I - Ch. 33: Limited Partnerships and Limited Liability Companies

Explain Distributions of cash and assets of the limited partnership.

1. RULPA allows partners to share in distributions in a different proportion than that which is used for sharing profits. 2. Distributions are allocated on the basis of the contributions each partner actually made.

What is a Foreign Limited Partnership?

A Limited Parternship is considered foreign in any state other than the one in which it was formed. 1. The RULPA requires all foreign limited partnerships to register with the secretary of state before transacting any business in that state.

Explain contributions as they relate to limited partnerships.

A promise by a limited partner to contribute to the limited partnership is not enforceable unless it is in a signed writing. Contributions may be cash, property, services rendered, a promissory note, or an obligation to contribute cash or property or to perform services.

Explain how general and limited partners may be secured or unsecured creditors of the partnership.

General and limited partners may be secured just as creditors who are not partners, subject applicable state/federal bankruptcy and fraudulent conveyance acts.

What status does a partner who becomes entitled to a distribution have?

He has the status of a creditor

What is partnership interest?

Partnership interest is the right to receive distributions of partnership assets and to share the profits and losses of the limited partnership.

Explain defective formation of a limited partnership.

The RULPA provides that a person who has contributed to the capital of a business, believeing erroneously and in good faith that he has become a lmited partner, is not liable as a general partner, provided that when he finds the mistake he 1. withdraws from the business or renounces future profits 2. files a certificate curing the defect

How does the Limited Partnership choose its associates?

The admission of additional limited partners requires the written consent of all partners. If admitting additional general partners, the written partnership agreement deteremines the procedures for authorizing their admission.

Explain what happens when a partner of a limited partnership assigns his partnership interest.

The assignee does not become a partner and may not exercise any rights of a partner. The assignment entitles the assignee only to receive the assigning partner's share of distributions. This assignee may become a limited partner- just not a general partner.

Explain what happens when a partner of a limited partnership assigns his partnership interest.

The partner ceases to be a partner upon assignment of his partnership interest.

What is filed with the Secretary of State and what must this document include?

Two or more persons must file a signed certificate of limited partnership. It must include: 1. name of the partnership 2. the address of its office and names/address of agent 3. The name and business address of each general parter 4. The latest date upon which the limited partnership is to dissolve 5. Any other pertinent matters

HOw may general and limited partners withdraw from a limited partnership?

1. A general partner may withdraw at any time by giving written notice to the other partners. 2. A limited partner may withdraw as provided in the limited partnership certificate (or written partnership agreement.) 3. A limited partner may withdraw upon giving at least 6 months written notice to each general partner.

How is a limited partnership controlled?

1. The general partners have almost exclusive control and management of the limited partnership. 2. If the limited partner shares in management or control, he forfeits his limited liability

Explain profit and loss sharing.

1. The profits and losses are allocated on the basis of the value of the contributions each partner has actually made. 2. Limited partners are not liable for losses beyond their capital contribution.

Differences Between Limited Partnership and Other Forms of Partnership

A general partnership is the one in which all profits, managerial responsibilities and liability for debts are shared in equal proportion among the partners. If they plan to share profits or losses unequally, this should be documented in a legal partnership agreement, to avoid future disputes. A joint venture is a form of general partnership that remains valid until a certain project is completed or a certain period elapses.

Explain Derivative Actions.

A limited partner may bring an action on behalf of a limited partnership, when a general partner with the authority to bring the action has refused to do so.

Differences Between Limited Partnership and Other Forms of Partnership

A limited partnership differs from other partnerships in that the partners are allowed to have limited liability. This means that partners are only liable for the business' debts up to a certain limit. This limit depends on the individual partner's investment contribution. A limited partnership venture is run by one or two partners known as general partner(s). Other contributors, known as limited or silent partners, provide capital but aren't allowed to make managerial decisions.

How does a partnership maintain its information?

It must keep an office within the state at which basic organizational and financial records are kept.

What is the difference in the formation of a general partnership and limited partnership?

The formation of a general partnership requires no special procedures, the formation of a limited partnership requires substantial compliance with the limited partnership statute.

How are the rights of a limited partnership distributed?

The general partner has all the rights and powers of a partner. The general partner may also be a limited partner and thereby may also share in profits, losses, and distributions as a limited partner.

Explain voting rights in a partnership agreement.

The partnership agreement may grant to all or a specific group of general or limited partners the right to vote. But, the limited partners must be careful not to act or participate in voting to the extent they have participated in control of the business.

Explain the name regulations for a limited partnership.

The surname of a limited partner is prohibited unless it is also the surname of a general partner or unless the business had been carried on under that name before the admission of that limited partner. The name must also contain the words "limited partnership."

When may a partner receive a distribution from a limited partnership?

When the LP assets would be sufficient to pay all liabilities even after partner distributions have been made.