Marbes Questions- Hybrids Flashcards
How is an LLC or a one of the forms of limited partnership formed?
Confirm selected LLC name available
Select designated office & registered agent
Draft AOI
File AOI with SOS
Draft Operating agreement
What are the characteristics or elements of an LLC?
Tax advantages – can elect – income and losses can pass through to members and LLC does not pay taxes OR entity can be taxed like corporation
Limited Liability – like corporation, members liability limited to their capital contribution; generally, members or managers are agents of LLC; generally, LLC is liable for member’s or manager’s wrongful conduct when “acting in the ordinary course of business”
Flexible management structure
How long can LLCs or one of the limited partnerships last?
Perpetual unless Articles of Organization set forth term. Term must be specified in the Articles of Organization (MUST be included in AOO)
What duties to members or partners owe each other during and after the LLC or partnership exists?
Member-managed: Member owes:
Duty of loyalty:
- account to company and hold as trustee any property
- refrain from dealing w/company as adverse party
- refrain from competition in condut of company’s business b/f dissolution.
Duty of Care:
-refrain from grossly negligent or reckless conduct, intentional misconduct or knowing violation of law.
Manager-managed:
Member who is NOT also manager owes no duties solely by reason of being member.
What rights to manage the partnership business do members or partners possess?
Member managed: absent contrary agreement, each member has equal rights in the mgmt. and conduct of business of the LLC. Most matters decided by majority vote
Manager managed: absent contrary agreement, each member has equal rights in the mgmt. and conduct of business of the LLC. Most matters decided by manager or majority of managers.
For both, significant matters require unanimous consent of members (e.g. merger, admission of new member, dissolution)
How does an LLC or limited partnership end?
By dissolution (then winding up), triggered by:
- event specified in OA
- consent of % members speciied in OA
- event that makes it unlawful for biz to continue
- judicial decree (after application by dissociated member or transferee of member’s interest)
NOTE: dissociation: withdrawal or expulsion of a member does not necessarily lead to dissolution)
When an LLC or limited partnership ends, what rights do members or partners have to distribution of business entity’s assets?
After creditors are paid, including members who are creditors, any surplus applied to return of contributions, then any remainder in equal shares. ULLCA uses equal shares rule.
What obligations do members or partners have to fund losses?
If LLC’s assets already distributed, limited to member’s proportionate share of claim or company’s assets distributed to the member in liquidation, whichever is less (not to exceed total amount of assets distributed to that member)
When an LLC or limited partnership ends, under what circumstances are the members or partners legally liable for the actions of their former business associates?
If claim is brought w/in 5 years of dissolution by claimant who:
- did not receive proper notice
- claim was timely sent to co; and
Claim contingent on event occurring after effective date
What is the difference between a general partnership and a limited partnership?
GP = no limited liability
LP = limited liability for LPs but not GP (personal liability)
How does a limited liability partnership differ from a limited partnership?
LLP = general partnership but with limited liability for partners
LP = limited liability for LPs but not GP (personal liability)
How does a limited liability limited partnership differ from a limited liability partnership? A limited partnership?
LLLP = LP in which gp is protected by limited liability shield.
LLP = general partnership but with limited liability for partners
How does a limited liability company differ from a general partnership?
LLC = members liability limited to their capital contribution; generally, members or managers are agents of LLC; election of tax treatment
GP = pass through taxes; personal liability
