FL Partnership/LLC

Partnership- Relations Among Partners- Management Rights

1. Absent an agreement to the contrary, all partners have equal rights in the management of the partnership business. 2. Decisions regarding matters within the ordinary course of business of the partnership may be controlled by a majority vote. 3. However, unanimity is required for acts outside of the ordinary course of business and to amend the partnership agreements. 4. Unless of course it is otherwise agreed. Contracts.

Partnership- Distribution of Partnership Assets After Dissolution

1. All the creditors get paid back with no consideration of whether it is a partner creditor or not. 2. Then, the partners receive their capital contributions and share of profits, minus their share of losses.(capital + share of profits - share of losses)

Limited Partnership- What are the rights and obligations of limited partners?

1. CONTRIBUTIONS: May be cash, property or services. A promise to contribute must be in writing; if so, it's enforceable by the L.P. or by a creditor who relied on it. 2. PROFITS/LOSSES/DISTRIBUTIONS: Unless otherwise provided in the partnership agreement, profits, losses, and distributions are allocated on the value of capital contributions. The default rule, is different from the general partnership. 3. TRANSFER OF INTEREST: Does not cause dissociation or dissolution. The transferee has the right to receive the distributions

Limited Partnership- Formation

1. FILING: Must file a certificate of L.P. with the Department of State -The certificate must contain only the name of the limited partnership, it's in -state address, -the name and address of its in-state agent for service of process, -the name and business address of each general partner, -whether the limited partnership is a limited liability limited partnership, and -statements of conversion or merger, if applicable. 2. WRITING: Must have a written agreement including value of each partner's contribution; when contributions will be made; and the events of dissolution.

LLC (Limited Liability Company)- Formation

1. FILING: Must file articles of organization (AO) with the Department of State. 2. NAME: Must end with the words "limited liability company" or the abbreviation "LLC." 3. PROFESSIONALS: May form a professional LLC (abbreviated as "PL" or "PLLC").

LLC (Limited Liability Company)- Management

1. MANAGEMENT: By managers or members, but members manage in proportion to current profit shares unless otherwise provided in the AO or an operating agreement. If managers manage, each manager has equal rights, and a majority vote rules. This is a hallmark of an LLC. 2. DUTIES: Whoever manages owes duties of care, loyalty and good faith.

Partnership Property- A partner's economic interest in the partnership:

1. Partners have the right to receive a share of the profits (e.g., a 25% stake). 2. Partners economic interest in a partnership is transferable (like any financial asset). A conveyance redirects the flow of profits; it does not confer any other rights or impose any obligations. Therefore, if there are losses the original partner still shares in the losses. 3. A partners judgment creditor may attach to a partners economic interest in a partnership just as it can attach to a partner's other financial assets.

Partnership Property- What are the partnerships rights in partnership property?

1. Partnerships have totally unrestricted rights in their own property. 2. The partnership may pledge partnership property as collateral for loans. 3. A partnership creditor can attach a lien on partnership property.

Partnership- Relations Among Partners- How are profits and losses shared among partners?

1. Profits and losses are shared equally unless otherwise agreed. This means, that the profits are not distributed in proportion to their capital contribution. 2. If the parties contract for profits not to be split equally, the losses will follow suite. 3. A partnership cannot limit a third party's rights without the consent of the third party. Therefore, if the the partners agree, one partner will not bear any losses, she is still not free from liability to the third party. Instead, the partner with limited liability will have to pay the third party and then she can seek reimbursement from the other partners.

Partnership- Admitting a new partner into the partnership

1. Unless otherwise agreed a new partner requires unanimous consent. 2. A newly admitted partner is liable for pre-existing debts, BUT, we cut him slack because he was not around when those debts were incurred. All that the newly admitted partner can lose is his interest in the partnership. He will not have any liability beyond that amount. 3. However, when it comes to future debts the newly admitted partner will be liable just like everyone else.

Partnership Property- What are the partners rights in partnership property?

1. Very limited! Partner can use it only for partnership purposes unless the other partners consent. The right cannot be transferred to a third party. It is personal to each and every partner. 2. A partner as an individual has no interests to sell or have attached to in partnership property. Also, no interests for a creditor to attack.

