Chapter 4 LIMITED PARTNERSHIP 1843-1854

Question 1

It is formed by 2 or more persons and includes 1 or more general partners and 1 or more limited partners wherein the limited partners are not bound to the obligations of the partnership.

Answer 1

Limited Partnership

Question 2

TRUE OR FALSE. A limited partner who takes part in controlling the partnership business is liable as a general partner to the partnership creditors.

Answer 2

TRUE

Question 3

TRUE OR FALSE. THE CONTRIBUTIONS OF A LIMITED PARTNER MAY BE CASH BUT NOT SERVICES.

Answer 3

FALSE. IT MAY BE CASH OR PROPERTY

Question 4

Difference between general partners and limited partners

Answer 4

In terms of liability - general partners are liable up to the extent of their separate property while limited partners are liable up to the extent of their share in the partnership.

In terms of management - general partners have an equal right to management of the partnership while limited partners do not have a share in management.

In terms of contribution - general partners may contribute money, property, or service while limited partners contribute money and property.

In terms of properness - general partners are proper parties while limited partners are not.

In terms of assigning their interest to others - general partners are not allowed to assign their interest to admit new partners but the interest of the limited partners is assignable with an assignee.

In terms of names that appear in partnership firm name - the name of the general partners appears but the names of the limited partners do not appear in the partnership firm name.

In terms of engaging in a business that is the same as the operation of the partnership -general partners are prohibited from engaging while limited partners are not.

In terms of dissolution, general partners dissolve the partnership if there are retirement, insolvency, and death of any one of them while limited partners do not dissolve the partnership.

Question 5

What are the characteristics of a limited partnership?

Answer 5

A limited partnership is formed in accordance with the requirement of the law

There must be one or more general partners

There must be one or more limited partners

Obligations of the partnership must be paid out first from the common fund and if insufficient, then the separate properties of the general partners.

Question 6

What are the requirements to form a limited partnership?

Answer 6

Article 1844 - There are 2 requirements if 2 or more persons desire to form a limited partnership.

1. They shall sign and swear to a certificate that states the (a) name of the partnership with a word “limited” attached to it, (b) character of the business, (c) location of the principal place of the business, (d) the name and address of the general and limited partners, (e) the term of the partnership, (f) the amount, description, and agreed value of the contribution of each limited partner, (g) the additional contribution to be made by each limited partner and the events which they shall be made, (h) If agreed upon, the time when the contribution of the limited partners to be returned, (i) the share of the profits which each limited partners shall receive, (j) If given, the right of the limited partner to substitute an assignee in his place and the terms and conditions therewith, (k) If given, the right of the partners to admit new limited partners, (l) if given, the prioritization of limited partners over other limited partners based on contributions, as to compensation by way of income, and the nature of such priority, (m) if given, the right of the remaining general parts to continue the business despite the death, insanity, insolvency, retirement, civil interdiction of a general partner, (n) if given, the right of the limited partners to demand and receive property other than cash in payment for his contribution.
2. File for the record the certificate to SEC

Question 7

What are the reasons or purpose of the law in authorizing the formation of the limited partnership?

Answer 7

It secures capital from others for one’s business and still retains control, shares in profits of a business without the risk of personal liability, and the last reason is to associate as partners with those having business skills.

Question 8

What are the acts that constitute controlling the business?

Answer 8

selecting who will be the managing partners

supervision over a superintendent of the business.

Question 9

Exceptions wherein the surname of the limited partners may appear on the partnership firm name.

Answer 9

Article 1846 -If the limited partner surname is also the surname of the general partner

If before he becomes a limited partner, the partnership already uses a name that is similar to the surname of the limited partner.

Question 10

IF THE CERTIFICATE CONTAINS FALSE STATEMENT AND THE ONE WHO SUFFERS LOSS BY RELYING on TO SUCH STATEMENT MAY HOLD LIABLE THE PARTY WHO KNEW THE STATEMENT IN THE CERTIFICATE IS FALSE AT THE TIME:

Answer 10

1. AT THE TIME HE SIGNED THE CERTIFICATE

2. SUBSEQUENTLY AND BEFORE THE STATEMENT WAS RELIED UPON BY THE PERON TO ENABLE HIM TO CANCEL/AMEND THE CERTIFICATE.

Question 11

What does not constitute taking part in the control of the business?

Answer 11

mere dealing with customers

mere consultation on one occasion with the general partners

Question 12

What are the conditions for exemption from liability of the limited partner liable as a general partner who believes he is limited partner?

Answer 12

Immediate renunciation of an interest

Non-inclusion of limited partner’s name in the firm name.

Non-participation in management of the business

Question 13

TRUE OR FALSE. A limited partner may loan and transact other business with the partnership and may receive claims against the partnership as general creditors, pro-rata share of the assets.

Answer 13

TRUE

Question 14

TRUE OR FALSE. He, who believes he is a limited partner and exercises his rights, is a general partner and may be liable as a general partner unless in ascertaining mistake, he immediately renunciation the interest or income, and if there is no renunciation, the partnership creditors are not prejudiced.

Answer 14

FALSE. THE ONE WHO BELIEVES AND EXERCISE THE RIGHTS OF THE LIMITED PARTNER IS NOT A GENERAL PARTNER SO IT MEANS HE IS A LIMITED PARTNER BUT LIABLE AS A GENERAL PARTNER TO THE PARTNERSHIP CREDITORS WHO ARE PREJUDICED.

Question 15

TRUE OR FALSE. After the formation of a limited partnership, additional limited partners may be admitted upon the stipulation of the partners

Answer 15

FALSE. AN ADDITIONAL LIMITED PARTNER MAY BE ADMITTED FROM THE TIME OF FILING AN AMENDMENT TO THE OFFICE OF SEC, AFTER THE FORMATION OF THE PARTNERSHIP.

Question 16

TRUE OR FALSE. A general partner shall have all the rights and power and be subject to all the restrictions and liabilities of a partner in a partnership with limited partners

Answer 16

FALSE. HE SHALL HAVE NO RIGHTS, POWER, ETC IF THERE ARE LIMITED PARTNERS IN THE PARTNERSHIP, A WRITTEN CONSENT IS REQUIRED.

Question 17

If the general partners failed to get written consent from the limited partners, what are the things they have no authority to do?

Answer 17

Article 1850

1. do any act in contravention of the certificate
2. do any act that makes it hard or impossible for the business to carry
3. confess a judgment against the partnership
4. possess partnership property or assign their rights in partnership property beyond the purpose of the partnership.
5. admit a person as a general partner
6. admit a person as a limited partner unless given in the certificate.
7. continue the business with the partnership property if one of the general partners dies, retires, becomes insolvent, or insane unless the right is included in the certificate.

Question 18

What are the rights of the limited partners which are similar to general partners?

Answer 18

Article 1851 - They have access to inspect and have a copy of the partnership book which is kept at the principal place of the business and at a reasonable time.

They have the right to demand true and full information concerning the partnership business and a formal account of the partnership affairs.

Have dissolution and winding up by decree of a court.

Have the right to receive the share of the profit or any other way of income and to return his contribution given in the certificate.