Question

Yolanda and Zachary decided to restructure their small bookstore as a limited partnership, called “Y to Z’s Books, LP.” Under their new arrangement, Yolanda contributed a new infusion of $300; she was named the general partner. Zachary contributed $300 also, and he was named the limited partner: Yolanda was to manage the store on Monday, Wednesday, and Friday, and Zachary to manage it on Tuesday, Thursday, and Saturday. Y to Z Books, LP failed to pay $800 owing to Vendor. Moreover, within a few weeks, Y to Z’s Books became insolvent.

Who is liable for the damages to Vendor?

What result would be obtained in Exercise 1 if Yolanda and Zachary had formed a limited liability company?

Suppose Yolanda and Zachary had formed a limited liability partnership.

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What result would be obtained then?

Answer 1

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1.

A limited partnership corporation includes two group of partners, joint partners and limited partners, in accordance with the limited partnership rules. While both types of partners are involved in the enterprise, the power of everyday control rests with general partners and, therefore, the limited partners have to have personal responsibility beyond their capital contribution to the enterprise, while their position in the management is only subject to a conflict between their limited liability status and their shareholds.Yolanda is directly responsible for losses from the retailer, as general partner and chairman. However, as it has been involved in running the store in the event of a dispute with its limited liability status, Zachary may still be personal responsibility. Yolanda and Zachary are also also responsible for debt paid by the buyer to the seller; Yolanda is solely responsible for the business debt of the general partner; Zachary is liable because the buyer is not limited to him, as he manages the business.

2.

LLC 's provision stipulates that no debt or loss resulting in due time of any members or owner of the company is directly liable. The creditors will also not collect the LLC's personal funds from the members they suffer. Therefore, Yolanda and Zachary shall not be responsible for any damages to the seller in this case.

3.

Both Yolanda and Zachary will be shielded from personal responsibility in a limited liability partnership if the seller sues them. The rule of LLP specifies that at least one spouse must be part of the company and that all voting rights must be provided with regular involvement in the corporation. In addition , at least one partner with decreased voting rights and decreased participation in the business day by day will also be the limited partner of the company. When the interests of the limited partner are limited, his responsibility for the company shall also be limited to the sum he invested in the business when it was set up. There is also a cap for Zacharie 's payment of only $300, the sum that he paid at the time he was created, if Y and Z had a limited-liability partnership firm both partners shall be responsible for paying to the vendor the loss of $800. A general partner-Yolanda in this case-will pay the remaining $500.