(19) Overview/Nature/Formation of Limited Partnership
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61 Terms
What is the primary source of limited partnership law?
State statutes.
Did the common law recognize the limited partnership?
No. The limited partnership is entirely a creature of statute.
What was the first uniform law governing limited partnerships?
The Uniform Limited Partnership Act (ULPA), published in 1916.
When was the Revised Uniform Limited Partnership Act (RULPA) first published?
1976.
When did the major revision of the RULPA occur?
1985.
Which version of the RULPA is used throughout Fleming's outline?
The 1985 revision unless otherwise stated.
What role does the ULPA play under the RULPA?
The RULPA incorporates the ULPA to govern areas not specifically addressed by the RULPA.
What significant change occurred to the RULPA in 2001?
It was completely rewritten (often called Re-RULPA), but it has not become the majority law.
What is the primary function of most RULPA statutory provisions?
They serve as gap-fillers when the partnership agreement is silent.
What matters are generally controlled by the limited partnership agreement rather than the default RULPA rules?
Voting rights, allocation of profits and losses, powers, rights, duties, liabilities, and withdrawal rights.
How many classes of partners exist in a limited partnership?
Two: general partners and limited partners.
Who manages a limited partnership?
The general partners.
Who are the passive investors in a limited partnership?
The limited partners.
Why was the limited partnership created?
To allow passive investors to avoid unlimited personal liability for partnership debts.
How does RULPA § 101(7) define a limited partnership?
A partnership formed under state law consisting of one or more general partners and one or more limited partners.
Why is a limited partnership considered a statutory entity?
Because it exists only by statute and allows passive investment without unlimited personal liability.
Who is personally liable for the debts of a limited partnership?
The general partners.
May a corporation serve as the general partner of a limited partnership?
Yes.
Why do many limited partnerships use a corporation as the general partner?
To limit the personal liability of the corporation's individual owners.
When may a court pierce the corporate veil of a corporate general partner?
When the corporation is undercapitalized or corporate formalities are not observed.
May a general partner also own a limited partnership interest?
Yes.
To what extent is a limited partner personally liable for partnership debts?
Only up to the amount of the limited partner's capital contribution.
How are profits and losses allocated in a limited partnership?
As provided in the limited partnership agreement.
Under RULPA § 503, how are profits and losses allocated if the partnership agreement is silent?
In proportion to the value of each partner's capital contribution at the time of distribution.
Under the ULPA, how are profits and losses allocated if there is no agreement?
Equally among the partners.
What must the name of a limited partnership include?
The words "limited partnership" or an authorized abbreviation such as "LP" or "Limited."
May a limited partnership use a name deceptively similar to another business entity?
No.
May the surname of a general partner be included in the partnership name?
Yes.
May the surname of a limited partner generally be included in the partnership name?
No.
What is the consequence if a limited partner improperly allows the partner's surname to appear in the partnership name?
The limited partner may lose limited liability and be treated as a general partner by a creditor who reasonably relies on the representation and lacks actual knowledge of the partner's limited status.
What are the exceptions allowing a limited partner's surname to appear in the partnership name?
When the limited partner is also a general partner, or when the limited partner shares the same surname as a general partner and the partnership used the name before the limited partner joined.
What is a master limited partnership?
A publicly traded limited partnership.
What additional laws apply to master limited partnerships?
Federal securities laws.
Are securities law registration exemptions available to master limited partnerships?
Yes.
How are master limited partnerships generally taxed under federal law?
As corporations.
What types of master limited partnerships were excluded from the general federal corporate tax treatment?
Certain pre-existing oil and gas development partnerships and some real estate master limited partnerships.
Testable Issue: Is a limited partnership recognized at common law?
No. It exists only by statute.
Testable Issue: Who bears unlimited personal liability in a limited partnership?
The general partners.
Testable Issue: What happens if a limited partner's surname improperly appears in the partnership name?
The limited partner may lose limited liability as to creditors who reasonably rely on the representation without actual knowledge of the partner's limited status.
Essay Rule: How should you analyze the liability of partners in a limited partnership?
First identify whether the individual is a general or limited partner, determine the applicable statutory protections or liabilities, and then analyze whether any exception removes the limited partner's liability protection.
Essay Rule: How should you analyze the allocation of profits and losses in a limited partnership?
First apply the limited partnership agreement. If it is silent, apply the default statutory allocation under the governing act.
Master Synthesis: What are the defining characteristics of a limited partnership?
A limited partnership is a statutory entity consisting of one or more general partners who manage the business and are personally liable for its debts, and one or more limited partners who are passive investors with liability generally limited to their capital contributions.
Master Synthesis: What are the most frequently tested limited partnership issues?
The statutory nature of the entity, the distinction between general and limited partners, personal liability, default allocation of profits and losses, partnership naming rules, and the circumstances under which a limited partner may lose limited liability.