Limited Partnerships

Winding up

Upon dissolution, the limited partnership must wind up the affairs of the business. Usually done by a general partner, but if there are none, it can be done by the limited partners.

Defective Formation

occurs when the certificate of partnership 1. is not filed properly 2. contains errors or 3. violates some other statutory requirements Defective formation can result in personal financial liability extending to the limited partnership as well as the generals

Formation

A certificate of Limited Partnership must be filed with the office of the secretary of state in the state of formation. It should include: (1) Name of the limited partnership (2) General character of the business (3) Address of the principle place of business (4) Name and address of the registered agent authorized to accept service of process for the business. (5) Name and business address of all general and limited partners (6) Latest date on which the limited partnership is to dissolve. (7) Amount of cash, property or services contributed by each partner and any cash, property or services promised to be paid in the future. (8) Any other matters the general partners decide to include. The limited partnership is formed when the certificate of limited partnership is filed.

Limited Partnership

A partnership that has 2 different types of partners. May also be called a Special Partnership. A limited partnership must have at least one general and one limited partner.

Limited Liability Limited Partnership

A special type of limited partnership that has both general and limited partners, but both have limited liability for the business obligations. Formed and operated like a limited partnership, except for the fact that all partners have limited liability for partnership obligations.

Distribution of Assets

After the winding up is completed, the assets are liquidated and distributed in the following priority: (1) Creditors (2) Partners; (a) Unpaid distributions (b) Capital contributions (c) Any remaining proceeds

Profits and Losses

If the partnership agreement does not specify how profits and losses are to be shared between the general and limited partners they are shared in the same proportions as their capital contributions.

Dissolution

Occurs with the expiration of the term indicated in the certificate of limited partnership; the written consent of all general and limited partners; the withdrawal of a general partner; or the entry of a decree of judicial dissolution. Must file a certificate of cancellation upon dissolution and the commencement of the process of winding up.

Management

The business is managed by the general partners. The limited partners are not allowed to participate in the management of the limited partnership. If a limited partner participates in management, he can become personally liable for the obligation of the partnership just the same as the general partners. Exception - A limited can participate in management without penalty if he has been hired by the partnership as an agent, employee or independent contractor to perform some managerial function.

Foreign Limited Partnership

The limited partnership is considered to be foreign in a state other than the state where it was formed.

Domestic Limited Partnership

The limited partnership is domestic in the state in which it is formed, and all matters having to do with the formation and operation of the limited partnership is controlled by the laws of that state.

Name

The name of the partnership must indicate that it is a limited partnership. It cannot contain the surname of a limited partner unless it is the same as a general partner or it did business under that name before the partner became a limited partner.

Tax Treatment

The profits from a limited partnership are taxed in the same manner as a general partnership. Through flow-through taxation, profits flow through the partnership to the partners who pay individual income tax on their share of partnership profits.

Limited Partners

these partners are basically investors. Limited partners do not participate in the management of the business, and do not have personal liability beyond the amount of their capital investment for the partnership obligations. In fact, if a limited partner takes an active part in the management of the business, he can be treated as a general partner and be held personally liable for business obligations.

General Partners

these partners invest the capital and manage the business. general partners have unlimited personal liability for the partnership obligations