Partnership expanded Flashcards
Limited Partnership: Formation
Definition: Partnership with one or more general partners (generally jointly and severally liable) and one or more limited partners (liability limited to their investment)
Formalities: file a certificate with SOS and have a written partnership agreement
Name: must include “Limited partnership,” “Limited” or an abbreviation
Law: general partnership law governs except where LP statute is inconsistent.
Limited Partnership: liability of limited partners?
Generally, limited partners can only lose their capital contributions and aren’t responsible for more liability from the partnership.
BUT, if a limited partner “takes control” (safe harbors by statute: employed in low-level position, advising, guaranteed a note, officer or director of the general partner)
Has to be more than the safe harbors to take control
Limited Partnership: When can a limited partner be liable beyond her capital contribution?
If limited partner:
(a) participates in control of business and
(b) specific creditor reasonably relied on the mistaken belief that the limited partner was a general partner.
Limited Partnership: What if the limited partnership forgot to file with the SOS?
It is a general partnership until it files and the limited partner would be jointly and severally liable, but a limited partner can avoid future liability by filing with the SOS or withdrawing from the LP in a reasonable time after discovering the failure to file.
Limited Partnership: rights specific to limited partners?
(a) right to bring derivative action
b) to vote on specific matters (but not to participate in control of the business
Limited Liability Limited Partnership: What is a limited liability limited partnership (LLLP)?
Like a limited partnership, except general partners are also shielded from personal liability for the torts of others.
Limited Liability Company: Formation
Filing: file certificate with SOS and pay fee
Name: Must include phrase (limited liability company, limited company, or an abbreviation of it.
Professionals (“PLLC”): members and managers must be licensed to provide professional services somewhere (note: no mixing of professions)
Profits/Losses: split in proportion to capital contributions, unless otherwise noted
Limited Liability Company: Management
Flexible management: can be structured like a partnership or corporation, but managers run the LLC unless otherwise agreed in certificate.
Series LLC: can partition assets/liabilities among separate series (designed to shield assets of one series from creditors of another)
Limited Liability Company: Defining Features
No shared liability for members (except for individual tortfeasors, e.g. malpractice)
Limited Liability Partnership: Formation
File certificate with SOS and pay fee
Name must include phrase “limited liability partner” or an abbreviation.
Limited Liability Partnership: Effect of partner withdrawal
Partnership buys out withdrawing partner and continues without her
Withdrawing partner may have apparent authority to bind partnership for one year (but LLP can protect itself by notifying creditors)
Limited Liability Partnership: Liability of withdrawing partner
To existing creditors: unless released by a creditor, expressly or impliedly
To subsequent creditors: if they were unaware of her withdrawal (but can protect herself by notifying potential creditors of her withdrawal)
To other partners: if she withdraws before the term is up or before the task is completed
*PLLC
Under the TBOC, a PLLC will
shield its members of liability for any creditors. A member/partner will be held personally liable for any
negligence they may have committed or liability on personal contracts entered into.
Under the TBOC, a professional limited
liability company may only provide one professional service. If more than one professional service is
provided, the PLLC will be in violation of the TBOC.
*Can a member validly assign his partnership interests unilaterally in any form of partnership?
Yes, but the new interest is merely an economic one and does not get to control day-to-day like a normal partner.
*Who is liable in regular partnership?
- if partnership is liable, then each individual partner is also J+S liable
so, if partnership is liable for an act by it or vicariously through an employee, both the partnership and each partner are liable
