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  1. #1
    Join Date
    May 2019
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    Default Dissolved Partnership is Still Operating

    Hi, I invested and became a partner in a venture that was supposed to acquire and develop some land. After many years, nothing has happened, and lots of promises that were made didn't pan out. The CEO/person who setup this venture is not answering questions or giving any information. So I started digging around and noticed a few things.

    1) According to the Secretary of State website, the partnership was administratively dissolved many years ago. None of the partners were never notified of this. We are still getting Schedule K-1s from the CEO for tax filing with the name of the partnership many years later even though it has been administratively dissolved for a long time.

    What does this mean for my investment stake? What are the implications of this?

    2) According to county property tax records, the land that the contract states would be acquired in the partnership's name was never acquired by the partnership (even before it became dissolved). However, the K-1 still deducts property tax from us in the name of the partnership (which has never owned the land and is also administratively dissolved).

    What are the implications of this?

    Thanks for helping me gain a better understanding.

  2. #2
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    Sep 2005
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    Default Re: Dissolved Partnership is Still Operating

    What sort of partnership are we talking about? A limited partnership? What state are we talking about?

    A partnership, as such, is not an incorporated entity, and thus even if it "dissolves" in relation to some sort of filing with the state it can continue to operate as an unincorporated entity.

    If this is a limited partnership, one in which the limited partners are shielded from personal liability beyond the value of their investment, then whatever happened with the state could have removed that protection.

  3. #3
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    May 2019
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    Default Re: Dissolved Partnership is Still Operating

    Thanks, the state is Georgia. The partnership is structured as an LLC, and I am a limited partner.

    Even if the entity dissolves with the state and can continue to operate, what would be the purpose of creating it in then letting it quietly dissolve? Why would the partners not be informed of it? Just trying to figure out if anything shady or underhanded (even if legal) is going on.

  4. #4
    Join Date
    Mar 2013
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    Default Re: Dissolved Partnership is Still Operating

    Quote Quoting clsbiz
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    What does this mean for my investment stake?
    Honestly? That you'll never see your money again.
    Quote Quoting clsbiz
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    What are the implications of this?
    That you got scammed out of your investment money. Talk to a lawyer ASAP.

  5. #5
    Join Date
    May 2019
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    4

    Default Re: Dissolved Partnership is Still Operating

    Thank you for the honest answer. I came to acceptance a while back that I will never see the money again. However, at this point I am just trying to become educated before confronting the CEO and before informing other investors so that we can hold CEO accountable. Once I can get fully educated I plan to work on next steps.

    Thanks in advance for any further advice anyone can provide.

  6. #6
    Join Date
    Oct 2014
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    7,306

    Default Re: Dissolved Partnership is Still Operating

    Quote Quoting clsbiz
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    Thanks, the state is Georgia. The partnership is structured as an LLC, and I am a limited partner.
    While under federal tax law a LLC with two or more members is taxed as a partnership, a LLC is not a partnership under state law and its owners are not called partners. They are called members.

    If it dissolves then the LLC ceases to exist and the members lose the limited liability protection that the statute provides and the business thereafter would be a general partnership.


    Quote Quoting clsbiz
    View Post
    Even if the entity dissolves with the state and can continue to operate, what would be the purpose of creating it in then letting it quietly dissolve? Why would the partners not be informed of it? Just trying to figure out if anything shady or underhanded (even if legal) is going on.
    Ask the members that had the LLC dissolved why they did it. Could be all sorts of reasons why they did it. That doesn't mean they were smart to do it, of course, but speculating as to why some unknown people did what they did isn't going to help you much. We know very little about the business; certainly far less than you do.

  7. #7
    Join Date
    May 2019
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    4

    Default Re: Dissolved Partnership is Still Operating

    Thanks will be asking them this week why it was dissolved. There is still the land issue - which I plan to ask them about. I know will get little information at all from them.
    The partnership "Abc LLC" which I am a partner of was supposed to purchase the land at "123 Elm St". However, property tax records show the land is owned by "Xyz LLC", which I have no affiliation with. So not even sure if I even have a legal stake in this land that the money was supposed to go to. Is there any way to find out? Of course I can ask the CEO and they will say "yes" regardless.

  8. #8
    Join Date
    Jul 2018
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    Default Re: Dissolved Partnership is Still Operating

    Quote Quoting clsbiz
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    The partnership is structured as an LLC, and I am a limited partner.
    While there are similarities, a partnership and an LLC are not the same thing, and one cannot be a "limited partner" in an LLC. I'll assume for the time being that you are a member of the LLC and own a minority interest.
    Quote Quoting clsbiz
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    What does this mean for my investment stake? What are the implications of this?
    The only clear implication is that someone is operating the LLC despite it being administratively dissolved. As for your investment share, it's impossible to opine intelligently without reading the LLC's operating agreement.

    If you're a member of ABC, LLC but not a member of XYZ, LLC and XYZ, LLC owns a piece of real property, you obviously have no "legal stake in this land." It's conceivable that you could have an equitable claim, but we don't have nearly enough information to assess that.

  9. #9
    Join Date
    Oct 2006
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    Default Re: Dissolved Partnership is Still Operating

    Quote Quoting pg1067
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    While there are similarities, a partnership and an LLC are not the same thing, and one cannot be a "limited partner" in an LLC. I'll assume for the time being that you are a member of the LLC and own a minority interest.
    A multi member LLC is by default a partnership and can certainly have limited partners/members.

    Clearly the LLC is still filing partnership returns even if it was administratively dissolved. Otherwise, there is no reason for K1s to be issued.

  10. #10
    Join Date
    Oct 2014
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    Default Re: Dissolved Partnership is Still Operating

    Quote Quoting llworking
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    A multi member LLC is by default a partnership and can certainly have limited partners/members.
    pg1067 was correct. You are looking at it through the lens of federal tax law. It is important for tax practitioners to remember that tax classification for tax law purposes is just that: for tax purposes only. For non tax purposes the treatment of the entity may well differ from the tax treatment. Under state business law statutes, a LLC is NOT a partnership and does not have partners, whether limited or otherwise, as owners. The owners are members of the LLC. A LLC may have managing and non managing members, but all members are afforded the limited liability protection the LLC provides. There is no such thing, therefore, as a limited partner of a LLC.

    Quote Quoting llworking
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    Clearly the LLC is still filing partnership returns even if it was administratively dissolved. Otherwise, there is no reason for K1s to be issued.
    Which it would need to do if the LLC was dissolved and now operating as a general partnership. In the eyes of the IRS that may not result in any change to the tax treatment of it, but under state business law that change would be very significant to the members of the now dissolved LLC.

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