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Member Managed LLC

A limited liability company (LLC) can be managed by a manger or managers, or the LLC can be managed by the members of the LLC.  There are advantages to both depending upon the circumstances of the business, the knowledge of the members, the involvement of the members and other issues.  For example, the members of a certain LLC may all be passive investors of the LLC and have little knowledge regarding the operations of the LLC.  Thus, it may be best to hire a professional manager or individual that has better know how regarding the subject matter or area in which the LLC is operating.  Furthermore, the members of an LLC may have no interest and not want to manage the LLC and thus hiring a manager or managers maybe more prudent.  On the flip side, the LLC may have a small number of members and the members are well versed and experienced in terms of operating a business and the area in which the LLC is operating.  Under such circumstances, it is likely the members themselves would want to manage the LLC.

In Colorado, you state whether the LLC is member managed or manager managed within the Articles of Organization.  The operating agreement of the LLC will state and control the powers of the manager or managers, or the members as they manage the LLC.  It is recommended that the managers responsibilities and powers be well defined in the LLC operating agreement.

The video below has been prepared by a Denver business attorney to provide more information regarding the management structure and options of an LLC.  Please remember this article and video are for informational purposes.  It is recommended that you speak with your business attorney regarding the management structure of your business.

Contact The McGuire Law Firm to discuss your business questions and issues with a Denver business attorney.  A free consultation is offered to all potential clients!

 

 

Limited Liability Partnership (LLP)

What is a limited liability partnership?  Limited liability partnerships (LLP) were initially developed in Texas as a response to the liability faced by partners of legal and accounting firms for failures of the savings and loan associations.  An LLP could be considered a form of a general partnership.  Under the legislation creating the LLP, an LLP can permit general partners to limit their liabilities for those partners that did not participate in the wrongdoing that brings liability upon the partnership.

Thus, the LLP shielded partners and protected these partners from the liability they would face as partners for the improper conduct and actions of other partners or of the partnership.  You can compare this to shareholders in a corporation as the most a partner in an LLP could lose would be his or her investment in the firm.

This concept of limiting liability spread quickly and now, I believe, most every state recognizes an LLP.  You can elect LLP status relatively easily.  A general partner will file a statement with the appropriate state office (maybe the Secretary of State) electing LLP status.  Some states may call an LLP a registered LLP because the partnership must register with the state.  The business must state “LLP” or “Registered Limited Liability Partnership in it’s name.  Additionally, some states may require an LLP to carry a certain amount of insurance or maintain a certain value in partnership assets.  The failure to maintain this threshold can cause the entity to lose its limited liability status.

Most statutes do not afford limited liability to the partner or partners who committed acts of negligence or malpractice.  However, the LLP statutes brought along the idea that a partner in a general partnership can have limited liability, and thus in some form or fashion these partners begin to look like shareholders in a corporation whereby they are owners, but not liable for debts.  However, unlike a shareholder, a partner can have full rights of management in terms of managing the partnership.

Although, a partner is not liable for the debts or torts of the LLP (if not caused by their negligence etc) it is important and practical to note that most loans or lines of credit will need to be personally guaranteed by one or more partners.  Thus, a partner in the LLP may be liable for a debt because they have personally guaranteed the note.

An LLP will be taxed as a partnership by filing Form 1065, which is the income tax return filed by partnerships.  Speak with a Denver business attorney or tax attorney at The McGuire Law Firm if you have questions regarding the formation of your business, your current entity structure or other business and tax matters.

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What is a General Partnership by Denver Business Attorney

There are many types of partnerships such as limited liability companies, limited liability limited partnerships, limited partnerships, general partnerships etc.  The article below has been drafted by a business attorney at The McGuire Law Firm to discuss a general partnership.  If you have questions related to your business, please contact The McGuire Law Firm.

A general partnership can be defined as an association of two or more persons to carry on business as co-owners for a profit. Thus, this type of partnership can be formed from conduct and conduct alone as you do not need to file any documents with the secretary of state, you simply start operating a business, with another individual in an attempt to earn a profit.  You may have even formed a general partnership at one time or are operating within one now and you do not even realize it.

Some laws have been codified such as the Uniform Partnership Act, but it is important to remember that when reviewing the relationship amongst partners and between the partners and the business, these statutes and acts really on provide default rules.   Most prudent business owners would have a partnership agreement spelling out the rights and duties of each partner that comply with the state laws in which the partnership sits, and certain tax laws developed by the Internal Revenue Service.  The partnership agreement can control the relationship amongst the partners and relationships between the partners and the partnership as a business.

A general partnership has traditionally not been an entity that is separate from the owners or individual partners, but rather has been viewed as an aggregate of the individual partners that operated the general partnership.  Thus, the partners are individually liable for the debts of the partnership, which is generally viewed as a major disadvantage to a general partnership.  However, the vast majority of “large” or “pertinent” debts other partnerships take on, would generally be personally guaranteed by the partners anyway, but you must consider torts the business may commit that the individual partners of a general partnership would be responsible for.

All of the partners in a general partnership are owners of the business and in the absence of an agreement to the contrary, all owners have an equal voice in the management and share of business profits and losses.  Further, a partner can bind the partnership to agreements that entered into in the ordinary course of business.  It is important to note that the partners have a fiduciary duty and generally must act in good faith and fair dealing for the benefit of the partnership.

If you have questions regarding the formation or entity structure of your business speak with a Denver business attorney at The McGuire Law Firm.  A business attorney can discuss your entity options, discuss the tax & liability consequences of specific entities and help you draft the proper business contracts.

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Denver Business Attorney Discusses a Partnership Agreement

A partnership agreement may be one of the most important documents for your partnership.  This agreement can govern the day to day operations of the partnership, how important business decisions are made, how income, gain and loss is allocated and more.  A business attorney at The McGuire Law Firm can discuss this agreement with you and help draft an agreement that meets the needs of your partnership.  The video below provides general information regarding a partnership agreement.

 

You can contact the McGuire Law Firm to speak with a business attorney.  The McGuire Law Firm has law offices in Denver and Golden Colorado for your convenience and all potential clients receive a free consultation.

Forming a Partnership

If you are considering forming a partnership, you may want to discuss the tax and business implications with an attorney.  The video below provides general information regarding the formation of a partnership, but you should discuss your specific business issues and questions with an attorney.

 

Contact The McGuire Law Firm to discuss your business or tax questions with an attorney.  Free consultation and offices in Golden and Denver Colorado.