Blaw 17

formation of an LP

- Formation of a limited partnership is a public and formal proceeding in which partners must strictly follow statutory requirements. - The partners must also sign a certificate of limited partnership.

as a legal person, the LLC can

- Sue or be sued - Enter into contracts - Hold title to property

rights and duties of limited partners in an LP

- have the right of access to the partnerships books - have a right of access to information regarding partnership business -are entitled to a return of their contributions in accordance with the partnership certificate, on dissolution of the partnership - can sue outside party on behalf of the firm in the general partners with authority to do so have refused to file suit

to form an LLC, articles of organization must be filed with a central state agency-- usually the secretary of states office

- the name of the business - the business's name must include the words "limited liability company" or the initials "LLC" - the business principal adrress - the name and address of the registered agent - the members name - how the LLC will be managed

liability in an LLP

-An LLP allows professionals to avoid personal liability for the malpractice of other partners. -A partner in an LLP is still liable for her or his own wrongful acts. The partner who supervised the individual who committed a wrongful act is also liable.

formation of an LLP

-LLPs must be formed and operated in compliance with state statutes. -The appropriate form must be filed with a central state agency and the business's name must include either "Limited Liability Partnership" or "LLP".

liability arise when the creditor believes, based on the limited partner conduct, that the limited partner is a general partner

-acting as a general partner - knowingly allowing their name to be used in partnership -contributing services to the partnership

the circumstances are

-in an LLC member fails to comply with certain formalities, such as by commingling personal and business funds, a court can impose personal liability -on rare occasions, courts ignore the corporate structure ("pierce the corporate veil") to expose the shareholder to personal liability when it is required to achieve justice

the events that trigger a members dissociation from an LLC include

-voluntary withdrawal -expulsion by other members -court order -bankruptcy -death

LLC members have two options for managing the firm

1. a "manager-managed" LLC 2. "member-managed" LLC most LLC statutes and the ULLCA provide that unless the articles of organization specify otherwise, an LLC is assumed to be member-managed

all of the partners in FLLP must be

1. natural persons 2. acting in a fiduciary capacity for the benefit of natural persons

limited liability company (LLC)

A hybrid form of business enterprise that offers the limited liability of a corporation and the tax advantages of a partnership

family limited liability

A limited liability partnership (LLP) in which the majority of the partners are members of a family.

limited partnerships (LP) (on exam)

A partnership consisting of one or more general partners and one or more limited partners.

limited liability limited partnership (LLLP)

A type of limited partnership in which the liability of the general partner is the same as the liability of the limited partners—that is, the liability of all partners is limited to the amount of their investments in the firm.

operating agreement

An agreement in which the members of a limited liability company set forth the details of how the business will be managed and operated.

dissolution in bu

Dissolution refers to the ceasing of a partnership. Acts of partners, the operation of the law, and acts of the court can rightfully dissolve a partnership.

management and foreign investors

Foreign investors are allowed to become LLC members, so organizing as an LLC can enable a business to attract investors from other countries.

liabilities of partners in an LP

General partners are personally liable to the partnership's creditors. This policy can be circumvented (to find a way around) in states that allow a corporation to be the general partner in a partnership.

limited liability of members

LLC members are shielded from personal liability in most situations and any liability of members is normally limited to the amount of their investments

distribution of assets

On dissolution, creditors' claims take priority. After that, partners and former partners receive unpaid distributions of partnership assets.

certificate of limited partnerships

The basic document filed with a designated state official by which a limited partnership is formed. must include certain information including -the partnerships name - the partnership mailing address - the capital contribution of each general and limited partner

LLC management

The members of an LLC have considerable flexibility in managing and operating the business.

limited liability partnerships (LLP)

a hybrid form of business designed mostly for professionals who normally do business as partners in a partnership

in an LLC, dissociation occurs when

a member ceases to be associated in the carrying on of the LLC business

general partner

a partner who assumes responsibility for the management of the partnership and has FULL LIABILITY for all partnership debts

these events wil cause dissolution of the limited partnership unless

all partners agree to continue the firm

flexibility in taxation

an LLC that has two or more members can choose to be taxed as a partnership (pass-through) or corporation (double-tax). A one-member LLC is taxed as sole proprietorship unless the owner wishes to be taxed as a corporation

a limited partenrship cannot be dissolved by a limited partners

bankrupcy (unless it causes bankruptcy of the firm) death assignment of interest

in addition to voluntary dissociation, a general partner can be dissociated from a limited partnership in any of the following ways

bankruptcy retirement death mental incompetence

the main disadvantage of the LLC is that state LLC statutes are not uniform. Therefore, businesses that operate in more than one state may not receive

consistent treatment in these states

unlike partnership or sole prop, if a member dies or otherwise dissociates from an LLC, the other members may;

continue to carry the LLC business unless operating agreement provides otherwise

another similarity between corporations and LLC is that LLC are

legal entities apart from their owners

in an LLP a partners personal liability for the malpractice of other partners is

limited

Advantages of LLC (why its popular)

limited liability tax pass-through simplicity and flexibility in management and operation flexible ownership

the liability of a limited partner is limited to the capital that they contribute or agree to contribute to the partnership

limited partners enjoy this lmited liability only so long as they DO NOT participate in management

like the shareholders of a corporation, t

members

in an LLP a

only when distributed to its partners. (pass through entity)

the members of an LLC can decide how to operate the various aspects of the business by forming an

operating agreement

limited partner

partner who contributes capital to the partnership but has no fight to participate in its management and has NO LIABILITY for partnership debts beyond the amount of his or her investment

there cannot be a partnership of one if the

partnership ends

because the corporation has limited liability by virtue of corporation statues, if a corporation statutes, if a corporation is the general partner, no one in the limited partnership has

personal liability

the LLP is attractive for

professional service firms and family business

like corporations, LLCs must be formed and operated in compliance with

state law

limited liabilty

the LLC as an entity can be held liable for any loss or injury caused by the wrongful acts or omissions of its members members themselves generally are not personally liable

when liability may be imposed

the members of an LLC, like the shareholders in a corporation , can lose their limited personal liability in certain circumstances

When an LLC is dissolved, any member who did not wrongfully dissociate may participate in the winding up process

to wind up the business, members must collect, liquidiate, and distribute the LLC assets