Limited Liability Companies, Limited Partnerships and More

Uniform Limited Liability Company Act

- Set of rules that guide how LLCs work if the owners haven't made their own special rules
- Rules are similar to those used by partnerships

LLC Formation

- At least one person (organizer), needs to fill out some official paper work
- Papers are filed with the state government

Article of Organization Includes:

- Name of LLC
- How long the LLC will last
- Name and address of a registered agent
- Must state whether LLC is member-managed or manager-managed

3 Options an LLC can be taxed:

- Partnership
- S corporation
- C corporation

Partnership & S corporation taxes

- LLC does not pay taxes directly
- Profits/losses from the LLC are shared with the owners (members)
- Report that income on their personal tax returns

Operating Agreement

Set of rules for how the company will work

Operating Agreement tells owners how they will:

- Share profits
- Manage the LLC
- Withdraw from the LLC

Capital Contribution

- Member of an LLC responsibilities are limited to the money you put into the business
- Don't have to personally pay for business's contracts/debts

Member-Managed LLC

- All members share equal rights to help run the business
- Each member can make decisions for the LLC
- Has power to do things (buy supplies/sign contracts)

Manager-Managed LCC

- Members choose someone called a manager to run the business
- Manager makes the big decisions

LLC: Dissociation

- If someone wants to leave an LLC they can do so
- Can choose to leave whenever they want
- Still might have some responsibilities depending on the situation

Limited Partnership (or LLLP)

- Type of business where some people are only responsible for putting in money
- Not managing the business
- Used for real estate, oil drilling, or sports

2 Kinds of Owners of a Limited Partnership:

- General Partners
- Limited Partners

General Partners

- People put money into the business, run it, and make important decisions
- Share in profits
- Fully responsible for any money the business owes

Limited Partners

- People put money into the business and share in the profits
- Do not help run the business
- Responsibility is limited to only the amount of money they invested

Steps to making a Limited Partnership:

- Fill our a certificate: "Certificate of Limited Partnership" to the state's Secretary of State
- Make sure to follow the rules

"Winding Up"

- When a business decides to end and the general partners are in charge of closing everything down
- Paying off Debts
- Dividing Leftover Money

Merging Business

- Two businesses decides to join together and become one
- Everyone must agree for this to happen

Changing Business Types (Conversion)

- Changing from one type of business to another
- Everyone must agree for this to happen