Upon graduation from college, Bob, Carol, Ted, and Alice formed Kotaku, LP, a li

Question

Upon graduation from college, Bob, Carol, Ted, and Alice formed Kotaku, LP, a limited partnership, to distribute video gaming software over the Internet. Bob and Carol each contributed $50,000 and became the general partners. Ted and Alice each contributed $25,000 and became the limited partners. Bob and Carol oversee the day to day management of the business. They hire designer, Nick, who develops their number one selling software program, Dawn of Ka. The company sends Nick as a representative to the annual Comic-Con convention in San Diego to promote their products. Nick rents a car to travel from the hotel to attend the convention and entertain potential clients. While there, Nick negligently causes a car accident and runs over a pedestrian, Ralph, who is seriously injured as a result. As a result, Ralph sues to recover damages and names Kotaku, LP, Bob, Carol, Ted, Alice, and Nick in the lawsuit. Discuss the liability of each party and the potential amount Ralph might recover from each. Upon graduation from college, Bob, Carol, Ted, and Alice formed Kotaku, LP, a limited partnership, to distribute video gaming software over the Internet. Bob and Carol each contributed $50,000 and became the general partners. Ted and Alice each contributed $25,000 and became the limited partners. Bob and Carol oversee the day to day management of the business. They hire designer, Nick, who develops their number one selling software program, Dawn of Ka. The company sends Nick as a representative to the annual Comic-Con convention in San Diego to promote their products. Nick rents a car to travel from the hotel to attend the convention and entertain potential clients. While there, Nick negligently causes a car accident and runs over a pedestrian, Ralph, who is seriously injured as a result. As a result, Ralph sues to recover damages and names Kotaku, LP, Bob, Carol, Ted, Alice, and Nick in the lawsuit. Discuss the liability of each party and the potential amount Ralph might recover from each.

Explanation / Answer

A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liability. It therefore exhibits elements of partnerships and corporations.[1] In an LLP, one partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from that of an unlimited partnership. In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation.[2] In some countries, an LLP must also have at least one "general partner" with unlimited liability. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders have to elect a board of directors under the laws of various state charters. The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as "corporate" individuals the legal responsibility to manage the corporation in the corporation's best interest. An LLP also contains a different level of tax liability from that of a corporation.

Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses where all investors wish to take an active role in management.

There is considerable confusion between LLPs as constituted in the U.S. and that introduced in the UK in 2001 and adopted elsewhere

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