Business Law: Chapter 35
Share of profits and losses
-Agreement may specify how profits and losses are to be allocated among the general and limited partners. -If not specified, RULPA provides that profits and losses are shared on the basis of value of the partner's capital contribution.
Limited Partnership
-At least one general partner and one limited partner. -No restrictions on maximum number of general or limited partners. -Any person may be a general or limited partner, or could be both.
Name of limited partnership restrictions:
-Cannot be the name of other corporations. -States can designate words that cannot be used in limited partnerships names. -Name must contain the words, "limited partnership".
Partnership must keep the following records:
-Certificate and all amendments -Full names and addresses of each partner -Written limited partnership agreements -All income tax returns -Three years of financial statements
Defective formation occurs when:
-Certificate not properly filed. -Defects in certificate that is filed. -Other statutory requirement for creation of limited partnership is not met.
Capital Contributions
-Contribution may be in cash, property, services rendered, or promissory notes or other obligations to contribute cash, property, or to perform services. -Partner or creditor may bring lawsuit to enforce promise to make contribution.
Limited Partnership Agreement
-Document that sets forth the rights and duties of general and limited partners. -Terms and conditions regarding operation, termination, and dissolution of partnership. -Approval of transactions by partners.
Participation in Management
-General partners have management rights. -Limited partners give up these rights in exchange for limited liability. - Liable as general partner if participation is substantially the same. - Only liable to persons who reasonably believe then to be general partners.
Revised Uniform Limited Partnership Act (RULPA)
-Modern comprehensive law for the formation operation, and dissolution of limited partnerships. -Supersedes the Uniform Limited Partnership Act. -Provides basic foundation for limited partnership law.
Admission of a new partner
-New limited partner can be added only upon the written consent of all partners (agreement can provide otherwise). -New general partner can be admitted only upon written consent of each partner (Agreement cannot vary this requirement). -Admission effective after amendment is filed.
Liability of general partners
-Unlimited liability for debts and obligations of the partnership.
Permissible activities of limited partners
Being an agent, employee, or contractor of the partnership. Acting surety for the partnership. Being a consultant or advisor to a general partner regarding the limited partnership. Approving or disapproving an amendment to the partnership agreement. Voting on other partnership matters, including dissolution, removal general partner, etc.
In case of such defects, limited partners may be liable as general partners:
Can escape liability by filing certificate of amendment or certificate of withdrawal.
Dissolution of Limited Partnership
Certificate of cancellation must be filed upon dissolution of limited partnership.
Order of distribution of partnership assets:
Creditors of the limited partnership. Partners with respect to: -Unpaid distributions. -Capital contributions. -The remainder of the proceeds.
Certificate of limited partnership
Document executed and signed by two or more persons that makes a limited partnership legal and binding. Contents of the certificate: -Name and business address of each general and limited partner. -Name, character, and place of business. -Amount of cash, property, or services. -Latest date of dissolution.
Right to info
Each limited partner has right to obtain full info regarding state of business, finances, etc.
Causes of dissolution of limited partnership:
End of life of limited partnership. Written consent of general and limited partners. Withdrawal of general partner. Entry of decree of judicial dissolution.
Limited Partners
Invest capital, but do not participate in management. Not personally liable for partnership debts beyond their capital contributions.
General Partners
Invest capital, manage the business, and are personally liable for partnership debts.
Liability of limited partners
Limited partners are liable only up to their capital contributions. Creditor may enforce personal guarantee and recover payment from limited partner who guaranteed repayment of loan.
Foreign limited partnership
Limited partnership in all other states besides the one in which it was formed. Law of the state governs its organization, internal affairs, and partners' liabilities. For business transactions, a certificate of registration is required.
Name of Limited Partnership
Name may not include surname of limited partner unless: -It also is the surname of the general partner. -Business was carried on under that name before admission of limited power.
Limited Liability Limited Partnership (LLLP)
Organized under state law by filing articles of LLLP with the secretary of state's office. Not personally responsible for debts of LLLP. General partners have management responsibility of the LLLP. -Permits limited partners to participate in management without losing limited liability shield.
Winding up of a limited partnership
Partnership must wind up its affairs upon dissolution. Affairs may be wound up by general or limited partners. Partners may petition court to wind up affairs.
Section 303 of the RULPA
Permits limited partners to participate in management of limited partnership.
Distribution of Assets
Proceeds must be distributed after the assets of limited partnership have been liquidated.
Exceptions to general liability of limited partners
Responsible for the debt, obligations, and tortious acts of the partnership in three situations: 1. Defective formation 2. Participation in management 3. Personal guarantee
Limited Liability Limited Partners
Special type of limited partnership that has both general partners and limited partners. Gen. and Lim. partners have limited liability and are not personally liable for the debts of the LLLP.
