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9 Partnerships Introduction to Forms of Business and Formation of Partnerships Operation of Partnerships Dissolution & Winding Up Limited Liability Companies & Limited Partnerships McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights held.

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INTRODUCTION TO FORMS OF BUSINESS AND FORMATION OF PARTNERSHIPS 37 C H E A P T R "It sounds exhausting, however anything is anything but difficult to begin – beginning a novel, beginning a business… it\'s keeping the thing going that is troublesome." Prue Leith, creator and official, cited in The Adventure Capitalists (Grout and Curry, 1998)

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Learning Objectives Choosing a type of business Creation of organization Purported accomplices Partnership capital and property Partnership premiums 37 - 3

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Overview Choosing a type of business is imperative in light of the fact that the entrepreneur\'s obligation and control of the business change enormously among the many types of business What you pick relies on upon where you need to go 37 - 4

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Basic Forms Sole proprietorship Partnership General, constrained, restricted risk, or restricted risk restricted association Corporation Regular "C", Subchapter "S", not-for-profit, proficient Limited risk organization Including proficient frame 37 - 5

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Sole Proprietorship A sole proprietorship has just a single proprietor and is an augmentation of its proprietor It is not a lawful element and can\'t sue or be sued, so loan bosses/petitioners sue the proprietor Advantages : no customs, charges stream to proprietor, proprietor takes all benefit and control Disadvantage : proprietor bears all danger of misfortune 37 - 6

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Partnership An association has at least two proprietors or accomplices and incorporates a few structures: general, constrained (LP), restricted risk (LLP), restricted obligation restricted (LLLP), or expert Though a lawful element, an association is not a government assess paying substance, along these lines all pay or misfortune must be accounted for on the individual accomplice\'s elected pay expense form regardless of whether conveyed or distributed to accomplices 37 - 7

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Partnership Advantages : moderately simple to make, has a legitimate element yet singular tax assessment, accomplices control the business, accomplices take all increase, adaptable structure Disadvantages : accomplices bear all danger of misfortune together and severally, extraordinary levels of risk to accomplices contingent upon sub-shape 37 - 8

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Corporation An enterprise is possessed by shareholders who choose a directorate to deal with the business, in this way possession and administration of an organization might be separate Shareholders have restricted obligation for the commitments of the partnership The enterprise is a lawful and duty paying element for elected wage impose purposes Exception: Subchapter S companies 37 - 9

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Corporation Advantages : shareholders appreciate restricted risk for corporate commitments, unending presence, capacity to raise a lot of capital Disadvantages : more noteworthy convention required for arrangement and operation, twofold tax collection, many-sided quality of structure 37 - 10

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Limited Liability Company A restricted risk organization (LLC) joins the nontax points of interest of companies with good duty treatment of associations A LLC is claimed by individuals, who may oversee themselves or hold a supervisor to maintain the business Members have constrained risk for the commitments of the LLC 37 - 11

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Business Forms Worldwide Many countries have comparable types of business, including organization and enterprise, however subtle elements fluctuate broadly 37 - 12

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The General Partnership Every state has sanctioned association laws The Revised Uniform Partnership Act (RUPA) of 1994, with the 1997 alterations, is a model association statute 37 - 13

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Partnership Creation RUPA characterizes organization as a "relationship of at least two people to bear on as co-proprietors a business revenue driven." Partners share benefit and misfortune An association is a willful and consensual relationship and may exist by law regardless of the possibility that the gatherings entered it unintentionally, without considering whether they had made an association 37 - 14

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Partnership Creation - Examples Several performers consent to frame a band and share benefits Two understudies remain in line for quite a long time to purchase 10 show tickets. They offer 8 tickets for a $5 charge for each ticket and part the benefits. 37 - 15

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Partnership Creation – The LLP Unlike a customary association, making a constrained obligation organization (LLP) must follow a state\'s restricted risk association statute Formation of a LLP requires recording a shape with the secretary of state, paying a yearly expense, and utilizing legitimate wording Registered Limited Liability Partnership, RLLP, Limited Liability Partnership, LLP 37 - 16

