Question

Instructions

1. Provide an original post with your answers to the questions below and reply to at least two classmates. Do not upload a document.

2. Do not repeat the questions in your post, but do number your answers.

3. A complete answer post is several sentences in length, and will: (1) define and explain the correct legal terms, rules, and principles, (2) apply the legal rules and principles to the facts in the question, (3) state a conclusion, and (4) support the application and conclusion. See the rubric. If your answer is shorter than the question, this is a good clue that is it an insufficient legal answer. Working through the course materials to provide complete answers will also help you tremendously on the quizzes and final exam.

4. A complete reply post is several sentences in length and adds something to the discussion. It does not merely state whether you agree or disagree. Remember, two replies are required for each discussion.

5. Use all your own words! Properly cite words that are not yours.

Questions

1. Goldie and Hattie want to develop real estate and want to organize it under their states Revised Uniform Limited Partnership Act. Please advise Goldie and Hattie about what they will need to create and capitalize their partnership. What advantages does the limited partnership business form offer to them over the general partnership? What should Goldie and Hattie expect about their personality liability and tax situation?

2. Shep and Gerald are nearing the end of the production of their new film, “It All Falls Sideways,” and are seeking advice on how to end their limited partnership. Shep and Gerald have some outstanding bills and still expect some income as well. What steps are necessary to end this limited partnership? What would happen if Shep wanted to end the partnership, but Gerald wanted to continue making films? What must Shep and Gerald do to wind up and distribute the remaining assets?

3. Alyssa and Becky are suddenly successful candy makers and have been advised to organize their business to continue their success. They both want to avoid liability and be taxed as little as possible. Alyssa and Becky have heard about the limited liability company and corporations and have sought your advice which form would better achieve their goals and how to organize their business. Please advise them on how to create and organize their business. How can Alyssa and Becky avoid being labeled as another business form? What challenges might exist for creating their desired form?

4. The very large Lido Family has recently won the lottery and their friends have encouraged them to open a restaurant chain to serve their classic family style Italian meals that the neighborhood has enjoyed for many years. The Lido’s are set on organizing their restaurants as an S corporation. Gina and Vito Lido are a married couple and are lawful permanent US residents, Maria Lito is an Italian citizen, Salvatore and Enzo Lido are married and US citizens. Please advise them on who can be a part of the S corporation and why or why not every family member can be an owner in the corporation. The Lidos are also interested in selling second-class shares to their neighbors, while retaining their first-class stock. Will this be possible for an S corporation?

Answer 1

1. A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional partnership under the UK Partnership Act 1890, in which each partner has joint (but not several) liability. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation.In some countries, an LLP must have at least one person known as a "general partner", who has unlimited liability for the company.There is considerable difference between LLPs as constituted in the U.S. and those introduced in the UK under the Limited Liability Partnerships Act 2000 and adopted elsewhere. The UK LLP is, despite its name, specifically legislated as a corporate body rather than as a partnership.

In the United States, each individual state has its own law governing their formation. Limited liability partnerships emerged in the early 1990s: while only two states allowed LLPs in 1992, over forty had adopted LLP statutes by the time LLPs were added to the Uniform Partnership Act in 1996.

The limited liability partnership was formed in the aftermath of the collapse of real estate and energy prices in Texas in the 1980s. This collapse led to a large wave of bank and savings and loan failures. Because the amounts recoverable from the banks were small, efforts were made to recover assets from the lawyers and accountants that had advised the banks in the early 1980s. The reason was that partners in law and accounting firms were subject to the possibility of huge claims which would bankrupt them personally, and the first LLP laws were passed to shield innocent members of these partnerships from liability.

Although found in many business fields, the LLP is an especially popular form of organization among professionals, particularly lawyers, accountants, and architects. In some U.S. states, namely California, New York, Oregon, and Nevada, LLPs can only be formed for such professional uses. Formation of an LLP typically requires filing certificates with the county and state offices. Although specific rules vary from state to state, all states have passed variations of the Revised Uniform Partnership Act.

