R8: M5: Structures: Part 1.

(5.4.3). Order of Distribution of Assets. After dissolution, if the limited partnership is terminated, assets are distributed in the following order:

(1). to creditors, including partners who are creditors; (2). To former partners in satisfaction of liabilities that were not paid on their withdrawal; and (3). to partners, first to return their contributions, and then to distribute profits- based on capital.

The examiners often ask what is necessary to form a general partnership. The key is to remember three simple elements: (i). two or more persons

(ii). who agree [expressly or impliedly] (iii). to carry on as co-owners a business for profit. There is no requirement of a writing, even if the partnership is to own land, unless the partnership is to lat for more than one year.

(5.3.1). General Partners-- [Agents].

A general partner is personally liable for all partnership debts. if there is a loss only the general partner can be held personally liable. ☐ A general partner may also be a limited partner at the same time. ☐ A general partner may be a secured or unsecured creditor of the partnership.

Formation of a Limited Partnership.

A limited partnership can be formed only pursuant to a state statute and only by filing a certificate of limited partnership with the state.

(6.3.4). Transferability of Ownership and Rights. Most statutes provide that unless the operating agreement provides otherwise, a member of an LLC may not transfer all of his interest in the LLC without the consent of all other members.

A member is free to assign his interest in distributions [e.g., of profits or on dissolution] but is not free to assign any rights to manage the LLC. Thus, transferability of ownership is similar to that of a partnership.

A very common business entities question on past exams asks simply: What type of business entity can be formed without filing organizational documents with the state?

A partnership or a sole proprietorship are the only possibilities. Formation of all other business entities requires filing some sort of organizational document with the state.

☐ Transferability:

A sole proprietor is free to transfer his interest in the sole proprietorship at will.

(3.2.). Operation of a General Partnership.

Absent an agreement to the contrary, all partners have equal rights to manage the partnership business. Management rights and voting power are not based on the amount contributed.

(3.6). Profit and Loss Allocation. (3.6.1). Profits.

Absent an agreement to the contrary, all partners have equal rights to share in the profits of the partnership. [regardless of money or services contributed].

Partnership Property vs. Personal Property. Alex and Becky agree to form a partnership to sell antique cars. Alex contributes 10 antique cars from his collection and Becky contributes $200,000. The cars and the cash are partnership property.

Alex may no longer use the cars for personal use--even if they are titled in his name-- and Becky may no longer freely spend the $200,000. The cars and cash can be used only for partnership purposes.

(3.1.3). Generally, a Writing is Not Necessary. [My LEGS].

As a general rule, a general partnership agreement need not be in writing. However, if the partners want to enforce an agreement to remain partners for longer than one year, a writing is required under the Statute of Frauds.

Sharing of Losses.

Assume the same facts as in the previous illustration. If there is a $100,000 loss, absent an agreement to the contrary, Alex, Becky, Cindy, Deanna, and Elias will each be responsible for $20,000 of the loss.

Sharing of Profits. Alex, Becky, Cindy, Deanna, and Elias form a general partnership- Glorious Jeans-- to manufacture coffee-colored clothing. Alex contributes 40 percent of the capital,

Becky contributes 30 percent of the capital, Cindy contributes 20 percent of the capital, Deanna contributes 10 percent of the capital, and Elias agrees to design all the clothes. Alex, Becky, Cindy, Deanna, and Elias will share profits equally absent an agreement to the contrary.

Management Rights in General Partnership. Alex, Becky, Cindy, Deanna, and Elias from a general partnership-- Glorious Jeans -- to manufacture coffee-colored clothing. Alex contributes 40 percent of the capital, Becky contributes 30 percent of the capital,

Cindy contributes 20 percent of the capital, Deanna contributes 10 percent of the capital, and Elias agrees to design all the clothes. Each partner has an equal right to participate in the management of the partnership.

(3.8.). Termination: Dissociation of a General Partnership. Dissociation is a change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business.

