Answered Essay: Yolanda and Zachary decided to restructure their small bookstore as a limited partnership,

Yolanda and Zachary decided to restructure their small bookstore as a limited partnership, called “Y to Z’s Books, LP” Under their new arrangement, Yolanda contributed a new infusion of $300: she was named the general partner. Zachary contributed $300 also, and he was named the limited partner: Yolanda was to manage the store on Monday, Wednesday, and Friday, and Zachary to manage it on Tuesday, Thursday, and Saturday. Y to Z Books, LP failed to pay $800 owing to Vendor. Moreover, within a few weeks. Y to Z’s Books became insolvent. Who is liable for the damages to Vendor? What result would be obtained in Exercise 1 if Yolanda and Zachary had formed a limited liability company? Suppose Yolanda and Zachary had formed a limited liability partnership. What result would be obtained then?

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1. Yolanda and Zachary decided to restructure their small bookstore as a limited partnership, called “Y to Z’s Books, LP.” Under their new arrangement, Yolanda contributed a new infusion of $300; she was named the general partner. Zachary contributed $300 also, and he was named the limited partner: Yolanda was to manage the store on Monday, Wednesday, and Friday, and Zachary to manage it on Tuesday, Thursday, and Saturday. Y to Z Books, LP failed to pay $800 owing to Vendor. Moreover, within a few weeks, Y to Z’s Books became insolvent. Who is liable for the damages to Vendor?

In this case, both the partners will be having their liabilities. There will be personal liabilities towards business debts of Yolanda as he is having the designation of GM but it does not mean that there is no liability of Zachary as he is also having an active participation in the management of the store

2. What result would be obtained in Exercise 1 if Yolanda and Zachary had formed a limited liability company?

In case the store was a limited liability company, both the individuals will not have any liability for the losses of the vendor as they would receive the protection against the personal liabilities for being the member of LLC firm. Let us consider that the store becomes insolvent, the compensations would be asked by the vendor to be compensated by the personal assets of Yolanda and Zachary which would not be possible in case of LLC as he is foreclosed from seeking the personal assets of the LLCs members.

3. Suppose Yolanda and Zachary had formed a limited liability partnership. What result would be obtained then?

Some kind of protection will be provided to both Yolanda and Zachary in case of limited liability partnership from any kind of personal liability if the vendor takes and legal action.

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