Business Law Partnerships and Limited Companies Committee

Background: Limited liability company (“LLC”) operating agreements commonly contain a clause on “Tax Matters Partner” (“TMP”). A TMP represents a partnership before the Internal Revenue Service (“IRS”) in all tax matters under the former Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). The TEFRA audit rules apply to LLCs that are treated as partnerships for federal income tax purposes. LLCs with 10 or fewer members are exempt from these rules. Read more

When a client requests the preparation of a purchase or sale agreement for limited liability company (LLC) interests, counsel should always gather additional information prior to the preparation of such an agreement to obtain a complete picture of the exchange. Read more

A single member Limited Liability Company is dissolved when its sole member dies unless either of the following two exceptions apply:
(1) The operating agreement allows the continuation of the LLC and provides a method for determining the successor to the deceased member; or
(2) The heirs, successors, and assigns of the deceased member’s interest elect to continue the LLC within 90 days of the sole member’s death. Read more

Generally, non-competes are not enforceable in California as set forth in California Business and Professions Code section 16600 which states that, “[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” There are some limited exceptions to this rule. One of those exceptions is when an owner of a business sells the company’s goodwill or interests. Read more

In Boschetti v. Pacific Bay Investments Inc., 2019 Cal. App. LEXIS 193, filed on March 7, 2019, the California Court of Appeal, First Appellate District held that Boschetti, a partner of a California general partnership, could not enforce California statutory buy-out provisions upon dissolution of foreign limited partnerships and limited liability companies owned by the general partnership. Read more

The same virtues which make the Limited Liability Company (“LLC”) an attractive entity choice for investors -- limited liability and few required formalities -- also make it susceptible to management choices that may jeopardize the liability shield normally provided for its members and managers. Read more

After obtaining a judgment against a corporate defendant, a plaintiff can seek to amend the judgment to add an individual shareholder, or other entity, as an additional judgment debtor predicated upon showing that the additional shareholder was the alter ego of the original corporate debtor and controlled the initial litigation. CCP §187, See Jack Farenbaugh & Son v. Belmont Construction, Inc. (1987) 194 Cal. App. 3d 1023, 1029-1031, 240 Cal. Rptr. 78; Dow Jones Co. v. Avenel (1984) 151 Cal. App. 3d 144, 148-151, 198 Cal. Rptr. 457; Schoenberg v. Romike Properties (1967) 251 Cal. App. 2d 154, 168, 59 Cal. Rptr. 359; Mirabito v. San Francisco Dairy Co. (1935) 8 Cal. App. 2d 54, 57-60, 47 P.2d 530. Read more

It is at this time of the year that businesses and their attorneys are interested in California’s so-called 15-Day Rule and how it might apply to them. Under California Law (R&TC Sections 17936, 17946, 17948.2 and 23114) there is conditional relief available to business entities (limited partnerships, limited liability partnerships, limited liability companies, and corporations) from the general requirement to pay the $800 annual/minimum tax. Read more