Limited Partnerships and Limited Liability Companies
Limited Liability Limited Partnership (LLLP)
A type of limited partnership. The difference between a limited partnership and an LLLP is that the liability of the general partner in an LLLP is the same as the liability of the limited partner. That is, the liability of all partners is limited to the amount of their investments in the firm.
Causes of Dissolution of a Limited Partnership
End of life of limited partnership Written consent of general and limited partners Withdrawal of general partner Entry of decree of judicial dissolution
Filing LLC statutes
LLC statutes generally require the central filing of articles of organization in a designated State office
Name of LLC
LLC statutes generally require the name of the LLC to include the words limited liability company or the abbreviation LLC
Members LLC
LLC statutes permit members to include individuals, corporations, general partnerships, limited partnerships, limited liability companies, trusts, estates, and other associations
Voting (LLC)
LLC statutes usually specify the voting rights of members, subject to a contrary provision in an LLC's operating agreement
Information (LLC)
LLCs must keep basic organizational and financial records; each member has the right to inspect and copy the LLC records
Contribution to an LLC
The Contribution of a member to an LLC may be cash, property, services rendered, or a promissory note or other obligation to contribute cash, property, or to perform services
duties of manager-managed LLCs
The managers of a manager-managed LLC have a duty of care and loyalty; usually, members of a manager-managed LLC have no duties to the LLC or its members by reason of being members
Assignment of LLC Interest
Unless otherwise provided in the LLC's operating agreement, a member may assign his financial interest in the LLC; an assignee of a financial interest in an LLC may acquire the other rights by being admitted as a member of the company if all the remaining members consent or the operating agreement so provides
Rights in Limited Partnership
a general partner in a limited partnership has all the rights and powers of a partner in a general partnership
Withdrawal
a general partner may withdraw from a limited partnership at any time by giving written notice to the other partners; a limited partner may withdraw as provided in the limited partnership certificate
Limited Liability Partnership (LLP)
a general partnership that, by making the statutorily required filing, limits the liability of its partners for some or all of the partnership's obligations
Limited Liability Companies Definition
a limited liability company (LLC) is a noncorporate business organization that provides limited liability to all of its owners (members) and permits all of its members to participate in management of the business
Derivative Actions in LP
a limited partner may sue on behalf of a limited partnership if the general partners refuse to bring the action
Derivative Actions llc
a member has the right to bring an action on behalf of an LLC to recover a judgment in its favor if the managers or members with authority to bring the action have refused to do so
Withdrawal (LLC)
a member may withdraw and demand payment of her interest upon giving the notice specified in the statute or the LLC's operating agreement
Definition of limited partnership
a partnership formed by two or more persons under the laws of a State and having one or more general partners and one or more limited partners
Foreign Limited Liability Companies
an LLC is considered "foreign" in any State other than that in which it was formed
Causes of dissolution llc
an LLC will automatically dissolve upon (1) in some States, the dissociation of a member if the remaining members do not choose to continue the LLC, (2) the expiration of the LLC's agreed duration or the happening of any of the events specified in the articles, (3) the written consent of all the members, or (4) a decree of judicial dissolution
Loans in LP
both general and limited partners may be secured or unsecured creditors of the partnership
Formation a limited partnership
can be formed only by substantial compliance with a State-limited partnership statute Filing of Certificate two or more persons must file a signed certificate of limited partnership Name inclusion of a limited partner's surname in the partnership name in most instances will result in the loss of the limited partner's limited liability Contributions may be cash, property, or services or may be a promise to contribute cash, property, or services Defective Formation if no certificate is filed or if the one filed does not substantially meet the statutory requirements, the formation is defective and the limited liability of the limited partners is jeopardized Foreign Limited Partnerships a limited partnership is considered "foreign" in any State other than that in which it was formed
Winding Up LLC
completing unfinished business, collecting debts, and distributing assets to creditors and members; also called liquidation
Information in LP
each partner has the right to inspect and copy the partnership records
Duties in LP
general partners owe a duty of care and loyalty (fiduciary duty) to the general partners, the limited partners, and the limited partnership; limited partners do not
Distribution of Assets in LP
goes to creditors first, then partners with respect to: unpaid distributions, capital contributions, the remainder of the proceeds.
