Alternative unincorporated biz orgs

Question 1

Limited partnerships

Answer 1

a. Defined: a partnership with at least 1 GP and 1 limited partner
i. We give the LPs limited liability
1. If we’re going to give you limited liability, state wants to know about you.
b. Formation:
1. So there is a formation requirement. → must file with the state a limited partnership certificate including the names of all general partners.
c. Liability and control :
i. general partners are still liable for all limited partnership obligations. But also have right to control/ manage the business.
ii. LPs: limited liability, not liable for obligation of partnership itself.
1. In most states → LPs may not manage business without giving up limited liability status.
2. But under revised uniform limited partnership act, LPs MAY manage the business without forfeiting their limited liability status.

Question 2

Registered limited liability partnerships

Answer 2

a. Formation:
i. must register with the state by filing a statement of qualification.
ii. Must also file annual reports
b. Liabilities: NO PARTNER IS LIABLE for partnerships obligations . not even general partners.
i. But can still sue individual partner for his torts/obligations.

Question 3

LLCs

Answer 3

C. Limited Liability Companies (LLCs)

a. Defined: hybrid between a corporation and a partnership in which owners (AKA members) have the same limited liability as shareholders in a corporation.
i. BUT they still have benefits of tax treatment of partnership (i.e. no double taxation)
b. Formation Requirements: must file the articles of organization, and MAY adopt an operating agreement.
c. Control: owners MAY control the business or they may delegate to a team of managers. This team of managers has same rights/ liabilities as a board of directors in a corporation
d. Limited Liquidity : some limit on liquidity for interest. Full membership interest may NOT be transferred without unanimous consent of members OR as provided, in the operating agreement.
e. Limited life: will dissolve upon certain events. Company will dissolve upon unanimous consent of members OR as provided in the articles of organization or the operating agreement.
f. Therefore LLCs =
i. Limited liability
ii. Limited liquidy
iii. Limited life
iv. Limited tax
g. Piercing the LLC veil – members and managers are not personally liable. BUT courts may pierce in same way you pierce veil of a corporation.
i. BUT failing to observe corporation type formalities does not equal ground for LLC veil piercing.