Dissociation of a partner does not necessarily cause a dissolution and winding up of the business of the partnership. A partnership at will [i.e., one without a stated termination point] may be rightfully dissolved by a partner's notice of withdrawal or dissociation at any time.

(3.5). Duties and Legal Obligations of Partners. (3.5.1). Fiduciary Duties Owed to other partners.

Each partner owes a fiduciary duty to the partnership and other partners.

(3.4.3). Right to Inspect Books and Records [Yes].

Every partner has the right to inspect and copy the books and records of the partnership.

(3.3.1). Required Approval. Decisions regarding matters within the ordinary course of the partnership's business may be controlled by majority vote unless the partnership agreement provides otherwise. Matters outside the ordinary course of the partnership's business require consent of all the partners.

Examples of areas requiring unanimous consent include: ☐ Admitting new partners; ☐ confessing a judgement [admitting liability in a lawsuit] or submitting a claim to arbitration; and ☐ making a fundamental change in the partnership business [e.g., the sale of a partnership.]

(3.1.1). Joint venture compared. Courts sometimes try to distinguish joint ventures from general partnerships, but the legal requirements and consequences, and advantages and disadvantages, of forming a joint venture generally are identical to those of a general partnership.

For exam purposes, the key difference between a joint venture and a general partnership is that a joint venture is formed for a single transaction or project or a related series of transactions or projects.

(3.9.2). Partnership Continues After Dissolution. A partnership continues to exist after dissolution until its business is wound up, at which time the partnership is terminated.

For example, each partner will continue to have apparent authority to bind the partnership, and each partner will continue to be liable for the obligations of the partnership. The partnership is terminated only after the winding-up process is complete.

☐ Tax Treatment:

For tax purposes, profits, and losses from the business flow through the business to the sole proprietor.

☐ Generally not personally liable for debts and contractual obligations.

Generally, partners in an LLP are not personally liable for the debts and contractual obligations of the LLP.

☐ Contents of Certificate of Limited Liability Partnership.

Generally, registration must provide information such as the LLP's name, the name and location of its registered office, the number of partners, a description of the partnership business.

(5.4.4). Loss Situation.

If there is a loss only the general partners are personally liable; limited partners have no personal liability beyond their capital commitments.

Operation of a Limited Partnership.

In a limited partnership, management is the responsibility of the general partners, just as in a general partnership.

(3.5.2). Each Partners Is Personally Liable for All Partnership Obligation.

In many states, however, a creditor cannot satisfy a judgement against an individual partner unless the partner was named in the lawsuit and the assets of the partnership are exhausted.

☐ Liable for Own Negligence and Negligence of Those Under Direct Control.

LLP partners are, of course, liable for their own negligence or wrongful acts and for the negligence and wrongful acts of those under their direct supervision or control.

(5.1.2). Similar to a Corporation. A limited partnership can be formed only pursuant to a state statute and only by filing with the state.

Limited partners are very much like shareholders. They contributes capital in exchange for a partnership interest, but they do not participate in management. [day to day.]

(5.3.2). Limited Partners. A limited partner's liability is limited to his investment and unpaid capital commitments. A limited partner has no right to take part in the management of the business. He is not an agent of the business and generally cannot bind the business in the contract.

Nevertheless, a limited partner has a right to review the financial information and tax returns of the limited partnership.

(2). Sole Proprietorship. (2.1). Advantages, implications, and constraints of a sole proprietorship. A sole proprietorship is the simplest form of business ownership. One person owns the business and manages all of its affairs, and the sole proprietor is not considered an entity separate from the business.

No formality is required to form a sole proprietorship, and nothing need be filed with the state in which the business operates [unless the state or city requires a business license]. ☐ Personal liability. ☐ Duration: Limited: ☐ Tax Treatment: ☐ Transferability:

(5.4.2). Death of a Limited Partner Does Not Cause Dissolution.

Note that the death of a limited partner will not dissolve the partnership.

