Monthly Archives: January 2013

Partnership or LLC? What is best for your business?

Each Friday, I ask my Twitter followers to send me their legal question via private message or email.  I choose one question to respond to anonymously each week.  Below is last week’s chosen question:

“I am starting a business with three friends to develop a video game.  We are confused about the difference between a limited liability company and a partnership.  Can you help us out?”

There are a number of important distinctions between a partnership and a limited liability company (“LLC”).  You should discuss the details of your business’s goals with an attorney, but the following will give you an idea of the main advantages and disadvantages of each type of business.

Liability

The defining characteristic that distinguishes a partnership from an LLC is the LLC members’ limited liability. A partnership is a business operating under its owners’ names (although a trade name might be used).  The partners are personally responsible for the debts of the business. That means they could lose their personal assets, such as a home, car or certain investments to satisfy the partnership’s debts.  Also, if the partnership owns assets, such as a building or vehicles, the individual partners also personally own those assets in proportion to each partner’s contribution to the business, or as arranged in a partnership agreement. If no agreement exist, the statutes dealing with partnerships will apply standard rules.

An LLC, however, is an independent legal entity and owns property, enters contracts, and loans or borrows money separately from the individual members. The members will generally not be liable for the LLC’s debts or obligations. It acts as a “corporate person” and all traditional duties of a business are carried out in the name of the LLC only.  Members must be careful not to “commingle” their personal assets with that of the LLC, or a court might determine that the LLC is merely a “shell” for the members’ personal use and find the members liable for obligations of the business.

Forming the business

Partnerships are formed as soon as two or more individuals begin doing business.  No formal filing is necessary to “start” the business.  However, it is always advisable that a partnership agreement is in place to outline the contributions, distributions, and responsibilities as they relate to each partner.  Further, a business license or fictitious name registration may be appropriate.

An LLC can be owned by one or more people, known as “members.” An LLC is generally created by registering with the state of formation, as well as any states where it is conducting business. Paying a fee is required, although this fee is generally quite low.  An LLC should always have an operating agreement, even if it has only one member, to lend legitimacy to its corporate status. Read more about this HERE

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Red Light Camera Tickets 101

— By guest author Frank Menendez

Since July 2010 municipalities in Florida have been allowed to use red light cameras on state-owned intersections and fine drivers who run red lights with the aim of enforcing “safe driving.” Mmmhmm…sure…and a big money maker for the cities!

TicketFit Red Light Camera Sign

Have you received a red light camera ticket? Unlike being pulled-over by an officer and receiving a traffic ticket, you won’t know if you ran a red light at one of these photo enforced intersections until you receive a “Notice of Violation” in the mail.

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What rights do you have as a condominium owner?

As a condominium owner living in a community controlled by an association, you may sometimes feel frustration or even anger at the way the board of directors or management company treats you. Associations are powerful, often operate arbitrarily, and may act beyond their rights to harass and threaten residents. However, that does not mean you are helpless or do not have rights of your own. Read on for five of the most important statutory rights that many condo owners do not know they have.  There are many more that are not part of this article.  If you feel any of your rights have been violated, you should contact an attorney immediately.

Condominiums

  1. You have the right to at least 48 hours notice of board and committee meetings. The notice must be posted in an obvious place on the association’s property. However, if there is a valid emergency, the board or committee may meet without notice.
  2. You are permitted to attend all board and committee meetings. This includes the right to speak about items that are designated on the agenda and tape record or videotape the meeting. There is an exception for meetings with the association’s attorney in very specific circumstances.
  3. If the board is considering a special assessment or changes to rules affecting condominium use, notice must be given at least 14 days before the meeting. This is to ensure all residents have the opportunity to respond regarding any such proposed change. Notice must be by mail, electronically, or personal delivery, and must also be posted on the property. Continue reading →

Guardianship 101 — What does guardianship mean for you and your loved one?

Perhaps you know someone who needs extra help with their personal or financial affairs, and have heard others talk about becoming a guardian for an ailing relative or a disabled family member. People that might need guardianship include those with dementia, Alzheimer’s, disabilities, or chronic illness. Read the article below for more information about what guardianship entails and what it means for you as the guardian.

What is a guardian?

A guardian is appointed by the court to make personal and/or financial decisions for an adult that has been determined by the court to be unable to manage their own affairs. This person is referred to as the “ward.” Before appointing a guardian, the court must first make a determination that the ward is so incapable of handling his or her own affairs that the right to handle his or her personal or financial decisions should be taken away and given to another person. Guardianship is an extreme measure and securing one should only happen when “no less restrictive alternative” is available.

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What is an operating agreement and why does your LLC need one?

An operating agreement governs the financial and functional operations of your business. It is a contract that is binding on the members of the LLC and ensures uniform and consistent handling of business matters.

Here are four reasons why your LLC needs an operating agreement:

1. Liability: An operating agreement helps give the members of an LLC protection from personal liability and confirms the LLC’s status as a true business entity. Having a clear operating agreement ensures that the LLC is not confused with a sole proprietorship or partnership. Simply filing your LLC with the state does not prevent you from being held personally liable for the debts of your business. Courts will look to many factors to determine whether your LLC is merely a shell for your personal use, such as whether company and personal funds are kept separate, whether the business was adequately capitalized, and whether an operating agreement is in place.

2. Misunderstandings among members: Perhaps your and your best friend are starting a flower business together. Or maybe you and your brother are finally opening up that restaurant you always talked about. You can never imagine arguing with this person over the operation of the business. Wake up and smell the reality: misunderstandings, disputes, and even expensive lawsuits result when people do not take the simple step to develop an operating agreement. You need to memorialize things like how much money each person is contributing to the business, how you will get paid when the business begins to take off, who will manage the day-to-day operations, and so on. There are many things to consider, but speaking with a qualified attorney can narrow the issues that are important to your type of business and make the agreement as basic as you like, or as detailed as necessary.
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