Articles Tagged with limited partnerships

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When the shareholder of a corporation files bankruptcy, the shareholder’s stock becomes part of the debtor’s bankruptcy estate and will generally be subject to liquidation by the bankruptcy trustee for the benefit of the debtor’s creditors.

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However, when a limited partner in a limited partnership (LP) or a member of a limited liability company (LLC) files bankruptcy, the debtor’s ownership interest may well be treated differently because interests in LPs and LLCs are typically considered and treated as more contractual in nature.

Membership Interests in LLCs

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Partnerships exist when two or more people agree to engage in business for profit. Partnerships can be formed to engage in a number of different ventures, and generally have low start-up costs and do not require many formalities. There a several types of partnerships, each with their own benefits and drawbacks. Two of the most popular are detailed below.

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General Partnerships

In a general partnership, each partner equally owns the business and has full authority to act as an agent of the business, meaning that he or she may make business decisions on behalf of the partnership. There are no formal filing requirements to form a general partnership in the state of California. On the contrary, general partnerships can be formed through an oral or written agreement or simply by the conduct of the parties, if a court determines that an implied partnerships. Importantly, each partner is personally liable for all business debts associated with the partnership. Continue reading ›