McBride Law Blog

BLOG

Category Archives: Choice of Entity

General Partnerships

August 4, 2015

Relationship Between Partners

We have discussed fiduciary duties in the context of LLCs in our previous posts.  Just like LLC managers, partners in a general partnership owe fiduciary duty to the partnership.  Thus, partners must act as an ordinarily prudent person would, refrain from competing with the partnership, and generally act in good faith.  Additionally, they must put the best interests of the partnership ahead of their own.  So, in the farming partnership case above, the parties owe fiduciary duties to the partnership, which they would not otherwise owe, if it was just a farming agreement. … Read the rest

Comparison of LLC Statutes

August 3, 2015

Series Availability: The Latest Option

Another interesting difference among LLC statutes is the availability of series LLC.  This relatively new concept is said to have its origin in offshore financial institutions as a way of allocating assets and risks among a series of companies.  Series LLC offers numerous advantages, which include flexible structure, greater protection against liability, and lower filing fee and administrative burdens, but is also fraught with uncertainty, particularly with respect to its treatment under federal bankruptcy law and the laws of states that do not recognize series LLCs. … Read the rest

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

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.