Chapter 14 - EXHIBIT 14E • LLC FORMATION CHECKLIST

• Jurisdiction: Colorado

EXHIBIT 14E • LLC FORMATION CHECKLIST

LLC FORMATION CHECKLIST¹

This summarizes some of the more significant points that should be considered by persons forming a limited liability company (the "LLC") in Colorado.

First Step—Who is the Client?

Identify the client.

Contributions and Capital

1. What contributions of cash, property, or services will each of the members make to the LLC? If one or more members will be contributing cash or services, and one or more members will be contributing property.

2. Will there be any required contributions after the initial ones (such as to fund working capital needs)? If so, what penalties will apply if a member fails to make a required contribution when due? Do the parties desire to modify the statutory provisions?

3. Under what circumstances, if any, may the LLC issue additional interests to existing members (e.g., to fund working capital needs)? Will all existing members have rights to participate in any such issuance? See § 5.3(b) of Appendix A contemplating that the managers will have the sole authority to approve the issuance of membership interests and the admission of members.

4. Under what circumstances, if any, may the LLC issue additional interests to new members (e.g., to new investors or to provide service providers with equity stakes in the LLC)? Will existing members have rights to participate in any such issuance? Will the LLC book-up capital accounts up under § 704(c) and Treas. Reg. § 1.704-1(b)(2)(iv)(f) to the fair market value of the company at the time of such contribution?

5. Under what circumstances, if any, may the LLC borrow money from members (e.g., to satisfy working capital needs in the event that other members are unwilling or unable to make a pro rata contribution to the LLC to satisfy the needs) or third-party lenders? Will members have rights to participate in any loans to the LLC? Will members who lend money to the LLC have rights to look to non-lending members for reimbursement if the loans are not repaid?

Distributions

6. Who will determine when distributions are to be made?

7. How will the members share in distributions? Will there be any preferences, or will all distributions be made pro rata? If there is a preference, is it a relatively simple one where the investors receive their money back (plus, perhaps, a return) before the normal sharing ratios kick in? If the preference is complicated, with different levels of sharing ratios based on waterfalls that may be based on differing...