(5.3.2). Limited Partners. ☐ Under the revised uniform limited partnership act of 1976, limited partners' names cannot be identified with the business, or they might be considered to be general partners and lose their limited liability status.

Note that this is not true under the uniform limited partnership act of 2001. ☐ A new partner can be added only upon the consent of all partners. ☐ A limited partner does not owe a fiduciary duty to the partnership. [Because they are not agents].

Partner Refuses to Pay.

Of course, if Cindy is solvent, Alex and Becky can seek to recover the $5,500 from Cindy in an action for indemnification.

The examiners often ask about the basic characteristics of a partnership.

One characteristic that has been key to several past questions is that a partnership is not of unlimited duration--because any one of the above event can trigger a dissolution.

The examiners often ask about the basis characteristics of a partnership.

One characteristic that has been key to several past questions is that a partnership is not of unlimited duration--because any one of the above events can trigger a dissolution.

(3.2.). Not a taxable entity for income tax purposes.

Partnerships are treated as entities for most purposes [e.g., may hold property and sue and be sued in own name etc.,] but they are not taxable entities for income tax purposes.

Examiners sometimes ask whether a limited partnership can be formed with limited liability for all partners.

The answer, of course, is no-you need at least one general partner who has unlimited personal liability for all partnership obligations.

(3.4.2). Rights in Partnership Interest- Owner's equity. A partner may assign his interest in the profits and surplus at any time. The assignee obtains the right to receive the partner's share of the profits.

The assignee does not become a partner and so has no right to attend partnership meetings, inspect the partnership books and records, vote, etc. An assignee can obtain such rights only if admitted to the partnership as a partner, which generally requires the approval of all the partners.

Summary of Entities. Nearly half of the recent Business Structures questions on the exam simply require the examinee to differentiate the attributes of the various business structures.

The major attributes are summarized in the following chart. More detail regarding each business structure follows.

Generally, the assignee's only right is to get whatever distribution the assignor would have gotten.

The same rule applies to a creditor with a charging order and an heir who receives a deceased partner's interest.

☐ Personal liability.

The sole proprietor is personally liable for all obligations of the business.

Formation of Partnership. Steve and Becky decide to operate a hot dog cart together. Steve agrees to pay for the cart, and Becky agrees to make and sell the hot dogs.

The two also agree to split the profits. A partnership has been formed even though Steve and Becky never expressly agreed to form a partnership.

☐ Divide profit [if any]. if money still remains, it is profit that must be divided among the partners. if the assets at dissolution are less than what is needed to pay the creditors and return contributions.

Then there is a loss that must be divided among the partners. In either case, remember that unless the partnership agreement provides otherwise, profits are divided equally among partners, and losses are divided the same as profits.

(3.5.2). Each Partners Is Personally Liable for All Partnership Obligation. Partners are personally liable for all contracts entered into and all torts committed by other partners within the scope of partnership business or which are otherwise authorized. The partners' liability is joint and several.

This means that each partner is personally and individually liable for the entire amount of all partnership obligations.

Because the partnership agreement is silent as to allocation of losses, they will be allocated in the same proportions as profits: 40% to Alex = $12,000 [i.e., 40% of $30,000]; 25% to Becky = $7,500; and 35% to Cindy = $10,500.

Thus, Alex is entitled to receive $18,000 [$30,000 capital contribution less $12,000 share of loss]; Becky is entitled to receive $7,500 [$15,000 capital contribution less $7,500 share of loss], and Cindy owes $5,500 [$5,000 capital contribution less $10,500 share of loss].

The examiners like to ask about the effect of a partner transferring his interest in the partnership without the consent of the other partners. The key is to remember that such a transfer does not make the assignee a partner [that can be done only with the consent of all of the partners].

Thus, the transferee has no power to manage the partnership, inspect the partnership's books and records, vote, etc.

(6.3.3). Profit and Loss Allocated According to Contributions. [Like a corp.] Unless the articles or an operating agreement provide otherwise, profits and losses of an LLC are allocated on the basis of the members' contributions in most states.

