Exam 15: Limited Liability Companies and Limited Liability Partnerships

Some states provide liability shields for LLP partners only when the liability arises from some __________ by another partner.

Both managing members and controlling members owe a fiduciary duty to other members.

In 1997, the IRS made LLCs:

Burt has gone to a commercial bank to negotiate a loan for the LLC in which he is a member. He tells the bank that he is authorized to act on behalf of and to bind the company. What is the best way for the bank to verify whether Burt does in fact have the authority he claims?

The procedure for collecting additional capital contributions from partners as necessary is called a _______.

Trish is a partner in an LLP, and the partnership is having a cash flow problem. To alleviate the problem, the partnership has initiated a capital call for each partner to contribute an additional $25,000 to the business. If Trish cannot come up with the necessary funds, she may be forced to sell her interest in the partnership.

Stop Now LLP manufactures brake linings and sells its product to repair and maintenance shops for use as replacements for worn brakes. Stop Now approaches Coastal Garage and offers Coastal a very good price on the brake linings. Coastal is a nationwide company, and the order would be very large. The management at Coastal is very interested in dealing with Stop Now but is concerned with the LLP's limited liability protections for Stop Now's partners. What could Coastal do to protect itself from the LLP's limited liability protections?

The Uniform Limited Liability Company Act preempts all state laws in order to maintain consistency throughout the U.S. business community.

LLCs may choose to be taxed as a pass-through entity or may elect to be taxed as a corporation.

LLPs were created to:

An LLC member with ownership sufficient to decide or veto internal operational matters is called a ________ member.

In an LLP, generally all partners have liability protection for _______ and liabilities of the partnership.

LLC laws define dissolution of an LLC as a ________ process.

LLCs were originally created by the:

The IRS has classified the LLC as a type of corporation for tax purposes.

Corporate tax structures result in ________ taxation.

The ability to distribute earnings without incurring double-level taxation is an advantage of a:

In an LLC, the members may act as agents of the LLC, but they will not be personally liable to third parties who successfully sue the LLC.

The origins of LLPs were rooted in protection of:

Jones LLC and Smith LLC both have 10 members and 5 managing members. Both entities go into dissolution. The procedures for dissolution, including preferences of members in terms of who is paid first and so on, will be identical for both companies.