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Lucy, Esq.
Lucy, Esq., Attorney
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Experience:  Lawyer
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What is a "defacto" LLC

Customer Question

What is a "defacto" LLC
Submitted: 2 years ago.
Category: Legal
Expert:  Lucy, Esq. replied 2 years ago.

My name is ***** ***** I'd be happy to answer your questions today.
A "defacto LLC" exists when a person believes that a limited liability company has been formed, and went through all of the steps to form the LLC, but there was some mistake in the formation that makes it defective. The individual has to have made a good faith effort to create the corporation and comply with all requirements. Also, the people who believed themselves to be officers or agents of the corporation must have performed some act on the company's behalf.
Essentially, the courts won't nullify a corporation's actions based on an unknown mistake if everyone acted in good faith. When a court finds that a corporation or LLC qualifies for de facto status, it's treated as if the mistake in incorporation did not happen.
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