Chapter 35 Business Law

General partners

Invest capital, manage the business, and are personally liable for partnership debts

Limited partners

Invest capital, but do not participate in management
 Personally liable for partnership debts beyond their capital contributions

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

Revised Uniform Limited Partnership Act (RULPA)

Modern, comprehensive law for the formation, operation, and dissolution of limited partnerships
• Supersedes the Uniform Limited Partnership Act (ULPA)
• Provides basic foundation for limited partnership law

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

Capital Contributions

Contribution may be in cash, property, services rendered, or promissory notes or other obligations to contribute cash, property, or to perform services

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

Limited Partnership Agreement

Document that sets forth the rights and duties of general and limited partners

Right to Information

Each limited partner has right to obtain full information regarding state of business, finances, etc.

Admission of a New Partner

New limited partner can be added only upon the written consent of all partners
– Agreement can provide otherwise

Master Limited Partnershipsecurities exchanges

Limited partnership interests are traded on organized securities exchanges

Liability of General

General partners have unlimited liability for debts and obligations of the partnership

General Rule

Limited partners are not individually liable for the obligations or conduct of the partnership beyond the amount of their capital contribution

Exceptions to the General Rule

Limited partners are individually liable for the debt, obligations, and tortious acts of the partnership in three situations:
1. Defective Formation
2. Participation in Management
3. Personal Guarantee

Dissolution of a Limited Partnership

Certificate of cancellation must be filed upon dissolution of limited partnership
• Causes of dissolution:
– End of life of limited partnership
– Written consent of general and limited partners
– Withdrawal of general partner
– Entry of decree of judicial dissolutiom

Distribution of Assets

Proceeds must be distributed after the assets of the limited partnership have been liquidated
• Order of distribution of partnership assets:
– Creditors of the limited partnership
– Partners with respect to
 Unpaid distributions
 Capital contributions
 The remainder of the proceeds