LPs, LLPs, LLLPs, LLC

Question 1

limited partnership defined

Answer 1

comprised of one or more general partners and one or more limited partners.
the general partner is personally liable for partnership obligations. (after he joins, that is)

the limited partner is not liable beyond being required to make agreed-upon contribution

Question 2

when is an LP available?

Answer 2

when a statute provides

Question 3

how is an LP formed?

Answer 3

must file certificate of LP

• must give name of partnership (must incl. LP)
• all GPs must sign and must give name and add. of each GP
  -must include an agent for service of process in the state

Question 4

how are distributions made in an LP?

Answer 4

in proportion to the value of each partners’ contribution
Contributions can be money, services, real property

Question 5

when is a distribution improper in an LP?

Answer 5

when it would make the LP unable to pay debts as they become due or
total assets less than liabilities

Question 6

document to form an LLC

Answer 6

articles of organization
must state
-name (incl. LLC)
-statement that the entity is LLC
-registered office and registered agent's addresses

Question 7

management of LLCs

Answer 7

by all members, majority vote

Question 8

LLC members’ liability for obligation

Answer 8

they are not personally liable. they can only be liable up to their investment in the LLC.

UNLESS it’s a member’s own wrongful act

Question 9

how to form an LLP

Answer 9

statement of qualification. must be signed by 2 partners and have the name and address of the partnership and a statement that it elects to be an LLP

name must include LLP

Question 10

management rights in an LP

Answer 10

only the GP has management rights and they all have equal voting rights. decisions made by majority vote if more than 1.

Question 11

liability of partners in LLP

Answer 11

not personally liable for partnership debts. only partnership assets can be reached

UNLESS it’s a partner’s own wrongful act

Question 12

liability of partners in LLLP

management rights

Answer 12

all partners are not liable (similar to LP/LLP)

the lim. partners just may not have mgmt rights

Question 13

if an LP wants to convert to LLLP how many partners need to agree?

Answer 13

ALL partners must agree

Question 14

things requiring unanimous consent in an LP

Answer 14

• amend p’ship agreement
• dispose of all/subs. all assets outside usual course of the business
• admit a new partner

Question 15

Liability of limited partners

Answer 15

Only up to the value of their investment. they are not personally liable.

Question 16

Fiduciary duties in an LP

Answer 16

Only the general partners owe fiduciary duties to the partners and the partnership
Limited partners can compete with the business

Question 17

Operating agreement

Answer 17

agreement detailing how the LLC operates and is governed

Question 18

LLC management

Answer 18

Presumed member managed where all members have right to vote in making decisions and most decisions are made by a majority vote, unless it’s an extraordinary event where unanimity is required

Manager managed is another option where certain people are designated managers and then Decisions are made by majority of managers or unanimous vote of managers for extraordinary events

Question 19

LLC member or manager liability

Answer 19

Not personally liable for LLC debts and obligations

Question 20

Distributions in LLC

Answer 20

Most states say they are made in proportion to the contributions of the members

Question 21

Liability of LLC members

Answer 21

Not personally liable for LLC obligations

Question 22

Fiduciary duties in an LLC

Answer 22

The members or managers as applicable have:

Duty of care - duty to act with the care a person in a similar position would use under the circumstances. Because of business judgment rule they’re only liable for gross negligence in decisions

Duty of loyalty- duty not to compete with the business, duty not to deal with the LLC as someone with an adverse interest, and duty to account for any benefit received from the LLC business or appropriating an LLC opportunity

Question 23

Right to transfer LLC membership interest

Answer 23

Only the right to receive distributions can be transferred
Management rights cannot be and the person cannot become a member without unanimous vote of the members

Question 24

LLC dissolution without court order

Answer 24

Happens automatically when there are no members for 90 days
LLC can also be dissolved with consent of all members, or on the happening of an event stated in the operating agreement

Question 25

Taxation of LLC

Answer 25

No entity level tax Income is imputed and taxed to each member (if income is earned but not paid to the members, they are treated as if they had received it and must report on their personal income tax returns)