Under the Uniform Limited Liability Company Act [ULLCA], which is followed by only a few states but which is sometimes specifically tested on the exam, profits are share equally, regardless of capital contributions.

(5.3.2). Limited Partners. ☐ under the revised uniform limited partnership act of 1976, a limited partner who participates in control of the business is liable to any creditor who reasonably believes that he is a general partner.

Under the Uniform Limited partnership act 2001, partners cannot be held personally liable for participating in management. Any exam questions on this issue should specify which act applies.

Distributions [Salary].

Unless agreed otherwise, partners are not entitled to compensation for services rendered to the partnership.

Losses.

Unless the partners agree otherwise , they share losses in the same manner as they share profits.

(3.8.1). Consequences.

When a partner dissociates his right to participate in management ceases, although the dissociated partner's apparent authority to bind the partnership will continue until third parties are given notice of the dissociation.

(5.3.2). Limited Partners. ♦ under both the revised uniform partnership act of 1976 and the uniform limited partnership act of 2001, a limited partner may vote on extraordinary matters without incurring liability

[e.g., admission or removal of a general partner, dissolution, amending the certificate of limited partnership, sale of substantially all assets, etc.].

☐ Amounts Due or Owed. to determine the amounts due or owed, deduct from the assets left upon dissolution any amounts owed to creditors

[including partners who are creditors] and then deduct the amounts needed to return the partners' contributions [if not already repaid].

(5.1.1). Generally no perpetual life.

a limited partnership does not have a perpetual life, unless the partnership agreement provides otherwise.

(5). Limited Partnership. [at least one [GP] / At least one [LP]]. (5.1). Nature of a limited partnership.

a limited partnership is a partnership made up of one or more general partners [who have personal liability for all partnership debts] and one or more limited partners [whose liability for partnership debts generally is limited to their investment].

☐ Duration: Limited:

a sole proprietorship cannot exist beyond the life of the sole proprietor. It may be terminated at any time by its owner.

(6.2). Formation of a Limited Liability Company. [Articles of incorporation-Corp.]

an LLC is formed by filing articles of organization with the secretary of state.

(3.9). Termination: Dissolution of a General Partnership. (3.9.1). Events Causing Dissolution. Generally , a partnership is dissolved and its business must be wound up if the partnership is at will [i.e., has no expiration date]

and a partner gives notice of withdrawal, the partners agree to dissolution, or a court orders dissolution. The death of a partner does not cause a dissolution if the remaining partners agree to continue the partnership within 90 days of the partner's death.

Limited Liability Partnership. [Similar to General Partnership]. A limited liability partnership [LLP] is similar to a general partnership in most respects, including the sharing of profits and losses,

and generally all of the advantages and disadvantages of a general partnership mentioned above apply to a limited liability partnership. Important differences are listed below.

☐ LLP Must File With the State. Generally, to become an LLP the partnership must file a document with the state [called a registration, statement of qualification,

application for registration, or certificate of limited liability partnership]. Some states restrict LLPs only to the learned professions, such as accounting or the practice of law.

Dissolution of Partnership. Alex, Becky, and Cindy contributed $30,000, $15,000, and $5,000, respectively, to the ABC Partnership. Upon dissolution, after paying all creditors , $20,000 remains. The partnership has suffered a $30,000 loss

because $50,000 was contributed to capital and only $20,000 remains. The partnership agreement is silent as to how losses are to be divided, but provides that profits are to be allocated 40% to Alex, 25% to Becky, and 35% to Cindy.

Fundamental Change in Partnership Business. In the partnership described in the previous example, the decision whether to buy cloth from Supplier may be approved by any three partners,

but a decision to shift production from the manufacture of clothing to the manufacture of small appliances would have to be approved by all the partners.