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Non-Partners Not Liable to Third Parties If a third individual manages at least two individuals who appear to be accomplices and is hurt, the third individual may sue to recuperate harms from both of the obvious accomplices RUPA Section 308(e): "people who are not accomplices as to each other are not subject as accomplices to different people." 37 - 17

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Purported Partners However, under the convention of indicated accomplices , if the outsider demonstrates that one clear accomplice deceived him to trust that the (at least two) individuals were accomplices, the outsider may sue the accomplice that brought on the trickery for harms endured when the evident association neglected to execute as concurred 37 - 18

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Partners and Ownership When an association or constrained obligation association is framed, accomplices contribute money or other property – organization capital – to the organization Belongs to association as an element Tangible and elusive property procured by an association hypothetically has a place with the organization as an element instead of individual accomplices 37 - 19

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A Partner\'s Partnership Interest As proprietor of an organization or LLP, an accomplice has a possession enthusiasm for the association The organization premium incorporates partner\'s: Transferable premium Partner\'s share of benefits and misfortunes and appropriate to get association dispersions Management and different rights 37 - 20

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Partnership or Joint Venture? By and large, association law applies to joint endeavors, yet a court may recognize the two if the business intention is constrained to a solitary venture as opposed to arrangement of related exchanges Reason: joint venturers typically held to have less inferred and clear expert than accomplices because of restricted extent of the undertaking 37 - 21

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Learning Objectives Limited Liability Companies Limited Partnerships and Limited Liability Limited Partnerships Creation of Limited Partnerships Right and liabilities of individuals and accomplices Dissociation and disintegration 40 - 22

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Overview The restricted risk organization (LLC) consolidates focal points of the enterprise concerning assurance from individual obligation and positive duty status of the association The Uniform Limited Liability Company Act of 1996 (ULLCA) offers default decides like RUPA that administer a LLC without an opposite understanding of its proprietors - 23

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Taxation of the LLC A LLC may choose to be burdened like an association or an organization for government pay assess purposes Election as association more basic Therefore, the LLC pays no elected wage expense and all pay and misfortunes of the LLC are accounted for by the LLC\'s proprietor individuals on their individual salary government forms 40 - 24

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Creation of the LLC At minimum one individual (coordinators) must record articles of association with a secretary of state Articles must incorporate LLC name, its length, and the name and address of its enlisted operator Owners of a LLC are individuals An individual, association, company, or another LLC might be an individual from a LLC A LLC is a substance isolate from its individuals 40 - 25

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Management of the LLC Articles of association must state whether the LLC is part overseen or director oversaw If chief oversaw, beginning administrators must be named A LLC presumably will have a working assention covering how individuals will share benefits, deal with the LLC, and pull back from the LLC 40 - 26

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Liability of Members A LLC part has no individual obligation on LLC contracts, unless LLC contracts marked in an individual limit (e.g., as a surety) A part\'s risk is normally constrained to the part\'s capital commitments A part is at risk for torts s/he conferred while representing the LLC 40 - 27

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A Member-Managed LLC Under the ULLCA, a LLC must be part overseen or supervisor dealt with Each part in a part oversaw LLC offers measure up to rights in the administration of the business and every part is a specialist of the LLC with suggested specialist to bear on its customary business 40 - 28

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A Member-Managed LLC The LLC working understanding may alter ULLCA default leads by conceding more influence to a few individuals Creating a class of individuals whose endorsement is required for specific contracts Members share influence in light of capital commitments 40 - 29

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A Member-Managed LLC Managers in a supervisor oversaw LLC are chosen and evacuated by a vote of a lion\'s share of LLC individuals A director\'s forces to represent the LLC are like a part\'s influence in a part oversaw LLC A collaboration. 40 - 30

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Tort and Contract Liability A LLC is subject for the legally binding commitments acquired by its individuals or directors acting inside their express, suggested, or evident specialist A LLC is additionally at risk for the torts and other wrongful demonstrations of overseeing individuals and different supervisors acting inside their power 40 - 31

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Duties of Members Each part in a part oversaw LLC and every chief in an administrator oversaw LLC is a trustee of the LLC and its individuals with obligations like the obligations of accomplices, incl

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