member list.
Where's this son?
Where's that son?
Where's that-- oh, that son died three years ago.
What does that mean?
That means that they have been operating a huge LLC
with no liability shield.
By definition of law, they were a partnership.
By their own document, they were a partnership.
So these little decisions that you make,
continuity of life, centralized management, member management,
manager manager-- remember that, there's
another video on it-- these are all
important decisions that you're making when you create an LLC.
Hopefully you understand continuity
of life a little better, has nothing
to do with the perpetual nature of the company
or the 20 year nature of the company.
It's does the company survive the death of one of the owners.
This is Lee [? Philips ?] giving you a little heads up
on continuity of life.