(a)Limited Liability Rule.

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Terms Used In Tennessee Code 48-217-101

  • Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
  • Business: includes every trade, occupation, profession, investment activity and other lawful purpose for gain or the preservation of assets whether or not carried on for profits. See Tennessee Code 48-202-101
  • Contract: A legal written agreement that becomes binding when signed.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Dissolution: means that the LLC has incurred an event under §. See Tennessee Code 48-202-101
  • Employee: includes an officer but not a director. See Tennessee Code 48-11-201
  • Governor: means a natural person or entity serving on the board of governors of a board-managed LLC. See Tennessee Code 48-202-101
  • Interest: means either or both of the following rights under the organic law of an unincorporated entity:
    (A) The right to receive distributions from the entity either in the ordinary course or upon liquidation. See Tennessee Code 48-11-201
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • LLC: means a limited liability company, organized under chapters 201-248 of this title. See Tennessee Code 48-202-101
  • Manager: means a person elected, appointed, or otherwise designated as a manager by the governing body, and any other person considered elected as a manager pursuant to §. See Tennessee Code 48-202-101
  • Member: means a person reflected in the required records of an LLC as the owner of some governance rights of a membership interest of the LLC. See Tennessee Code 48-202-101
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Operating agreement: means a written agreement described in §. See Tennessee Code 48-202-101
  • Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
  • Person: includes individual and entity. See Tennessee Code 48-202-101
  • Proceeding: includes civil suit and criminal, administrative, and investigatory action. See Tennessee Code 48-202-101
  • Secretary: means the corporate officer to whom the bylaws or the board of directors has delegated responsibility under §. See Tennessee Code 48-11-201
  • signed: includes a mark, the name being written near the mark and witnessed, or any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, regardless of being witnessed. See Tennessee Code 1-3-105
  • Termination: means the end of an LLC's existence as a legal entity and occurs when the articles of termination are filed with the secretary of state under §. See Tennessee Code 48-202-101
  • Tort: A civil wrong or breach of a duty to another person, as outlined by law. A very common tort is negligent operation of a motor vehicle that results in property damage and personal injury in an automobile accident.
(1) Except as provided in subsections (e) and (f), a member, holder of financial interest, governor, manager, employee or other agent of an LLC does not have any personal obligation and is not otherwise personally liable for the acts, debts, liabilities, or obligations of the LLC whether such arise in contract, tort or otherwise.
(2) A member, holder of financial interest, governor, manager, employee or other agent of an LLC does not have any personal obligation and is not otherwise personally liable for the acts or omissions of any other member, manager, governor, employee or other agent of the LLC.
(3) Notwithstanding subdivisions (a)(1) and (2), a member, holder of financial interest, governor, manager, employee or other agent may become personally liable in contract, tort or otherwise by reason of such person‘s own acts or conduct.
(b)Limited Liability after Dissolution. The limited liability described in subsection (a) continues in full force regardless of any dissolution, winding up, and termination of an LLC.
(c)Member Not a Proper Party to Proceeding. A member, holder of financial interest, governor, or manager of an LLC is not a proper party to a proceeding by or against an LLC except:

(1) Where the object of the proceeding is to enforce such person’s right against or liability to the LLC;
(2) In a derivative action brought pursuant to chapters 201-248 of this title, the articles or the operating agreement; or
(3) Where the proceeding asserts personal liability of such member, holder of financial interest, governor, or manager as described in subdivision (a)(3).
(d)Sales Tax Liability. Notwithstanding any other provision of chapters 201-248 of this title to the contrary, each person, member, or employee required to collect, truthfully account for, and pay over to the department of revenue any tax collected from the customers of an LLC shall be personally liable for such taxes in the same manner as responsible persons of a corporation under § 67-1-1443.
(e)Failure to Follow Formalities Not to Generate Personal Liability. The failure of an LLC to observe the usual company formalities or requirements relating to the exercise of its LLC powers or management of its business is not a ground for imposing personal liability on the members, governors, managers, employees or other agents of the LLC.
(f)Voluntary Unlimited Liability.

(1) Notwithstanding anything to the contrary in this section, the articles may provide that one (1) or more specifically identified members, as named in the articles, will be personally liable for all of the debts, obligations and liabilities of the LLC and, if so, each such specifically identified member shall be liable to the same extent as a general partner in a general partnership; provided, that:

(A) In order to be effective, each member so identified must sign the articles, or an amendment to the articles containing this provision; and
(B) Each such member shall continue to be personally liable for debts, obligations and liabilities of the LLC until the articles are amended to strike such member’s name, but the amendment must be signed by the chief manager or secretary and any remaining members who continue to be identified in the articles as being personally liable for the debts, obligations and liabilities of the LLC.
(2) A member who is identified in the articles as being personally liable has the power, but not necessarily the right, to withdraw from the LLC by filing an amendment to the articles stating that such member has withdrawn from the LLC and will not be liable for any future debts, obligations and liabilities of the LLC; provided, that such an amendment to the articles shall be effective immediately except with respect to parties that have reasonably relied upon the articles naming such person as individually liable for the debts, obligations and liabilities of the LLC.
(3) An amendment to the articles filed pursuant to subdivisions (f)(1) and (2) is not effective against such parties reasonably relying upon such articles until the passage of ninety (90) days from the filing of the amendment to the articles. Notwithstanding the preceding, such member or former member will continue to be liable for all debts and obligations of the LLC incurred by the LLC while such member assumed liability.
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