Chapter 32: All Forms of Partnerships

pass-through entity

A business entity that has no tax liability. The entity's income is passed through to the owners, and they pay taxes on the income.

Limited liability partnership (LLP)

A hybrid form of business organization that is used mainly by professionals who normally do business in a partnership.

limited partnership (LP)

A partnership consisting of one or more general partners (who manage the business and are liable to the full extent of their personal assets for debts of the partnerships) and one or more limited partners (who contribute only assets and are liable only up to the extent of their contributions).

information return

A tax return submitted by a partnership that only reports the income and losses earned by the business. The partnership as an entity does not pay taxes on the income received by the partnership.

family limited liability partnership (FLLP)

A type of limited liability partnership owned by family members or fiduciaries of family members.

limited liability limited partnership (LLLP)

A type of limited partnership in which the liability of all of the partners, including general partners, is limited to the amount of their investments.

articles of partnership

A written agreement that sets forth each partner's rights and obligations with respect to the partnership.

Partnership

An agreement by two or more persons to carry on, as co-owners, a business for profit.

General Partner

In a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts.

limited partner

In a limited partnership, a partner who contributes capital to the partnership but has no right to participate in the management and operation of the business. The limited partner assumes no liability for partnership debts beyond the capital contributed.

Joint and Several Liability

In partnership law, a doctrine under which a plaintiff may sue, and collect a judgment from, one or more of the partners separately (severally, or individually) or all of the partners together (jointly). This is true even if one of the partners sued did not participate in, ratify, or know about whatever gave rise to the cause of action.

charging order

In partnership law, an order granted by a court to a judgment creditor that entitles the creditor to attach profits or assets of a partner on dissolution of the partnership.

joint liability

Shared liability. In partnership law, partners incur joint liability for partnership obligations and debts. For example, if a third party sues a partner on a partnership debt, the partner has the right to insist that the other partners be sued with him or her.

Confession of Judgment

The act or agreement of a debtor permitting a judgment to be entered against him or her by a creditor, for an agreed sum, without the institution of legal proceedings.

buyout price

The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up on that date, and offset by any damages for wrongful dissociation.

Certificate of Limited Partnership

The basic document filed with a designated state official by which a limited partnership is formed.

dissolution

The formal disbanding of a partnership or a corporation. It can take place by (1) acts of the partners or, in a corporation, of the shareholders and board of directors; (2) the death of a partner; (3) the expiration of a time period stated in a partnership agreement or a certificate of incorporation; or (4) judicial decree.

winding up

The second of two stages in the termination of a partnership or corporation. Once the firm is dissolved, it continues to exist legally until the process of winding up all business affairs (collecting and distributing the firm's assets) is complete.

Dissociation

The severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business.