Business Law Chapter 37: Limited Partnerships and Limited Liability Partnerships

Liability of the Limited Partner:

A limited partner's liability is limited to the amount of his capital contribution

These types of people can be a partner in an LP:

•Natural persons •corporations •LLCs •Partnerships

•A form of partnership that has elected to obtain limited liability for its partners. •Designed for professionals who historically have done business as partners.

Limited Liability Partnerships (LLP)

Limited Partners Partner's Transferable Interest:

each partner owns a transferable interest in the limited partnership. •each partner may transfer their partnership interest •judgment creditor may file a judgement for a partner's interest

Liability of the General Partner:

A general partner's liability is unlimited personal liability for the debts and obligations of the limited partnership.

A partnership formed by two or more person under the laws of the state

Limited Partnerships (LP)

A form of limited partnership where both general partners and limited partners have limited liability.

limited liability limited partnership (LLLP)

Limited Partners Voting Rights:

the ULPA requires few actions to be approved by all of the partners

Limited Partners Admission of New Partners:

the ULPA's default rule is that no new partner may be admitted unless each partner consents to the admission.

Taxing LPs

LPs are not separate taxpaying entities

Limited Partners Power and Right to Withdraw:

partner's have the power to withdraw from the limited partnership at any time. •because there is an expectation that the LP has perpetual existence, they have no right to withdraw unless there's an agreement otherwise. •leaving the LP may result in a loss of capital contribution

a business or individual who can receive service of process and notices for the entity

registered agent

Forming an LP

requires complying with relevant statutes, preparing a certificate of limited partnership, and filing it with the Secretary of State.

Limited Partnerships (LP) types of partners

Two types of partners, must have at least one of each type: •General partners •Limited partners

Limited Partners Capital Contributions:

A partner may contribute any property or other benefit to the limited partnership such as: •cash •tangible or intangible property (cars or stocks) •services rendered •promissory note •a promise to contribute cash, property or services

LP general partner Fiduciary Duties?

Duty of loyalty: •account for limited partnership property •can't compete with the LP •personal gains come 2nd to the LP's gains Duty of care: • breached by violating the law •breached by negligence (GP who is in charge of filing paperwork forgets to file for fire insurance. The building burns down. General partner is liable)

Partner who invests capital, manage the business, share in its profits, and are personally liable for partnership debts

General partners

Limited Liability Partnerships taxation

LLP's enjoy the flow-through tax benefit of other types of partnerships. •All profits and losses are reported on the individual partners' income tax returns.

Partner who invests capital and share profits, but do not participate in management and are not personally liable for partnership debts beyond their capital contribution. (silent partners)

Limited partners

Limited Partners Share of Profits and Losses:

under the ULPA, profits and losses are shared on the basis of the value of each partner's capital contribution (unless there's a written agreement stating otherwise).

Rights and Liabilities Shared by General and Limited Partners:

•Capital Contributions •Share of Profits and Losses •Voting Rights •Admission of New Partner •Partner's Transferable Interest •Power and Right to Withdraw

Limited Partnerships Additional Rights of General Partners:

•The general partner has the same right to manage as a partner in a general partnership. •Compensation: if there is no agreement, the GP has no right compensation beyond their share of the profits

Naming an LLC

•The name cannot be the same or deceptively similar to that of any other LLC •In Florida, the name of the LLC can contain the name of a partner

Liability of a partner in an LLP.

•The obligation of an LLP is solely the obligation of the partnership. •A partner is responsible for their own negligence of the negligence of someone they supervise.

Limited partner management rights

•The old law says that limited partners would lose their limited liability shield if they participated in management. •In Florida, Limited partners can participate in management without losing their limited liability shield. (however, there will be tax consequences)

Additional Rights of Limited Partners

•They have the right to be informed about the partnership affairs. •A limited partner may inspect and copy a list of the partners, tax returns, partnership agreements, information concerning contributions by partners, and the certificate of limited partnership.

2 ways to circumvent the liability of the general partner

•have the general partner be a corporation or an LLC • choose to be a LLLP

When do you need the approval of all partners in a LP?

•making an amendment of the LP certificate or LP agreement •sale or transfer of substantially all of the LPs assets outside the ordinary course of business

Under the Uniform Limited Partnership Act (ULPA 2001), information that the certificate of limited partnership must contain:

•name of the limited partnership; •address of the principal place of business; •name and address of the registered agent; •name and address of each general partner; and •whether it is a limited partnership or an LLLP.

LP limited partner Fiduciary Duties?

•no limited partner owes fiduciary duties solely by being a limited partner. (can invest in other firms) •Duty to act in good faith