BLAW-Chapter 14

Distribution of Assets on Liquidation- Order of Priorities

1. Outside creditors and partner creditors 2. Partners and former partners entitled to distributions or partnership assets 3. Unless otherwise agreed, return of capital contributions and distributions of profit to partners.

Dissociation and Dissolution of LLC

A member of an LLC has the power to dissociate from the LLC at any time, but he or she may not have the right to dissociate. Even if a member dies or dissociates from an LLC, other members may continue to carry on the LLC unless operating agreement has contrary provisions.

Advantages of LLP

Allows a partnership to continue as a partnership for tax purposes but limits the personal liability of the partners.

General Partner

Assumes management responsibility for the partnership and has full responsibility for the partnership and all debts.

Liability in LLP

Avoid personal liability for malpractice of the other partner,

Creation of Limited Partnership(RULPA)

By agreement of two or more persons to carry on a business as co-owners for profit. Must include one or more general partners, one or more limited partners, filling a certificate with SoS is required.

Management of an LLC

Can either be member managed or manager-managed. Managed can either be members or non members. Managers owe duties including loyalty and care.

Limited partnership(RULPA)

Consists of one general partner and one or more limited partners.

Operating Agreement

Contain provisions relating to management , division of profits, transfer of membership, whether LLC will be disolved on death or departure of member.

Limited partner

Contributes assets and owns an interest in the firm but does not undertake any management responsibilities, not personally liable for debts beyond their investments.

Limited Liability Limited Partnership (LLLP)

Differs from RULPA (LP) in that a general partner in a LLLP has the same liability as a limited partner in a limited partnership. Liability of all partners is limited to the amount of their investments in the firm. Few states provide expressly for LLLP.

Effects of Dissolution of LLC

Dissociated member has no right to force the LLC to dissolve. The remaining members can opt to either continue or dissolve. members who did not wrongfully dissociate may participate in the winding up process.

Management of RULPA

General partner of partners only. Limited partners have no voice or else subject to liability as general partners(but only if a third party has reason to believe that limited partner is general partner). A limited partner may act as an agent or employee of the partnership and vote on amending the certificate or on the sale or dissolution of the partnership.

Limited Liability Partnership (LLP)

Hybrid form for professionals to work as partners.

Family limited liability partnership

Majority of the partners are related to each other

Advantages of LLC

Members are not personally liable of debts or obligations of the entity, offers flexibility in both taxation and management, LLC exist beyond death or illness of its members.

Members

Owners of LLC. LLC's are separate from their owners

Sharing of Profits and losses of RULPA

Profits are shared as required in the certificate agreement , and losses are shared likewise, up to the amount of the limited partners' capital contributions. In the absence of a provision in the certificate agreement, profits, and losses are shared on the basis of percentages of capital contributions.

Rights and Liabilities of RULPA

Right to access books and other information, Can sue with GP authority, entitled to a return of their contributions,

Capital contributions

Set by Agreement

Disadvantages of LLC

State LLC statutes are not uniform

Duration of RULPA

Terminated by agreement in the certificate or by retirement, death, or mental incompetence of a general partner in the absence of the right of the other general partners to continue the partnership. Death of a limited partner, unless he or she is the only remaining limited partner, does not terminate the partnership.

Liability of RULPA

Unlimited personal liability of all general partners; limited partners liable only to the extent of their capital contributions.

Effects of Dissociation of LLC

When a member dissociates, he or she loses the right to participate in management and right to act as an agent. Operating agreement may contain a buyout price, but if it does not, the member's interest is usually purchased at a fair value. LLC must purchase the interest at fair value with 120 days after dissociation.

LLC(Limited liability company)

hybrid that combines limited liability aspects of the corporation and tax advantages of a partnership