Limited Liability Partnership and others

Question 1

Limited Liability Partnership, Limited Liability Limited Partnership, and Limited Partnership - Filing

Answer 1

Required

Question 2

Limited Liability Partnership and Limited Liability Limited Partnership, and Limited Partnership - Taxation

Answer 2

Flow/pass through (individual partners pay individual income tax based on profits earned from partnership, not partnership itself)

Question 3

Requirement for Limited Liability Partnership

Answer 3

Must be a professional service (like a law firm)

Question 4

Limited Liability Limited Partnership - Liability

Answer 4

Only liable to the extent that there are assets in the LLP

Question 5

Limited Partnership - function

Answer 5

(1) There is a general partner that has full management and full personal liability.
(2) then there are limited partners who put money into the business and hope to get money out but are prohibited from managing biz
(3) limited partners have no personal liability

Question 6

Limited Liability - Control

Answer 6

when a limited partner exercises a degree of control that is substantially the same as that of a general partner, the limited partner may face personal liability.

Question 7

Limited Liability Company - Filing

Answer 7

required

Question 8

Limited Liability Company - Taxation

Answer 8

flow/pass through, but can elect to be taxed as corporation

Question 9

Shelf LLC

Answer 9

an LLC formed with at least one member, usually during negotiation so that the company is ready to do biz right away when an agreement is reached

Question 10

Low Profit LLC (L3C)

Answer 10

flexible structure in which each member’s management and financial interest may vary. Prioritize socially beneficial goals with generating profit as secondary priority.

Question 11

LLC - Membership requirements

Answer 11

generally required to make a contribution to the capital of the company for membership, but contribution is broadly defined

Question 12

LLC Management

Answer 12

The default rule is that all members have equal management rights, and are free to turn over control of the biz to a manager in the agreement.

Question 13

LLC Liability

Answer 13

Members are not personally liable for debts and obligations of the biz, but courts may pierce corporate veil to disregard liability protection to impose personal liability under certain circumstances

Question 14

Piercing the veil (1,a,b,c,2)

Answer 14

(1) Alter ego or instrumentality (bal test) (a) commingling of funds/assets, (b) failure to observe corporate formalities, (c) undercapitalization (where corporation is formed w/out adequate capital to meet known and expected risks)
(2) deception, misrepresentation, or fraud

Question 15

Transfer of Interest

Answer 15

a member in a partnership may transfer its financial interest to another person w/out consent of other members, but not in management. Needs unanimous consent of other members unless agreement says otherwise.