Management of LLC
in the absence of a contrary agreement, each member has equal rights in the management of the LLC, but LLCs may be managed by one or more managers who may be members
Protection of Creditors llc
many LLC statutes establish procedures to safeguard the interests of the LLC's creditors, including (1) mailing notice of dissolution to known creditors, (2) publishing of notice, and (3) preserving claims against the LLC for a specified time
Dissociation of LLC
means that a member has ceased to be associated with the company through voluntary withdrawal, death, incompetence, expulsion, or bankruptcy
duties of member-managed LLCs
members of member-managed LLCs have the same duties of care and loyalty that managers have in manager-managed LLCs
Formalities LLP
most statutes require only a majority of the partners to authorize registration as an LLP; others require unanimous approval
Choice of Associates
no person may be added as a general partner or a limited partner without the consent of all partners
Profit and Loss Sharing in LP
profits and losses are allocated among the partners as provided in the partnership agreement; if the partnership agreement has no such provision, then profits and losses are allocated on the basis of the contributions each partner actually made
Formation of an LLC requires substantial compliance with a State's LLC statute
requires substantial compliance with a State's LLC statute
Liability Limitation LLP
some statutes limit liability only for negligent acts; others limit liability to any partnership tort or contract obligation that arose from negligence, malpractice, wrongful acts, or misconduct committed by any partner, employee, or agent of the partnership; most provide limited liability for all debts and obligations of the partnership
Liabilities llc
subject to certain exceptions, no member or manager of an LLC is obligated personally for any debt, obligation, or liability of the LLC solely by reason of being a member or acting as a manager of the LLC
Profit and Loss Sharing in LLC's
the LLC's operating agreement determines how the partners allocate the profits and losses; if the LLC's operating agreement makes no such provision, in most States, the profits and losses are allocated on the basis of the value of the members' contributions
Authority (LLC)
the actual authority of a member or manager to act for the LLC terminates, except so far as may be appropriate to wind up LLC affairs; apparent authority continues unless notice of the dissolution is given to a third party
Operating Agreement in LLC
the basic contract governing the affairs of an LLC and stating the various rights and duties of the members
Merger of LLC
the combination of the assets of two or more business entities into one of the entities
Distribution of Assets llc
the default rules for distributing the assets of an LLC are (1) to creditors, including members and managers who are creditors, except with respect to liabilities for distributions; (2) to members and former members in satisfaction of liabilities for unpaid distributions, except as otherwise agreed; (3) to members for the return of their contributions, except as otherwise agreed; and (4) to members for their LLC interests in the proportions in which members share in distributions, except as otherwise agreed
Control rights
the general partners have almost exclusive control and management of the limited partnerships; a limited partner who participates in the control of the limited partnership may lose limited liability
Liabilities in LP
the general partners have unlimited liability; the limited partners have limited liability (liability for partnership obligations only to the extent of the capital that they contributed or agreed to contribute)
Distributions in LLC
the members share distributions of cash or other assets of an LLC as provided in the operating agreement; if the LLC's operating agreement does not allocate distributions, in most States, they are made on the basis of the contributions each member made
Designation LLP
the name of the LLP must include the words limited liability partnership or registered limited liability partnership or the abbreviation LLP
Distributions in LP
the partners share distributions of cash or other assets of a limited partnership as provided in the partnership agreement
Voting Rights
the partnership agreement may grant to all or a specified group of general or limited partners the right to vote on any matter
Effect of merger LLC
the surviving entity receives title to all of the assets of the merged entities and assumes all of their liabilities; the merged entities cease to exist
Assignment of Partnership Interest
unless otherwise provided in the partnership agreement, a partner may assign his partnership interest; an assignee may become a substituted limited partner if all other partners consent
Winding Up of LP
unless otherwise provided in the partnership agreement, the general partners who have not wrongfully dissolved the partnership may wind up its affairs