(3.8.3). Dissociated Partner's Liability to Other Parties. Generally, a dissociated partner remains liable for the debts incurred by the partnership prior to dissociation unless there has been a release by the creditor or a novation. A dissociated partner may be held liable for debts incurred

by the partnership for up to two years after dissociation unless the partner gives notice of dissociation. If a new partner is admitted, the new partner is not personally liable for debts incurred by the partnership before becoming a partner. [but you can lose investment].

(6.3.5). Books and Records.

each member of an LLC is entitled to inspect and copy the books and records of the LLC during regular business hours.

(5.3.3). Allocation of Profits and Losses [Unlike GP and LLP [Equal]]. If the partners have agreed on how profits are shared, the agreement governs. Unless otherwise agreed,

general and limited partners share profits and losses in proportion to the value of the partners' contributions. Remember, though, a limited partner is not liable for any loss beyond his or her capital contribution.

(6.1.2). Controlling law [Statute vs. Operating Agreement]. LLC members may, but need not, adopt operating agreements with provisions different from the LLC statute, and generally the operating agreements will control. The operating agreement is just that: an agreement among members regarding

how they will operate or run their business.Its intent is to forestall and resolve disputes among the members. These agreements are not filed with the state. Indeed, under the Uniform Limited Liability Company Act, such operating agreements need not be in writing.

Partner Refuses to Pay. If there is a loss and some partners refuse to contribute, are not subject to process [i.e., are not within a court's jurisdiction], or are insolvent, the remaining partners must share the extra loss proportionally. Thus, in the illustration above,

if Cindy refused to pay anything else, Alex and Becky would have to share the $5,500 loss that Cindy owes on a 4 to 2.5 basis [Alex would have to deduct an extra $3,385 from his capital and Becky would have to deduct an extra $2,115 from her capital].

Agency Law Governs. Every partner is an agent of the partnership for the purpose of its business and the partnership is their principal. An act of a partner apparently carrying on in the ordinary course of business the business of the partnership will bind the partnership through apparent authority.

if a partner acts without actual or apparent authority, the partnership can still become bound if it knows of the material facts of a transaction and assents [i.e., ratifies], either expressly or by accepting the benefits of the transaction.

The examiners often ask how partners will share profits and / or losses. The key is to remember that, as with the partners' management powers, unless the partners provide otherwise, profits and losses will be split equally, regardless of the partners' contributions.

if a partner cannot contribute his share of losses [e.g., because of bankruptcy or other refusal], the remaining partners must make up the share on a pro rata basis.

(3.1.2). When Intent is Unclear: Sharing of Profits.

if it is unclear whether the parties intended to enter into a partnership, an agreement to share profits gives rise to a presumption that the parties intended to form a partnership.

☐ Manager-managed limited liability company.

if management is by managers, each manager is an agent of the LLC and has the power to bind the LLC. In this case, the members are not agents of the LLC and do not have the power to bind the LLC.

☐ Member-managed limited liability company.

if the members are managing the LLC, each member is an agent of the LLC and has the power to bind the LLC by acts apparently carrying on the business of the LLC.

★ Entities: Limited Partnership. ☐ Formation: Formalities: File certificate of limited partnership with state. ☐ Liability of Owners: General partner: unlimited personal liability. Limited Partner: only investment is at risk. ☐ Management: General partner(s):

is [are] exclusive manager(s); Limited Partners: ordinarily do not manage. ☐ Transferability: Partners [whether general or limited] cannot transfer ownership interest without unanimous consent. ☐ Taxation: "Flow through" [but limited partners have passive loss restrictions].

Compensation. in the previous example, if Alex, Becky, and Cindy never did any work for Glorious Jeans, and Deanna and Elias worked full time to

manufacture the clothes, Deanna and Elias would have no right to be paid for their services [unless Alex, Becky, and Cindy breached an agreement to work].

(6.2.2). Number of Members

most states now allow one person to form an LLC.

(3.8.1). Events of Dissociation. A partner is dissociated from the partnership when the partner gives notice of withdrawal, dies, become bankrupt, or is expelled,

or if an event occurs that was set out in the partnership agreement as an event that would cause a dissociation.

