OTHER UNINCORPORATED BUSINESS FORMS

Question 1

Define limited partnership

Answer 1

A partnership with at least one general partner and at least one limited partner. Because it is a partnership, general partnership principles typically apply unless displaced by LP-specific provisions.

Question 2

How do you forma limited partnership?

Answer 2

Must file a certificate of limited partnership with the secretary of state.

Question 3

What is required in the certificate to form a limited partnership?

Answer 3

The information required in the certificate is minimal. It includes, among other items: (1) the name of the LP; (2) the name and address of the agent for service of process; and (3) the name and address of each general partner.

Question 4

What happens if you fail to file the certificate to create the limited partnership?

Answer 4

(If you fail to file, you are just a general partnership.)

Question 5

What must the name of the limited partnership contain?

Answer 5

The name of the LP must contain the phrase “limited partnership” or the abbreviation “L.P.” or “LP.” (The policy here is to alert the public to the limited liability nature of the business.)

Question 6

What is in the partnership agreement? What can be displaced in it?

Answer 6

The real detail on the operation and governance of a LP is typically found in a partnership agreement. It can be written, oral, or implied. As in a general partnership, the agreement can displace almost all of the statutory provisions.

Question 7

Who manages the LP?

Answer 7

The general partners

Question 8

Does each general have a eual right in the management and conduct of the LP’s activities?

Answer 8

Yes

Question 9

How much of the vote is necessary for ordinary business activities?

Answer 9

The vote of a majority of the general partners is necessary for ordinary business activities.

Question 10

Do limited partners have management rights?

Answer 10

Limited partners usually have no management rights unless the partnership agreement grants them rights.

Question 11

What vote is needed for an LP’s extraordinary activity?

Answer 11

unless otherwise agreed, the vote of all partners (general and limited) is necessary for certain extraordinary activities

Question 12

What do extraordinary activities include for an LP?

Answer 12

including an amendment of the partnership agreement, the admission of a new general or limited partner, and the sale of all or substantially all of the LP’s property (if such sale is outside the ordinary course of the LP’s activities).

Question 13

How are profits and losses distributed in an LP?

Answer 13

Unless otherwise agreed, distributions from a LP are made on the basis of the partners’ contributions (i.e., in proportion to the value of each partner’s contribution).

Question 14

Who has liability for the LP?

Answer 14

1. General partners are liable for the obligations
   of the LP, just as they are in a general partnership.
   2 A limited partner is not personally liable for an obligation of the LP solely by reason of being a
   limited partner. Limited partners have limited liability, meaning that they can only lose the value of their investments.

Question 15

Chef Tom forms a LP to run a bistro. Padma invests $50,000 as a limited partner. The bistro flops; all of its assets, including Padma’a $50,000, are gone. Is Padma liable for the LP’s debts?

Answer 15

No. A limited partner has no liability for the LP’s obligations, you can only lose the amount of your investment.

Question 16

Does an LP shield a limited partner from their own torts?

Answer 16

The limited liability shield of any business organization does not protect a person from liability
for her own torts.

Question 17

What fiduciary duties to LP partners owe each other?

Answer 17

A general partner owes the LP and the other partners the same fiduciary duties of loyalty and care that general partners owe in a general
partnership. A limited partner does not have any fiduciary duty to the LP or to any other partner solely by reason of being a limited partner.

Question 18

What is the definition of an LLP? Limited Liability Partnership

Answer 18

An LLP is typically a general partnership where all of the partners have limited liability. In general, you apply general partnership rules to LLPs, with the exception of the material below.

Question 19

What do you need to file to form a LLP?

Answer 19

Must file a “statement of qualification” with the secretary of state

Question 20

What needs to be in a statement of qualification?

Answer 20

The required minimal information includes (1) the
name and address of the partnership; (2) a statement that the partnership elects to be an LLP; and (3) a deferred effective date, if any. The partnership becomes an LLP at the time of the filing of the statement or on the date specified in the
statement. (There is no LLP unless this statement is filed.)

Question 21

What must be in an LLP’s name?

Answer 21

The name of a registered limited liability partnership must end with the words “Registered Limited Liability Partnership” or “Limited Liability Partnership” or one of the abbreviations “L.L.P.,” “LLP,” “R.L.L.P.,” or “RLLP.”

Question 22

What is the liability in a LLP?

Answer 22

A partner in an LLP is not personally liable (directly,
indirectly, or by way of contribution) for the obligations of the LLP, whether arising in tort, contract, or otherwise. As always, however, a partner remains personally liable for her own wrongful acts.

Question 23

Define an LLC

Answer 23

A hybrid between a corporation and a partnership in which the owners (called “members”) have limited liability as well as the benefits of partnership tax treatment. This is not a corporation, nor is it a partnership. It is its own business form.

Question 24

What must you file for an LLC?

Answer 24

Must file “Articles of organization” with the secretary of state.

Question 25

What is required in the Articles of organization?

Answer 25

(1) the name of the LLC; (2) the address of the LLC’s registered office; and (3) the name of its registered agent.

Question 26

What must be in the name?

Answer 26

The LLC’s name must include an indication that it is an LLC. In general, the name should contain the words “limited liability company” or the abbreviation “LLC” or “L.L.C.”

Question 27

What is the most important document in an LLC? What can the operating agreement do?

Answer 27

The operating agreement. The operating agreement

can displace almost all of the statutory provisions.

Question 28

Who manages the LLC

Answer 28

Management of the LLC is presumed to be by all of the members.

Question 29

Other management arrangements can be made for an LLC (e.g., management by only some of the members or by outside managers), but they must be specified in the articles. If management is by the members what vote is required?

Answer 29

1. a majority vote is required to approve most
   decisions and
   (ii) each member is an agent of the LLC (i.e., the LLC may be bound by the acts of any member).

Question 30

How are profits and losses distributed in an LLC?

Answer 30

Unless otherwise agreed, profits and losses are

allocated on the basis of contributions.

Question 31

What is the liability in an LLC?

Answer 31

Members generally are not personally liable for the LLC’s obligations. They have limited liability and can only lose the amount of their
investments. As always, members are liable for their own torts.

Question 32

What are the fiduciary duties owed in an LLC?

Answer 32

The fiduciary duties owed by a member (if membermanaged) or a manager (if manager managed) to the LLC and to its members are the fiduciary duties of care and loyalty.

Question 33

How can you transfer ownership interest in an LLC?

Answer 33

financial rights are unilaterally transferable, but management rights are not. One can become a member (i.e., management rights can be transferred) only with the consent of all of the members.

Question 34

How are taxes done in an LLC?

Answer 34

Partnerships and LLCs are taxed on a “pass-through” basis. There is no entity-level tax; instead, business income is passed through to the owners and reported on the owners’ individual tax returns (regardless of whether that business income is actually distributed to the partners).

Question 35

How is a corporation taxed?

Answer 35

By contrast, a corporation is subject to “double taxation.” The corporation pays taxes on its income, and the shareholders pay taxes on that income again when and if it is distributed to them. In today’s tax climate, passthrough treatment usually results in less taxes paid.