Family Limited Liability Partnership Agreement

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					                                                  LLCs


       Limited Liability Company (“LLC”): A hybrid form of
        business, which is taxed like a partnership while offering
        owners the limited liability of a corporation.

                An LLC can be owned, in whole or in part, by
                 corporations, partnerships, or foreign investors, and need
                 not be “closely-held” – meaning that it may have
                 unlimited investors.

       An LLC is composed of one or more owner(s), called
        member(s), who must file articles of organization with the
        appropriate state authority.

                Some states’ statutes require that an LLC have at least
                 two members; other statutes are silent on the number of
                 members required to form an LLC.

       An LLC must include the words “Limited Liability
        Company” or the initials “LLC” in its business name, as
        reflected on its articles of organization.




Ch. 41: Limited Liability Companies and Limited Partnerships - No. 1
West’s Business Law (9th ed.)
                              LLC PROS AND CONS


       Key Advantages:

                members enjoy limited personal liability;

                LLCs with two or more members may elect to be taxed
                 as a corporation or a partnership; and

                flexibility in management and operations.

       Key Disadvantages:

                non-uniform state LLC law creates uncertainty as to
                 personal liability; and

                lack of case law addressing LLC issues creates
                 uncertainty.




Ch. 41: Limited Liability Companies and Limited Partnerships - No. 2
West’s Business Law (9th ed.)
         LLC OPERATION AND MANAGEMENT


       Operating Agreement: An agreement, usually written,
        among the members of an LLC, addressing management,
        profit-sharing, transfer of ownership, dissolution, and other
        important issues.

       Management: LLCs are typically either member-managed –
        meaning that all of the owners of the LLC participate in its
        management – or manager-managed – meaning that a
        designated group of persons, some or all of whom may be
        non-members, manage the LLC.

                In the absence of a contrary agreement, all members of
                 an LLC are entitled to participate in its management.




Ch. 41: Limited Liability Companies and Limited Partnerships - No. 3
West’s Business Law (9th ed.)
          LIMITED LIABILITY PARTNERSHIPS


       Limited Liability Partnership (“LLP”): Similar to an LLC,
        an LLP allows its members to enjoy the tax benefits of
        partnership while avoiding personal liability for the
        malpractice of other partners.

                The LLP is designed for professionals who historically
                 have done business as partners (e.g., accountants,
                 attorneys) but who want to limit their liability for their
                 partners’ (but not the partnership’s) misdeeds.

                Because of the non-uniformity of state LLP statutes,
                 some concerns exist whether the partners of an LLP
                 created in state X would be subject to personal liability
                 in state Y that they would be shielded from in state X.

       Family Limited Liability Partnership (“FLLP”): An LLP
        in which the majority of the partners are persons related by
        blood or marriage or fiduciaries of persons so related. All of
        the partners must be natural persons.




Ch. 41: Limited Liability Companies and Limited Partnerships - No. 4
West’s Business Law (9th ed.)
                        LIMITED PARTNERSHIPS


       Limited Partnership (“LP”): A partnership consisting of
        one or more general partners, who manage the business and
        are personally liable for the partnerships debts, and one or
        more limited partners, who contribute only assets and do not
        participate in the management of the business.

       Limited Liability Limited Partnership (“LLLP”): An LP
        in which the liability of the general partner, as well as the
        limited partners, is limited to the amount of his investment in
        the firm.




Ch. 41: Limited Liability Companies and Limited Partnerships - No. 5
West’s Business Law (9th ed.)
              LP FORMATION AND OPERATION


       Formation: Forming an LP requires complying with relevant
        statutes and preparing a certificate of limited partnership and
        filing it with the appropriate authorities.

       Rights: Limited partners enjoy most of the same rights as
        general partners, including the right to inspect the LP’s
        books and to demand other information about the LP’s
        operations; and, upon dissolution, limited partners are entitled
        to the return of their capital contribution as provided for in
        the certificate of limited partnership.

       Liabilities: A limited partner’s liability is limited to the
        amount of his capital contribution as long as he does not
        participate in management. A limited partner who actively
        participates in management is subject to the same liability as
        a general partner.

       Dissolution: An LP will dissolve for most of the same
        reasons as a general partnership, but only in the event that a
        general partner withdraws (e.g., dies, goes bankrupt).




Ch. 41: Limited Liability Companies and Limited Partnerships - No. 6
West’s Business Law (9th ed.)

				
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