☐ Partners Generally Not Liable For Acts of Fellow Partners, Employees, or Agents. an LLP differs from a general partnership in that partner in an LLP is not personally liable for the obligations

or liabilities of the partnership arising from errors, omissions, negligence, malpractice, or the wrongful acts committed by another partner or by an employee, agent, or representative of the LLP.

(3.4.). Rights of Partners. (3.4.1). Rights in Partnership Property [Inventory, PP&E]. A partnership owns all money and property contributed to the partnership by the partners and all other property acquired by the partnership. Partners do not own partnership property. As a general rule, partners have no

right to possess or use partnership property other than for partnership purposes.Thus. ☐ an individual partner may not assign or sell partnership property for his own benefit; and ☐ a partner's personal creditor cannot attach partnership property to satisfy an individual partner's debt.

★ Entities: Subchapter S Corporation. ☐ Formation: Formalities: Same as regular corporation plus file "S" election. ☐ Liability of Owners: Shareholders generally not personally liable beyond their investment. ☐ Management: managed by board of directors, which appoints officers

to run day-to-day operations. ☐ Transferability: Shareholders generally may transfer ownership unless they agree otherwise, but cannot transfer to foreign or entity shareholders. ☐ Taxation: "Flow through" taxation [but shareholders not managing have passive loss restrictions].

(6.1.1). Basic Characteristics. ☐ the ability to be taxed like a partnership [i.e., profits and losses flow through the LLC and are treated as the owners' personal profits and losses,

unlike profits of a corporation, which are taxed at the corporate level and again when distributed to the shareholders]. [Note: Under tax laws, LLCs are taxed as a partnership unless they elect to be taxed as a corporation. ]

(6.3.2).Voting Strength Proportional to Contributions. [like a corp.]

voting strength is proportional to contributions. For example, a member who contributed 5 percent of the LLC's current capital is entitled to 5 percent of the total vote.

Choice as a Business Entity. The sole proprietorship may be a good choice of business entity when an individual wants to form a business that he or she will manage,

wants to claim the income or losses from the business on personal taxes, and does not want to bother with a lot of formality. The individual risks all of his or her personal assets, however, when this type of business entity is formed.

(3.10.2) Application.

☐ Amounts Due or Owed. ☐ Divide profit [if any].

Difference: Formation.

☐ LLP Must File With the State. ☐ Contents of Certificate of Limited Liability Partnership.

★ Entities: Sole Proprietorship. ☐ Formation: No formalities : owner simply operates a business.

☐ Liability of Owners: Unlimited personal liability for all business obligations. ☐ Management: Sole proprietor manages directly or can appoint manager. ☐ Transferability: Sole proprietor can sell business at will. ☐ Taxation: "Flow through taxation."

★ Entities: General Partnership / Joint Venture. ☐ Formation: No formalities: can be formed by verbal or written agreement, or mere conduct. ☐ Liability of Owners: Unlimited personal liability for all partnership obligations.

☐ Management: Owners manage directly or can agree to appoint managing partner. ☐ Transferability: Partners cannot transfer ownership interest without unanimous consent. ☐ Taxation: "Flow through taxation. "

★ Entities: Limited liability partnership [LLP]. ☐ Formation: Formalities: File statement of qualification with state. ☐ Liability of Owners: Partners are generally not liable for partnership obligations, unless caused by their own negligence.

☐ Management: Partners manage directly or can agree to appoint a managing partner. ☐ Transferability: Partners cannot transfer ownership interest without unanimous consent. ☐ Taxation: "Flow through taxation [but limited partners have passive loss restrictions.]"

(6.3). Operation of a Limited Liability Company. (6.3.1). Generally All Members May Participate in Management. Unless the articles or an operating agreement provides otherwise, all members have a right to participate in management decisions of the LLC.

☐ Member-managed limited liability company. ☐ Manager-managed limited liability company.