However, a sizable minority of states only extend such protection against negligence claims, meaning that partners in an LLP can be personally liable for contract and intentional tort claims brought against the LLP. While Tennessee and West Virginia have otherwise adopted RUPA, their respective adoptions of Section 306 depart from the uniform language, and only a partial liability shield is provided.

As in a partnership or limited liability company (LLC), the profits of an LLP are allocated among the partners for tax purposes, avoiding the problem of "double taxation" often found in corporations.

Some US states have combined the LP and LLP forms to create limited liability limited partnerships.

2. Winding up an LLP may be done voluntarily or by the order of a Tribunal. In case the LLP is shutting down voluntarily, it has to first pass a resolution, with at least 3/4th of the partners approving of this resolution. In case the LLP has unsecured or secured lenders, their approval must also be gained before the LLP can be shut down. You have to submit the documents, verify via a video call and get your DSC.

The process starts by approving and filing a resolution with the Registrar seeking the closure of the LLP within a period of thirty days from the date of approval of this resolution. The voluntary winding-up procedure will be declared to have commenced from the date this resolution has been passed. This resolution is to be then filed with the Registrar along with a declaration & affidavit by a majority of the LLP’s partners that the entity does not have any debt or that it’s capable of paying off all its debts within a specified period, stated in this declaration. However, the period should not exceed 1 year from the commencement date of the winding-up procedure of the LLP. Apart from the affidavit that’s to be signed, these documents should also be filed and submitted to the Registrar of Companies within a period of fifteen days from the date of passing the resolution for the LLP’s dissolution.

• A statement of assets & liabilities for the period starting from the date of closure of accounts to the date of dissolution of the LLP that is attested by a minimum of 2 partners

A valuation report, containing details about the LLP’s assets, prepared and filed by a competent valuation expert.

3. Both of them can start a LLP, which is the best type of firm to organize a business and avoid tax and liabilities. A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional partnership under the UK Partnership Act 1890, in which each partner has joint (but not several) liability. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation.In some countries, an LLP must have at least one person known as a "general partner", who has unlimited liability for the company.There is considerable difference between LLPs as constituted in the U.S. and those introduced in the UK under the Limited Liability Partnerships Act 2000 and adopted elsewhere. The UK LLP is, despite its name, specifically legislated as a corporate body rather than as a partnership.

4. An S corporation, for United States federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes. Instead, the corporation's income and losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.

A corporation is "eligible" if it:

• Has no more than 100 shareholders,
• Has shareholders who are all individuals (exceptions are made for various tax-exempt organizations, estates, and trusts)
• Has no nonresident as shareholders, and
• Has only one class of stock.

A limited liability company (LLC) is eligible to be taxed as an S corporation under the check-the-box regulations at § 301.7701-2. The LLC first elects to be taxed as a corporation, at which point it becomes a corporation for tax purposes; then it makes the S corporation election under section 1362(a).

Shareholders must be U.S. citizens or residents (not nonresident), and must be natural persons, so corporations and partnerships are ineligible shareholders. However, certain trusts, estates, and tax-exempt corporations, notably 501(c)(3) corporations, are permitted to be shareholders. An S corporation may be a shareholder in another, subsidiary S corporation if the first S corporation owns 100% of the stock of the subsidiary corporation, and an election is made to treat the subsidiary corporation as a "qualified subchapter S subsidiary" (QSub). After the election is made, the subsidiary corporation is not treated as a separate corporation for tax purposes, and all "assets, liabilities, and items of income, deduction, and credit" of the QSub are treated belonging to the parent S corporation.

Spouses (and their estates) are automatically treated as a single shareholder. Families, defined as individuals descended from a common ancestor, plus spouses and former spouses of either the common ancestor or anyone lineally descended from that person, are considered a single shareholder as long as any family member elects such treatment.