Question 26

LLC member right to info

Answer 26

If member managed can inspect and copy any financial or other company records that are material to the member duties. Must automatically furnish docs to other members that are material to the member’s duties and rights If manager managed managers have the right to inspect and copy any financial or other company records that are material to the manager duties. Must automatically furnish docs to members that are material to the member’s duties and rights. In a manager managed LLC the members must make a request for docs regarding LLC activities and finances as is reasonable if it is 1 requested for a purpose related to members interest as a member 2 info sought is described with reasonable particularity 3 info sought directly connected to member’s purpose

Question 27

actions that limited partners have the right to vote on in a LP

Answer 27

admitting a new partner amending the certificate of LP selling substantially all the assets converting to a limited liability limited partnership amending a partnership agreement compromise a partner's obligation to make a contribution compromise a partner's obligation to return an improper distribution

Question 28

right to transfer LP interest

Answer 28

can only transfer the financial component (right to receive distributions) if the whole partnership interest is transferred it is a ground for expulsion

Question 29

right to distribution in an LP

Answer 29

a partner is only entitled to distribution if he made a contribution to the LP

Question 30

contribution obligation in an LP

Answer 30

if a partner makes an agreement to make a contribution, the obligation is not excused by death or disability can only be compromised by consent of all partners any benefit (money, property, services) to the partnership counts as contribution

Question 31

liability for improper distributions in an LP

Answer 31

general partners who consent to it are liable for the difference between what was distributed and what the LP could have properly distributed

Question 32

liability of general partner in an LP

Answer 32

jointly and severally liable for all LP obligations, personally liable like a partner in a regular partnership not liable for LP acts taken before they became a partner

Question 33

rights of all partners in an LP

Answer 33

all partners, even GPs who have duty of loyalty: can transact business with the LP can loan the LP money can apply for a decree of dissolution if it's not reasonably practicable to carry on the business as provided in the LP agreement

Question 34

rights of LP partners to file lawsuits

Answer 34

direct lawsuits to protect their own rights derivative lawsuits to enforce LP rights after giving general partners a demand to file a lawsuit, unless it would be futile

Question 35

rights of LP partners to dissociate

Answer 35

GPs can dissociate at any time (unless the partnership is for a term) LPs cannot dissociate before termination

Question 36

LP dissociation events

Answer 36

same as in a partnership

Question 37

LP dissolution

Answer 37

happening of event specified in partnership agreement consent of all GPs and LPs holding majority of the right to receive distributions consent of remaining partners owning a majority in interest after 1 of several general partners dissociates 90 days after dissociation of the only general partner if a new GP is not admitted

Question 38

partner power to bind an LP after dissolution

Answer 38

only GPs can, and generally for acts appropriate to wind up. if the third party did not have notice of dissolution then the GP can bind the LP to a contract with that party

Question 39

LP winding up

Answer 39

marshal assets and liquidate them pay creditors (including loans from limited partners) pay surplus as a distribution if the assets are insufficient, the GPs must contribute to the losses

Question 40

can you pierce the veil in an LLC?

Answer 40

yes in a way similar to corporations

Question 41

in an LLC who is an agent able to bind the LLC?

Answer 41

in member-managed, any member in manager-managed, only the managers

Question 42

in an LLC who owes fiduciary duties?

Answer 42

whoever has the management rights- members or managers

Question 43

LLC dissociation of members

Answer 43

same events trigger dissociation as in a partnership, but the LLC members have the right at any time

Question 44

LLC dissolution with court order on application from a member

Answer 44

LLC controlling members have acted or will act illegally or fraudulently Conduct of all / substantially all LLC activities is unlawful Not reasonably practicable to carry on company's activities and conform with the operating agreement Controlling members are acting or have acted oppressively in a way that is directly harmful to the member seeking dissolution

Question 45

LLC creditor claims

Answer 45

can give creditors notice with a deadline at least 120 days from the date of notice can publish notice of dissolution and this will bar claims from unknown creditors made 5 years after the publication

Question 46

indemnity of LLC managers/members

Answer 46

in member managed, members have the right to be indemnified for costs and claims incurred in the course of their activities on behalf of LLC in manager managed, managers entitled to indemnification