General Partnership / Joint Venture. (3.1). Formation. A general partnership is formed whenever two or more persons intend to carry on as co-owners a business for profit:

☐ Papers need not be drawn up to form a partnership. ☐ Nothing need to be filed with the state. ☐ An express agreement is not required; and agreement can be implied from conduct.

(4.1). Difference: Personal Liability.

☐ Partners Generally Not Liable For Acts of Fellow Partners, Employees, or Agents. ☐ Liable for Own Negligence and Negligence of Those Under Direct Control. ☐ Generally not personally liable for debts and contractual obligations.

(6.2.1). Contents of Articles. Most states require the articles to include the following: ☐ a statement that the entity is an LLC; ☐ the name of the LLC, which must include an indication that it is an LLC;

☐ The street address of the LLC's registered office and name of its registered agent; ☐ If management is to be vested in managers; a statement to that effect; and ☐ the names of the persons who will be managing the company.

★ Entities: Limited Liability Company [LLC]. ☐ Formation: Formalities: File articles of organization with state. ☐ Liability of Owners: members generally not personally liable beyond their investment. ☐ Management: member manage directly or can agree to appoint a manager.

☐ Transferability: absent agreement otherwise, members cannot transfer ownership interest without unanimous consent. ☐ Taxation: "Flow through" taxation [but members not managing have passive loss restrictions].

★ Entities: Corporation. ☐ Formation: File articles of incorporation or corporate charter with state. ☐ Liability of Owners: shareholders generally not personally liable beyond their investment. ☐ Management: managed by board of directors, which appoints officers to run day-to-day operations.

☐ Transferability: shareholders are free to transfer ownership interest unless they agree otherwise. ☐ Taxation: income taxed at corporate level and taxed again to shareholders when dividends are distributed.

(3.4.2). Rights in Partnership Interest- Owner's equity. ☐ creditors may attach a partner's interest [called a charging order]. a creditor of an individual partner may obtain from a court a charging order against an individual partner's share of profits.

☐ Upon Death, Heirs Are Entitled to a Deceased Partner's Share of Profits / Surplus. When a partner dies, his or her right to profits vests in his or her heirs. The partner's right to partnership property vests in the surviving partners.

(3.10.). Distribution of Assets- Final Accounting- [terminate operations]. (3.10.1). order of distribution. When a solvent partnership is dissolved and its assets are reduced to cash, the cash must be used to pay the partnership's liabilities in the following order:

☐ creditors: creditors, including partners who are creditors, must be paid before the non-creditor partners receive any payments. ☐ partners: after obligations to creditors are satisfied, each partner is entitled to payment, first to return their contributions and then on account of profits.

(6.4). Termination of a Limited Liability Company "Limited Life." An LLC will dissolve upon: ☐ expiration of the period of duration stated in the articles; ☐ the consent of all members;

☐ the death, retirement, resignation, bankruptcy, incompetence, etc., of a member [unless the remaining members vote to continue the business]-- these events dissociate the member; or ☐ a judicial decree or administrative order dissolving the LLC for violation of law.

(6). Limited Liability Company. (6.1.). Nature of a Limited Liability Company. (6.1.1). Basic Characteristics. An LLC is an entity designed to provide its owners, who are called members, with two main features:

☐ the limited liability that shareholders of a corporation enjoy [i.e., owners are not personally liable for obligations of the business entity].

(5.4). Termination of a Limited Partnership. (5.4.1). Methods of Dissolution. A limited partnership may be dissolved by:

☐ the occurrence of the time or event stated in the partnership agreement; ☐ written consent of all partners [i.e., unanimous written consent to dissolve]; ☐ withdrawal or death of a general partner; or ☐ judicial decree.

(5.3.2). Limited Partners. ☐ A limited partner may assign his interest in the partnership. ♦ The assignment of a limited partner's interest is like an assignment in a general partnership--the assignee has the limited partner's rights to profits.

♦ Unless otherwise agreed, the assignor ceases to be a limited partner upon assignment of all his limited partnership interest.