chapter 17 limited liability companies and limited partnerships n.
Skip this Video
Loading SlideShow in 5 Seconds..
Chapter 17 Limited Liability Companies and Limited Partnerships PowerPoint Presentation
Download Presentation
Chapter 17 Limited Liability Companies and Limited Partnerships

Loading in 2 Seconds...

play fullscreen
1 / 21

Chapter 17 Limited Liability Companies and Limited Partnerships - PowerPoint PPT Presentation

  • Uploaded on

Chapter 17 Limited Liability Companies and Limited Partnerships. Introduction. Limited liability companies are relatively new creatures of state statute. An LLC is a hybrid entity that combines the limited liability of a corporation and the tax advantages of a partnership.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Chapter 17 Limited Liability Companies and Limited Partnerships' - gwendolyn

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
  • Limited liability companies are relatively new creatures of state statute.
  • An LLC is a hybrid entity that combines the limited liability of a corporation and the tax advantages of a partnership.
  • LLC’s are increasingly become the entity of choice for businesses.
1 llc s
§ 1: LLC’s
  • 1997 IRS rules provide that any unincorporated business (including LLC’s) will automatically be taxed as a partnership unless otherwise indicated on the tax return.
  • LLC’s are attractive in today’s global business environment because they allow foreign investors to own interests.
nature of the llc
Nature of the LLC
  • Like corporations, LLC’s are creatures of state law.
  • The owners are called “members” (not shareholders) and their ownership is called an “interest” (not shares).
nature of the llc1
Nature of the LLC
  • Members of an LLC enjoy limited liability.
  • Case 17.1:Kaycee Land and Livestock v. Flahive (2002).
  • Can a third party pierce the LLC “veil” and hold managing member liable?
llc formation
LLC Formation
  • Articles of Organization require:
    • Name of Business.
    • Principal Address.
    • Name and Address of Registered Agent.
    • Names of the Owners; and
    • How the LLC will be managed.
  • Business name must include LLC or Limited Liability Company.
jurisdictional requirements
Jurisdictional Requirements
  • An LLC is a legal entity separate from its owners.
  • For federal jurisdiction based on diversity, an LLC may be treated differently than a corporation.
  • For diversity purposes the citizenship of an LLC is the citizenship of its members, which may live in multiple jurisdictions.
llc operating agreement
LLC Operating Agreement
  • Operating agreement is analogous to corporation’s bylaws.
  • Operating agreements may be oral and contain provisions relating to management, dividends, meetings, transfer of membership interests, and other significant issues.
  • Generally, if the operating agreement is silent, courts will apply partnership principles.
  • Case 17.2: Hurwitz v. Padden (1996).
llc management
LLC Management
  • There are two options for management, generally set forth in the articles of organization:
    • Member-Managed: all of the members participate in management, like a partnership.
    • Manager-Managed: members are elected to manage the LLC.
  • If the articles are silent, statutes provide either that each member has one vote or votes are made based on percentage of ownership.
2 llp s
§ 2: LLP’s
  • Creature of state statute, similar to an LLC except that an LLP is designed for professionals who normally do business as a partnership (lawyers and accountants).
  • LLP allows partnership to limit personal liability of the partners but allows “pass through” tax advantages.
liability in an llp
Liability in an LLP
  • Recall that partnership law makes all partners jointly and severally for another partner’s tort, including personal assets.
  • The LLP allows professionals to avoid personal liability for the malpractice of other partners.
  • Supervising Partner is also liable for acts of subordinate.
family limited liability partnerships
Family Limited Liability Partnerships
  • FLLP is a limited liability partnership in which the majority of the partners are related to each other.
  • Used frequently for agriculture.
3 limited partnerships
§ 3: Limited Partnerships
  • Entity that limits the liability of some of its owners (the limited partners).
  • Creature of state statute. Filing a certificate with the Secretary of State is required.
  • Agreement between at least one general partner and one limited partner to carry on a business for profit.
rights and liabilities of partners
Rights and Liabilities of Partners
  • Only General Partners can manage but they have a fiduciary obligation to LP’s.
  • LP’s enjoy limited liability as long as they do not engage in management functions.
  • An LP will be liable to a 3rd party if the 3rd party believes, based on conduct, that the LP is a general partner.
rights and liabilities of partners1
Rights and Liabilities of Partners
  • The General partner assumes all management and personal liability.
  • Limited Partner contributes cash but has no management rights. Liability is limited to the amount of investment. A limited partner can forfeit this “veil” of immunity by taking part in the management of the LP.
  • Case 17.3:BT-I v. Equitable Life Assurance Society of the United States (1999).
rights and liabilities of partners2
Rights and Liabilities of Partners
  • General partners are personally liable to 3rd parties for breach of contract and tort liability. However, a corporation (or an LLC) can be a general partner and have limited liability.
  • Limited partners have the right to inspect the LP’s books and be informed of the LP’s business.
dissolution of the lp
Dissolution of the LP
  • On dissolution, the limited partner is entitled to return of capital contributions.
  • LP interests are considered securities and regulated by both federal and state securities laws.
  • Limited partners’ liability is limited to the capital investment.
dissolution of the lp1
Dissolution of the LP
  • Dissolved in much the same way as a general partnership (Chapter 36).
  • Retirement, withdrawal, death bankruptcy or mental incompetence of a general partner will trigger dissolution unless the remaining GP’s consent to continue.
  • Creditors are paid first then partners.
4 lllp s
§ 4: LLLP’s
  • Limited Liability Limited Partnership is a type of limited partnership.
  • Difference between LP and LLLP is that the general partner has limited liability, like a limited partner, up to the amount of investment.
  • Most states do not allow for LLLP’s.
law on the web
Law on the Web
  • Comparison of Different Business Entities.
  • LLC’s at
  • Legal Research Exercises on the Web.