Chapter 15 LLCS, LLPS, and Global Forms of Business.
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Transcript of Chapter 15 LLCS, LLPS, and Global Forms of Business.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-2
Limited Liability Company (LLC)
An unincorporated business that combines the most favorable attributes of general partnerships, limited partnerships, and corporations
An LLC is a separate legal entity—an artificial person—that can own property, sue and be sued, enter into and enforce contracts, etc.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-3
Characteristics of LLCs LLC is taxed as a partnership unless
it elects to be taxed as a corporation. LLC has the same powers as an
individual to conduct business. Members are liable for the LLC’s
debts, obligations, and liabilities only to the extent of their capital contributions.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-4
Limited Liability Company (LLC)
Member
Limited liability company(LLC)
Thirdparty
Debt orobligation owed
Capital investment
Liability limited to capital contribution
Members have no personal liability for LLC’s debts and obligations
Member Member
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-5
Liability of an LLC LLC is liable to persons injured as a
result of a wrongful act or omission by a member, manager, agent, or employee while acting within the ordinary course of business.
The individual who commits a tort is also liable to persons injured.
Managers are not personally liable for the debts of the LLC they manage.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-6
Forming an LLC Articles of organization
must be filed with the appropriate state office, usually secretary of state.
The articles must state the name, duration, and other required information.
Members of LLC may enter into an operating agreement.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-7
Forms of LLC Management Member-managed
Each members has equal rights to manage the LLC.
Each member has agency authority to contract for the LLC.
Members owe a fiduciary duty to the LLC.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-8
Forms of LLC Management Manager-managed
Members designate a manager and delegate management authority.
Manager may be an LLC member or nonmember.
Manager has authority to contract for the LLC.
Manager owes a fiduciary duty to LLC.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-9
Dissolution and Continuation of an LLC
Dissolution Member has power to withdraw from at-will or
term LLC. Withdrawal before the LLC term expires is
wrongful disassociation. Continuation after end of term
Members may unanimously vote to extend the term.
May continue as at-will LLC if only a majority of the members vote to extend the term.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-10
Limited Liability Partnership
Does not require a general partner Most states restrict LLP use to
professional groups, such as lawyers.
Articles of partnership must be filed with secretary of state.
Liability insurance is required.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-11
FranchiseA franchise is
established when one party (franchisor) licenses another party (franchisee) to use the franchisor’s name, trademark, symbols, and other property in the distribution and selling of goods and services.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-12
Types of Franchises Distributorship franchise – franchisee sells
a product produced by franchisor. Processing franchise – franchisee produces
and distributes franchisor’s product. Chain-style franchise – franchisor licenses
the franchisee to make and sell its products from a retail outlet.
Area franchise – franchisor authorizes franchisee to sell franchises on behalf of the franchisor.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-13
Liability of Franchisorand Franchisee
Franchisee operates as an independent contractor.
Franchisee is usually not franchisor’s agent. Franchisee is liable for its own contracts and
torts. Franchisor is liable for its own contracts and torts. Neither is liable for the other party’s contracts or
torts.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-14
Special Forms of Business License – one party
owns intellectual property such as a trademark and contracts to permit another party to use it.
Joint venture – two or more business entities combine resources for a single project.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15-15
Global Forms of Business International Franchising Joint Ventures
Two or more business entities combine their resources to pursue a single project
Strategic alliance Two or more companies in the same
industry agree to work together to accomplish an objective.