Charging order

A creditor of a partner who has obtained a judgment against the partner may enforce that judgment against the partner's partnership interest by obtaining a judicial charging order. The charging order constitutes a lien on the partner's partnership interest. In addition, a court may appoint a receiver of the partner's distributions from the partnership and order a foreclosure sale of the interest. The purchaser of the interest at a foreclosure sale is treated as transferee.

Derivative Action

A partner has the right to bring a derivative action on behalf of the limited partnership if the partner first -makes a demand on the general partners requesting that they bring the action to enforce the right -but they fail to bring the action within a reasonable time, or if demand would be futile. The complaint must state with particularity the date and content of the demand or why demand would be futile.

What is a limited partnership?

An L.P. is a partnership with one or more general partners [general liability] and one or more limited partners [limited liability].

Limited Liability Limited Partnership- Defined

An LLLP is a just like a limited partnership, except for liability of the general partners. A general partner can register his limited partnership as an LLP... in other words he can combine these two business forms to create and LLLP. This is a hybrid business form, exactly like a limited partnership, except general partners also have limited liability.

A Partnership is

An association of two or more persons to carry on as co-owners a business for profit, whether they intend to form a partnership or not.

Partnership- What effect does dissociation have on the partnership?

Dissociation is generally no big deal! Usually, the partnership buys out the dissociating partner (for the greater of liquidation or going concern value) and continues without her. 1. However, the management rights and fiduciary duties of the partners terminates.

Partnership- Authority

Every partner is an agent of the partnership for the purposes of its business. An act performed by any partner either with actual or apparent authority, or that is ratified by the partnership, will bind the partnership and thereby other partners. Apparent Authority: The RUPA provides that 1. The act of any partner 2. For apparently carrying on in the ordinary course the partnership business OR business of kind carried out by the partnership; 3. Binds the partnership unless: a. partner had no authority to act for the partnership in the particular matter; AND b. the person with whom the partner was dealing knew or had received notification the partner lacked authority.

Partnership- Relationship between Partners and Third Parties- Agency Principles

Usually, the issue is whether the Principle/Partnership is bound to a third-party (T) on a contract entered into by the Partner/Partnership's Agent. The principle will be liable if Agent had: 1. ACTUAL AUTHORITY: Principle tells Agent to act on Principles behalf. May be created by partnership agreement, by majority vote, or by the statute, which makes every partner an agent for carrying on business in the usual way [but can be negated by partners, meaning not absolute]. 2. APPARENT AUTHORITY: Principle leads 3rd party to believe Agent has authority to bind Principle even though Agent has no actual authority. It protects 3rd party's reasonable reliance. (this is really the fall back provision). Look at the partner's title and past conduct to determine if they had apparent authority to bind, even when they did not have actual authority. 3. RATIFICATION KEY FACT: This is an equitable doctrine that is designed to protect the third party's reasonable belief, that was created at least in part by Principle, and not by Agent alone. Otherwise, it wouldn't be fair to Principle.

LLC (Limited Liability Company)- Must an LLC file an annual report to retain LLC status?

Yes, must file an annual report to maintain LLC status.

Limited Liability Company is

an entity eligible to be taxed like a partnership while offering its owners the limited personal liability that shareholders of a corporation enjoy. - Taxed like a partnership (income is passed through to the owners) unless it elects to be taxed like a corporation (firm income is subject to "double taxation"). Unlikely because corporations are double taxed....

charging order- LLC

enables a judgment creditor of a member of an LLC to receive that member's distributions.

Partnership- How long does apparent authority continue after a partner dissociates?

it for one year after dissociation, but the partnership can protect itself by notifying creditors (effective immediately) or filing a statement of dissociation (becomes effective 90 days after filing).

judgment creditor of a single-member Florida LLC

may obtain a charging order, thereby making him the assignee of a member's distributions. If the distributions are insufficient to satisfy the judgment, then the creditor can foreclose the member's interest in the LLC. This means that the creditor, or the purchaser at the foreclosure sale, becomes a member of the LLC to the exclusion of the debtor member, who no longer holds any interest in the LLC upon foreclosure.