Question re Partnerships

From a student:

I understand that partnership is “An agreement b/w two or more persons to carry on a business TOGETHER for a profit.” I also understand that within the meaning of the word “persons” in the partnership definition it includes that person can be “persons, corporations, LLC’s, etc.” Thus, this indicates that when we have a corporation issue on a hypothetical, it means that we may also have a discussion of partnership.

What is confusing me though is the fact that partners are liable for partnership debts and I cannot understand how this fact about partners being liable for partnership debts would go on a discussion about corp and partnership. So, who is liable for the partnership debt in a corp/partnership hybrid question?

Answer:  Suppose two corps decide to do business together, perhaps to run a food truck, or build a building or develop software.  At that point there are three entities, the two corps and the partnership.  Any debts that arise in the course of running the food truck etc would be a liability of the partnership; the partners of the partnership would be liable for the debts.   Continue reading

Question re Close Corps

Question from a student

Regarding Closely Held Corp.
Where there is a question of salary/compensation for a board member, would there be a discussion of Interested Director Transaction?

Compensation of a board member is clearly an interested director transaction.  Remember though that all that really means is – is the transaction fair to the corp?  There cannot be a safe harbor exception because the board cannot step out of the room – there will be no one in the room! Continue reading