1. LIMITED PARTNERSHIPS
(LP) 1 1

2. CREATION LP vs. General PartnershipGP
By express or implied agreement of two or more persons to carry on business as co-owners for profit LP
By written agreement (Certificate of Limited Partnership) of two or more persons to carry on business as co-owners for profit
Must include
one or more general partners and
one or more limited partners
File Certificate of Limited Partnership with designated state official 2 2

3. SHARING PROFITS/LOSSES LP vs. General Partnership
By provision in Certificate of LP or
In absence of such provision in Certificate, profits and losses shared on basis of percentages of capital contributions
EXCEPT: Losses are shared by limited partners only up to capital contributions GP
By agreement or
In absence of agreement, profits are share equally and losses are shared in same proportion as profits 3 3

4. LIABILITY LP vs. General Partnership
Unlimited personal liability for all general partners
Limited partners have limited liability---only liable to extent of agreed capital contribution GP
Unlimited personal liability for all partners 4 4

5. CAPITAL CONTRIBUTION LP vs. General Partnership
Set by provision in Certificate of LP
May be cash, property, services , or any obligation under Revised ULPA, but other statutes may limit to cash and property GP
No minimum or mandatory amount
Set by agreement 5 5

6. MANAGEMENT LP vs. General Partnership
By agreement or in absence of agreement, all general partners have equal voice
Agents of partnership
Limited Partners
No voice in day-to-day management
Subject to liability if participate in day-to-day management
Except may vote an amending the Certificate and on sale or dissolution of partnership
Not agents of partnership and no fiduciary duty GP
Partners have equal voice unless agree otherwise in writing
Partners are agents of partnership with fiduciary duty 6 6

7. DURATION LP vs. General Partnership
By provision in Certificate of LP unless dissolved
By operation of law
General partners ‘
death
withdrawal
mental incompetence
Illegality
By illegality
By court decree
Death, withdraw, etc. of limited partner does not cause termination unless it was the last limited partner GP
By agreement unless dissolved
By unilateral withdrawal of partner
By operation of law
death
bankruptcy
illegality
By court decree 7 7

8. ASSIGNMENT LP vs. General Partnership
Same as General Partnership except
In addition to consent of all partners , the Certificate of LP must be amended in order to admit assignee as a partner
Upon assignment of all interest, the assigning partner ceases to be a partner GP
Partner’s interest can be freely assigned
Assignee only as right to assigning partners share of profits
Assignee does not have rights of a substituted partner ---without consent of all other partners 8 8

9. PRIORITIES UPON LIQUIDATION LP vs. General Partnership
Order of Priority
Outside creditors and Partner creditors
Partners and former partners entitled to distributions before withdrawal under the Certificate or RULPA
Partners in respect to capital contributions
Partners in respect to profits GP
Order of Priority
Outside creditors
Partner creditors
Partners in respect to capital contributions
Partners in respect to profits 9 9

10. TAXATION LP vs. General Partnership
Same as general partnership GP
Individual partners are taxed on their share of partnership income even if no cash is actually distributed to them
Partnership pays no tax but must file informational return 10 10

11. LIMITED LIABILITY PARTNERSHIP
(LLP) 11 11

12. CREATION LLP vs. General Partnership
Follow procedure set by statute---for example Texas requires
File appropriate application form with state official
Pay annual fee ($200 per partner)
Maintain professional liability insurance ($100,000 minimum)
Add tag to firm name (either “L.L.P.” or “Registered Limited-Liability Partnership) GP
By express or implied agreement of two or more persons to carry on business as co-owners for profit 12 12

13. LIABILITY LLP vs. General Partnership
Some limit on liability which protects innocent partner from person liability for negligence, wrongful acts or misconduct of other partners
Under RUPA(adopted by >half of states):
Partners are not personally liable for either tort or contract debts of partnership,
Except Partners are liable for own misconduct. GP
Unlimited personal liability for all partners 13 13

14. OTHER CHARACTERISTICS LP vs. General Partnership
Generally the same as general partnership in respect to other characteristics although statutes vary somewhat from state to state---and, of course, not all state have passed LLP statutes GP 14 14

15. LIMITED LIABILITY COMPANY
(LLC) 15 15

16. LIABILITY LLC vs. CORPORATION
Owners (Members) have no personal liability beyond their agreed upon capital contribution (like corporate shareholders)
CORPORATION
Owners (Shareholders) have no personal liability beyond their agreed upon capital contribution 16 16

17. CREATION LLC vs. CORPORATION
Follow statutory procedure which is generally similar to incorporation procedure, except some states require at least two owners (called “members”)
CORPORATION
Follow statutory procedure
Charter (Articles of Incorporation) issued by state 17 17

18. MANAGEMENT LLC vs. CORPORATION
Owners (members) have choice
Manage directly (like general partners) or
Elect managers (like corporate board of directors)
Participation in management does not jeopardize limited liability
CORPORATION
Centralized Management
Owners (Shareholders) have indirect control of corporation through election of directors
Directors set corporate policy and appoint officers who manage the day-to-day operation of the corporation
Shareholder may also be director or officer without jeopardizing limited liability 18 18

19. DURATION LLC vs. CORPORATION
Some state statutes limit existence to a period of years (20 years for example)---no perpetual life
CORPORATION
Can have perpetual existence or continuity of life 19 19

20. TRANSFERABILITY LLC vs. CORPORATION
Although state statutes vary, transfer of interest generally resembles that of a partnership
CORPORATION
Shares of stock can be freely transferred and purchaser acquires all rights of a substituted shareholder
Unless restrictions on transfer are provided for in the Articles of Incorporation and noted on stock certificate 20 20

21. TAXATION LLC vs. CORPORATION
Members van elect to be taxed like a partnership (if 2 or more members) or like a corporation
If no election they are taxed as partnership
CORPORATION
Double Taxation
Corporation pays income tax on net profits (with no deduction for dividends paid out to shareholders)
and
Shareholders pay income tax on the disbursed dividends they receive 21 21

22. OTHER CHARACTERISTICS LLC vs. CORPORATION
In most other respects a LLC resembles a corporation---it is treated as an entity or legal “person”
For jurisdictional purposes It is a citizen of every state of which its members are citizens
CORPORATION
An entity
Where is a corporation considered a citizen? 22 22

23. How Do You Choose Between LLCs and LLps
Number of participants
Liability Considerations
Distributions from the firm
Management structure
Nature of Business
Financial and Personal Relationships