Bài giảng Business Law (13th edition) - Chapter 40: Limited Liability Companies & Limited Partnerships

Partnerships9McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Introduction to Forms of Business and Formation of PartnershipsOperation of PartnershipsDissolution & Winding UpLimited Liability Companies & Limited PartnershipsLimited Liability Companies & Limited PartnershipsPAETRHC40“As work becomes more complex and collaborative, companies where people work together best have a competitive edge.” Daniel Goleman, Working With Emotional Intelligence (1998)Learning ObjectivesLimited Liability CompaniesLimited Partnerships and Limited Liability Limited PartnershipsCreation of Limited PartnershipsRight and liabilities of members and partnersDissociation and dissolution40 - *The limited liability company (LLC) combines advantages of corporation’s protection from personal liability and the favorable tax status of partnershipThe Uniform Limited Liability Company Act of 1996 (ULLCA) offers default rules similar to RUPA that govern an LLC in the absence of a contrary agreement of its owners - *At least one person (organizer) files articles of organization with secretary of stateMust state whether LLC is member-managed or manager-managedOwners of an LLC are membersOperating agreement covers how members will share profits, manage the LLC, and withdraw from the LLCLLC Creation40 - *A member’s ownership interest in an LLC is the member’s personal propertyLimited ability to sell or transfer LLC rightsA member in an LLC has the right is to receive distributions (usually profits)Member may transfer distributional interestULLCA: members share profits and other distributions equally unless otherwise agreedOwnership Interest of Members 40 - *Each member in a member-managed LLC shares equal rights in management and each member is an agent of the LLC with implied authority to carry on its ordinary businessA managing member or manager is a fiduciaryManagers in manager-managed LLC elected and removed by majority vote of membersManager’s powers to act for LLC similar to member’s power in member- managed LLCLLC Management40 - *LLC entity is liable for contracts and torts incurred by members or managers acting with express, implied, or apparent authorityLLC member has no individual liability on LLC contracts, unless contracts signed in a personal capacity (e.g., as a surety)A member is liable for torts s/he committed while acting for the LLCTort and Contract Liability 40 - *Under ULLCA, members dissociate from an LLC in ways similar to partnership or LLPMay be wrongful or nonwrongfulDissolution of an LLC similar to partnershipAfter LLC assets sold, proceeds distributed first to creditors, then member contributions returned; remaining proceeds distributed in equal shares to membersDissociation & Dissolution40 - *ULPA establishes limited partnership lawLimited partnership has two owner classes: General partners: contribute capital, manage business, share profits, possess unlimited liability for partnership obligationsLimited partners: contribute capital and share profits, but possess no management powersLiability limited to amount of investmentUniform Limited Partnership Act40 - *Limited partnership or limited liability limited partnership (LLLP) created by filing a certificate of limited partnership (signed by all general partners) with secretary of statePartners contribute property or other benefit to limited partnership, and share profits and losses on the basis of the capital contributionUnless otherwise agreedLP or LLLP Creation 40 - *ULPA is clear: limited partners have no inherent right to vote on any matterEach partner owns a transferable interest in limited partnership as personal propertyGeneral partner of a limited partnership or LLLP has right to manage and has agency powers, including fiduciary duties to the partnership entity and to other partnersRights & Management 40 - *Through a derivative action or derivative suit, a partner may sue to enforce a limited partnership right of action against a person who has harmed the limited partnershipDerivative Actions 40 - *ULPA gives partners no right to withdraw from partnership or to receive value of partnership interest absent a provision in the limited partnership agreementLimited partner dissociates upon death, withdrawal, or expulsion from partnershipULPA treats dissociation of general partners as RUPA treats partner dissociations General partner may have apparent authorityWithdrawing & Dissociation40 - *Under ULPA, limited partnership (or LLLP) is not dissolved, wound up, or terminated merely because a partner dissociatesIf limited partnership chooses to dissolve, winding up follows automaticallyGeneral partners liquidate assets, distribute proceeds: to creditors first, remainder to partners in same proportions they shared distributionsDissolution of the LP and LLLP40 - *Test Your KnowledgeTrue=A, False = BThrough a derivative action or derivative suit, a partner may sue to enforce a limited partnership right of action against a person who has harmed the limited partnership.General partners and limited partners are the same except in regard to how distribution of profits occur.40 - *Test Your KnowledgeTrue=A, False = BUnder the ULLCA, an LLC must choose to be partner-managed or manager-managed.To create an LLC, articles of limited liability must be filed.Under the ULLCA, members dissociate from an LLC in ways similar to those by which a partner dissociates from a partnership or LLP under RUPA.40 - *Thought QuestionWhy should business owners be allowed to limit their liability or choose the form of business that gives them the greatest protection? 40 - *What risks does the typical business face?