LLCs and Limited Partnerships

LLCs and Limited Partnerships - BUSINESS LAW II Limited...

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    BUSINESS LAW II Limited Liability Companies and Limited Partnerships
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    Limited Liability Company (LLC) A form of business that combines the  nontax advantages of a corporation  (continuing life, limited liability) with the  favorable tax status of a partnership
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    History The first LLC statute was passed in  Wyoming in 1977 California adopted a Limited Liability  Company law in 1994 Now, every state has an LLC statute Since 1996, there has been Uniform  Limited Liability Company Act California has not adopted this law
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    Tax Treatment The members may elect treatment as a  partnership, or a corporation Most chose partnership All income and losses are passed through  to the members
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    Formation Must file articles of organization with the  Secretary of State The articles must include: Name Duration Name and address of its registered agent Whether the LLC is Member-Managed or  Manager-Managed
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    LLC Names Name must include the designation: “LLC” “L.L.C.,” “Limited Liability Company,” or  “Limited Company”  This is to make sure that people dealing  with the LLC know that the member’s  liability is limited
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    Operating Agreement An operating agreement is not required It is good practice to have one The operating agreement is an  agreement by the members describing  profit sharing, management  responsibilities, withdrawal, etc.
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    Separate Entity The LLC exists separate from its  members It can buy and sell property, hold property,  sue, and be sued It can make contracts on its own behalf
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    Limited Liability Members have no liability on LLC  contracts Their liability is limited to their capital  contribution Members Liable for Own Torts   Members are liable for torts committed  while acting for the LLC
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    (Cont.) Capital Contributions Members are obligated to make capital  contributions to the LLC as agreed
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    (Cont.) Management Rights Certain Acts Require Consent of All  Members This include amendment of the operating  agreement, admission of new members,  and sale of substantially all of the LLC’s  assets
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    (Cont.) Member-Managed LLC Members in a member-managed LLC  have equal rights to manage the business They have the implied authority to carry  on the ordinary business of the LLC They may have apparent authority if the  LLC agreement limits authority and the  LLC does not adequately notify third  parties of the limits
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LLCs and Limited Partnerships - BUSINESS LAW II Limited...

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