BL Ch. 33: Limited Partnerships and Limited Liability Corporations

distribution of assets

1) creditors (also partners) 2) partners and ex-partners in satisfaction of L for unpaid distributions 3) partners for return of contributions 4) partners for partnership interest

dissolution triggers

1) expiration of time specified in certificate 2) events in agreement 3) written consent of all 4) withdrawal of general partner unless a)provisions allow remainder to continue or b) within 90 days all partners agree to continue 5) judicial dissolution, when not reasonably practical to continue conformed to agreement

differences btw limited and general partnerships

1) there must be a statute in effect providing for the formation of limited partnerships 2) lim. partnership must substantially comply with the statute's requirements 3) liability of a limited partner for partnership debts or obligations if limited to the capital she has contributed/agreed to

dissolution

1)dissolution 2)winding up 3)termination limited partners can't dissolve

filing of certificate

2 or more must file s signed certificate in the office of the secretary of state of the state in which the LLP has its main office. must be amended if anything in partnership changes

merger

LLC can merge with another and absorb its assets and debt; LLC can merge into other forms of entities

distribution

RULPA allows different allocation of assets than profits; FV of contributions if no writing;

partnership interest

a partner's share of the profits and losses of a LP and the right to receive distributions of partnership assets (personal property)

limited partnerships

a partnership formed by two or more persons under the laws of a state and that has one or more general and one or more limited partners (including an actual person, partnership, limited partnership, trust, estate, association, or corporation)

choice of associates

admission of more general and limited partners requires written consent of all partners (or as described in written partnership agreement)

Revised Uniform Limited Partnership Act (RULPA)

adopted by all states except Louisiana; generally govern limited partnerships

formation of LLC

an LLC may have only 1 member; central public filing of articles of organization in state office; perpetual existence; LLC must be included; agreement and records of contributions must be written; operating agreement required

duties of care and loyalty

apply to partnerships and LLC's

limited liability partnership

authorizes a general partnership that limits the liability of its partners. provide protection for all debts and obligations except where a) partner committed wrongful act b) partner supervised the person who committed wrongful act

defective formation

certificate isn't filed, or it is and it doesn't meet the statutory requirements of the state. limited liability of partners is jeopardized. RULPA lowers chance that limited partner will be exposed to L bc of omission in certificate.

management

each member has equal rights in LLC (doesn't have to be a member)

LLC statutes

enacted by all states

loans

general and limited partners may be secured or unsecured creditors of the partnership

withdrawal

general partner can withdraw any time with written notice. if it violates the agreement, the LLP can recover damages. limited partner can withdraw as provided in the LP certificate or in agreement; entitled to receive distribution to which she's entitled under partnership agreement (or the fair value of interest in LP)

winding up

general partners may wind up

general partner duties

has fiduciary relationship to general and limited partners; owes duty of care to LP (limited partner owes no duty of care to LP)

limited partner liability

is liable only to those who conduct business with the partnership believing, based on the limited partner's conduct, that the limited is a general partner

derivative action

limited partner can bring action on behalf of the LP to recover a judgment in its favor if general partners have refused to bring the action

foreign limited partnerships

limited partnership in any state in which it hasn't been formed. under RULPA, all foreign limited partnerships must register with the secretary of state before conducting business in the state (fail to register--> can't bring action)

limited liability limited partnership

limited partnership in which the liability of general partners has been limited to the same extent as an LLP

control

mainly by general partners.

manager-managed LLC

managers have by statute a duty of care to refrain from grossly negligent, reckless, or intentional conduct; in some states this duty is to act in good faith as a prudent person would

assignment of partnership interest

may assign interest without dissolving the LP (assignee doesn't become a limited partner unless all other partners provide written consent)

contributions

may be cash, property, services rendered, promissory notes, or an obligation to do so. promise by a limited partner isn't enforceable unless in writing. if fail to contribute value in signed writing, can be held liable.

member-managed LLC

members have the same duties of care and loyalty that managers do

agreement for sharing profits and losses

must be in writing RULPA; allocated among partners as described; if no description, then given based on value contributed

certificate parts

must have 1) name of the LLP 2) address of the office and the name and address of the agent for service of process 3) name and business address of each general partner 4) latest date upon which limited partnership will dissolve 5) any other matters

partnership information

must keep office within the state that holds organizational and financial records; each partner has right to inspect

foreign LLC

must register with the secretary of the state before conducting business in the state (can't file actions)

limited liability company

noncorporate business org. that provides limited liability to all owners, permits all members to participate in management of the business, and may be taxed as a partnership.

liability of members

not for LLC's obligations; yes if liable for wrongful act or an LLC debt that she personally guarantees. a member who fails to make a contribution if liable to the LLC for the deficiency. a member receiving a return for her contribution in violation of LLC's operating agreement is liable

voting rights

partnership agreement may grant to all or specified group voting rights on any matter. if agreement grants limited parts. voting rights beyond the act's safe harbor, then said to have control.

financial interest

rights to share profits and receive distributions (distributions wrongful if made by LLC when insolvent)

management interest

rights to vote, manage and obtain info.

rights

set forth in articles of limited partnership and the agreement; general partner has all rights and power of partner in general partnership; general partner can also be a limited partner

withdrawal of member

some may if give written notice; other states permit operating agreement to deny

name of partnership

surname of a limited partner can't be included unless its also the name of a general partner. if limited partner knowingly permits her name to be used, then she's liable to any creditor who didn't know she was limited. can't be similar to another corporation, and must say "limited partnership"

operating agreement

the basic context governing the affairs of the company and the source of rights and duties of its members and managers

general partner liabilities

unlimited external liability unless it's a LLLP (limited partners have limited liability); liable to any who suffers loss from reliance on LP certificate if knew of false statement

voting rights of LLC

usually set forth by statute; include i) adopt or amend operating agreement ii) admit any person as a member iii) sell assets prior to dissolution iv) merger with LLC

activities of limited partners under RULPA

without seen as having control, can 1) be a contractor, agent or employee of a general partner 2) advising a general partner about business 3) acting as a surety for limited partnership 4) approving an amendment 5) voting on changes