Business Associations Flashcards
What are the default terms of a Limited Liability Company?
Members have liability of shareholders but management and tax treatment of partners. Can elect to be taxed as a corporation.
Requires articles of organization, members may manage or delegate management, membership interest may not be transferred without other member’s unanimous consent, may be dissolved on unanimous consent.
Operating agreement may amend any of the above.
What are the basic characteristics of a Partnership?
An association of two or more persons carrying on a business for profit.
Management authority and profits are split equally.
A contribution of management or capital for profit creates a presumption of a partnership.
How is a Registered Limited Liability Partnership formed in California?
Applicants Must register by filing statement of qualification and annual reports.
No partners are liable for RLLP debts.
Otherwise identical to LLPs.
What are the requirements of Limited Partnerships in California?
1) Must file limited partnership certificate indicating the name of the general partners;
2) General partners have management rights and are liable for all obligations;
3) Limited partners are liable only up to their contributions, but cannot be managers.
Limited Partnerships must have at least one of each type of partner.
What are the default procedures for Partnership Dissolution?
Partnership dissolves on notice of one partner’s intent to disassociate.
Then, winding up occurs, where partners are liable for all acts taken to wind up the dissolving partnership.
In the order of distribution of partnership funds, creditors receive their money first, then partners are returned their capital contributions, then profits are split among partners.
What are the default rules for Partnership Property and Profit in California?
Property and profits may not be transferred without the partnership’s approval.
Profits are shared equally absent an agreement.
Management is shared equally absent an agreement.
Losses are shared equally absent an agreement.
What is General Partnership Liability by Estoppel?
One who represents the existence of a general partnership to a third party will be liable to that party as if the partnership exists.
What are the liabilities of a Disassociating Partner?
Disassociating partners will retain liability for future debts of the partnership until she gives notice of her disassociation to creditors;
or, she will remain liable to the partnership’s creditors for 90 days after a notice of disassociation is filed with the state registrar.
What is a Fiduciary’s Duty of Care?
Fiduciaries may not engage in self dealing, usurp a partnership opportunity, or obtain a secret profit.
Remedy for breach is an accounting, and the breacher is liable for disgorgement and any losses caused by the breach.
What is Required to Pierce the Corporate Veil?
Shareholders of a corporation may be found liable for a corporation’s actions where:
1) the corporation is merely an alter ego of a shareholder;
2) the corporation was undercapitalized or there is commingling of personal and corporate funds; or
3) if there are severe shortcomings in following corporate formalities.
