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Limited Liability Companies. Introduction. Limited liability companies LLC are relatively new creatures of state laws. An LLC combines the liability of a Corp and the tax advantages of a partnership What does that mean?. LLC’s.
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Introduction • Limited liability companies LLC are relatively new creatures of state laws. • An LLC combines the liability of a Corp and the tax advantages of a partnership • What does that mean?
LLC’s • IRS rules - any unincorporated business (including LLC’s) will automatically be taxed as a partnership unless otherwise indicated on the tax return. • LLC allow foreign investors to own interests.
LLC The owners are called “members” (not owners). Members can distribute profits as want
Example: you and a partner own an LLC. Your partner contributed $40,000 for capital. You only contributed $10,000 but you perform 90% of the work. • Agree to share the profits 50/50
Nature of the LLC - IMP • Can a LLC be • 1. member-managed, meaning that the member or owner run the company; or • 2. manager-managed, where member/owner give responsibility to someone who may not be owner in the LLC.
LLC Duration How long can a LLC last? Duration is limited by state laws so look to state laws-- • (most commonly to less than 35 years)
LLC Formation - TN • Must file with Tn S____ of S____: • File: • Articles of Organization require: • Name of Business and principal address. • Name and Address of ________. – person or company who will accept all lawsuits • Names of the M_______
Name - imp • To get protection of LLC must use LLC!! • Unless you register as an assumed name.
TN LAW NAMES • TN Law - LLC, domestic or foreign, may elect to transact business under an assumed name, provided the assumed name meets the name requirements of TCA §48-249-106 . Costs We will go online to see.
LLC Operating Agreement • LLC Operating Agreement is similar to corporation’s bylaws = internal running of LLC • Operating agreements = relating to management, meetings and other significant issues.
LLP • Created by state law, similar to an LLC but LLP is designed for professionals • Examples:
Liability in an LLP • The LLP allows professionals to avoid personal liability for the malpractice of other partners.
Family Limited Liability Partnerships • FLLP is a limited liability partnership in which the majority of the partners are family or related to each other. • Used frequently for agriculture.
Limited Partnerships/Silent Partners • For silent partners – where have one person just give $$ • What does this mean?
Formation of an LP • An LP is a creature of state statute and must follow statutory requirements. Must file with the a secretary of state who will issue a certificate of limited partnership.
Limited Partnership • The General partner assumes all management and personal liability. • Limited Partner contributes cash but has no management rights so silent partner’s liability is limited to the amount of invest. Just can look money invested. • When can a limited partner/silent partner be held liable ????
Question? Mark Hardie was the sole member of Technical Plastics of Oregon, LLC (TPO). TPO operated out of Hardie’s home, and Hardie used TPO’s accounts to pay such personal expenses as landscaping, housecleaning, personal credit card bills, his step-son’s tuition, family vacations, and K-Mart, and Mattress World. Hardie received cash advances from his personal credit cards and deposited them into the TPO account. Hardie did not take a salary from TPO. When TPO filed for bankruptcy, it owed BLD Products approximately $120,000 for goods that it had purchased. LIABILITY?
QUESTION? Blum, an attorney, was negligent in his representation of Anthony. To settle the lawsuit, Blum signed a promissory note for $10,400 on behalf of his law firm, Gladstone, Schwartz, Blum & Woods, LLC. When the law firm did not pay, Anthony filed suit against Blum. In his suit, Anthony alleged that Blum, as a member of the LLC, was personally liable for the promissory note.
