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Archive for for July, 2015

Comparison of LLC Statutes

July 30, 2015

Fiduciary Duties: Do Managers Owe Special Duties to the LLC or Its Members?

A fiduciary duty is a legal duty to act solely in another party’s interests.  For those familiar with the context, a fiduciary duty is often likened to the duties of a trustee to hold property in trust.  Fiduciary duties generally encompass the duty of care (i.e., duty to act in good faith and exercise reasonable care in carrying out their obligations to the LLC) and the duty of loyalty (i.e.Read the rest

General Partnerships

July 28, 2015

Liability of Partners

Generally speaking, partners are jointly and severally liable, and each partner is personally and individually liable for the entire amount of all partnership obligations.  For example, in the farming partnership case we discussed above, each partner would be liable to any person with a claim against the partnership, e.g., if the supplier sues the partnership – each individual partner would be liable if the partnership fails to pay the supplier, because they are each a partner in a general partnership (as opposed to a farming contract), whether they intended to be a partner or not or whether they knew they were exposed to such liability. … Read the rest

Comparison of LLC Statutes

July 27, 2015

Creditors’ Rights: Can My Creditors Go After the LLC’s Assets?

In Delaware, as in most other states, LLC members are generally not liable for the debts, obligations, and liabilities of the LLC.  We say generally, because there are situations where LLC members can be personally liable for business debts so as to allow courts to “pierce the corporate veil” based on, for example, fraud, intermingling of personal and business affairs, and improperly drafted operating agreements.  This is a highly fact-intensive analysis, the result of which may vary significantly depending on the specific circumstances and the jurisdiction.… Read the rest

Comparison of LLC Statutes

July 23, 2015

Comparison of LLC Statutes: Delaware, New York, and Texas

Should I Form My LLC in Delaware or Elsewhere?

Business owners often ask us where they should form an LLC.  Delaware has long been the preferred state of incorporation for businesses.  Indeed, of the corporations that make up the Fortune 500, more than one-half are incorporated in Delaware.[1]  There are many advantages of forming a company in Delaware, including the state’s flexible business law and highly respected business court, among others, which provide more guidance and certainty in conducting business than anywhere else in the country.… Read the rest

General Partnerships

July 21, 2015

Formation of a General Partnership

In Post 1 of this series, we talked a little about general partnership and one of their most dreaded characteristics.  So if general partnerships exist, how do courts and others know?

Statutes often state that a partnership is an association of two or more persons to carry on as co-owners of a business for profit.  Unlike other business entities such as corporations or LLCs, which require filing of certain forms with the secretary of state, no formalities are required to form a general partnership. … Read the rest

Aiding and Abetting Securities Violations

July 20, 2015

SEC v. Apuzzo

When we think about third party liability in securities violations, we tend to think service providers (e.g., lawyers, accountants, or brokers) that somehow participated in preparation of false or misleading statements in connection with the sale of securities.  While that is certainly true in many cases, it is not always the case.  Here’s a case in point showing how a third-party business partner can be liable.

In SEC v. Apuzzo,[1] United Rentals, Inc. (“URI”) engaged in fraudulent sale-leaseback transactions whereby it sold used equipment to General Electric Credit Corp.… Read the rest

Aiding and Abetting Securities Violations

July 18, 2015

Can I Be Liable for Somebody Else’s Wrongdoing?:  Aiding and Abetting Liability in Securities Law Violations

The Dodd-Frank Amendment

The financial crisis and the ensuing economic downturn of the past few years prompted a series of reforms aimed at improving regulation of the financial industry.  The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in particular, amended the Securities Exchange Act of 1934 to permit the SEC to bring an action for aiding and abetting a securities law violation. … Read the rest

General Partnerships

July 16, 2015

What Is a General Partnership and Why Is It Important for Business Owners To Know About It?

Two brothers agree to invest in several tracts of real property and make some money.  The brother who is an engineer is responsible for using his engineering skills to enhance the value of the properties; the other brother is responsible for marketing and administrative services, such as obtaining the title and paying taxes.  They do not enter into a written agreement.  Later, someone is injured on the property. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.