Ch 17 - Limited Liability Flashcards

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1
Q

Limited Liability Company

A

Hybrid entity that combines limited liability of a corporation and tax advantages of partnership

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2
Q

What is increasingly the entity of choice for businesses?

A

LLC

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3
Q

Owners are called _____ and ownership is ____

A

Members, interest

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4
Q

Piercing the corporate veil

A

Courts put aside limited liability and hold members liable (abuse and to achieve justice)

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5
Q

Similarities to corporations

A

Separate legal entity from owners, can hold property separately, “foreign” designation if doing business in state other than where LLC formed

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6
Q

Pre-formation contracts

A

If promoter forms one prior to formation, they may be personally liable

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7
Q

Promoters

A

Owners of firm prior to charter

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8
Q

Jurisdictional requirements

A
  • Legal entity separate from owners

- Citizenship of LLC is citizenship of members

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9
Q

Advantages:

A
  • Limited liability

- Members can choose to be taxed as pass-through or double-tax

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10
Q

Disadvantages

A
  • Lack of uniformity with state laws

- Business operating in multiple states may not receive consistent treatment

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11
Q

Fiduciary duties

A

Managers in manager-managed LLC owe duties to LLC and its members

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12
Q

Effects of dissociation

A
  • Member loses right to participate and right to act as an agent
  • Has right to have interest bought out by other members
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13
Q

Winding Up

A

Members collect and liquidate LLC assets and honor prior contracts

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14
Q

Who WILL get paid first>

A

CREDITORS

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15
Q

Limited Liability Partnership

A

Hybrid form of business designed mostly for professionals who normally do business as partners

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16
Q

LLP allows partnership to continue as

A

Pass-through entity but limits personal liability of partners

17
Q

Liability

A

Only liable for own actions. But if partner supervised wrongful individual, then partner is liable too.

18
Q

Outside State of Formation

A

LLP formed in NC can do business elsewhere, but both states may provide different liability protection

19
Q

Limited Partnership

A

Business organizational form that limits liability of SOME owners (the limited partners)

20
Q

General partner

A

Assumes management responsibilities

HAS FULL RESPONSIBILITY FOR ALL PARTNERSHIP DEBTS

21
Q

Limited partner

A

Contributes cash or property and owns interest on firm

Not personally liable for debts UNLESS they partake in management of business

22
Q

Liabilities of LP

A

General partners personally liable to partnership’s creditors

23
Q

Franchise Price Arrangements

A

Franchises can advise franchisees on prices to set but they cannot mandate them

24
Q

An LLC is a citizen in every state its members are citizens T/F?

A

True

25
Q

All partners are liable in a partnership T/F?

A

True

26
Q

Limited partner liable to the extent of

A

Capital contribution