fl partnerships Flashcards
partnership formation
a partnership is an association of two or more persons to carry on a business for profit as co-owners.
* “person” may be individual or legal entity, including corporation, llc, trust, estate, partnership, or government entity
A separate legal entity distinct from its partners
* May own property and sue and be sued.
General partners are not protected from personal liability for partnership obligations
* They can be sued personally for claims against the partnership
(1) general partnership requirements
Two or more persons: any individual or any legal entity
* A corporation can be a partner
* the same capacity to contract is required
Intent: To carry on a business for profit as co-owners.
* you do not need to have the intent to form a partnership
* you can not opt out of partnership status, subjective intent will not control your status
* sharing GROSS RETURNS rather than profits DO NOT create a presumption that partnership has formed
written agreement is not necessary
* Can be a verbal/oral agreement
* Can be an implied agreement
A partnership agreement is subject to the SOF. This means that contracts that cannot be performed within one year require a writing.
Passive co-ownership of property is usually not enough to form a partnership; look for ongoing activities designed to obtain a specific business purpose
* General partnerships are the default entity.
Profit sharing
* There is a general presumption that an agreement to share business profits creates a partnership.
* The presumption will not apply when profits are used to:
1. Pay debt
2. pay interest
3. Pay rent
4. Pay wages compensation to an employee or independent contractor
5. Make goodwill payments stemming from the sale of a business
6. Pay a retirement or health benefit to the beneficiary or designee of a deceased or retired partner
(2) Sub-partnership: a partner contracts with a third party to share in the partner’s profits
It is not a true partnership, and the subpartnership arrangement does not make the third party a member of the partnership.
* The third party has a contractual claim
(3) partnership by estoppel: a person might be treated as a partner even when a partnership does not exist
Representing yourself as a partner might lead others to expect that you’ll be good for any debt of the partnership.
Partnership by estoppel can arise when:
* The defendant makes or consents to a representation to the plaintiff that he is a partner in an actual/purported partnership; and
* The plaintiff must reasonably relies on the representation and suffers damages as a result of the reliance.
* No duty to deny: Merely being named as a partner by another is not enough. Look for consent to the representation by the defendant.
* Public holding out: If the representation of partnership is very public, the defendant may not be able to defend by claiming she was unaware of the representation.
* The falsely named partner: Can act as an agent for the person incorrectly naming the party as a partner.
partnership operation
duties partners owe to the partnership
Every partner is an agent of the partnership entity for business purposes; each partner will owe the partnership—and the other partners—a number of fiduciary duties.
(1) the duty of loyalty
A partner in a partnership cannot:
* Compete with the partnership business
* Pursue an interest adverse to the partnership
* Take an opportunity that belongs to the partnership without notifying the partnership
* may use or possess partnership property for personal benefit, but must compensate the partnership for the benefit
Mercenary partnership: You can not eliminate the duty of loyalty by agreement of all partners, but you can carve out activities that will not violate the duty of loyalty.
Safe harbor: Partners can authorize or ratify a transaction between the partnership and a partner.
(2) the duty of care
A partner cannot engage in grossly negligent, reckless, or intentional misconduct.
sloppy partnership: partners can reduce this duty by agreement, but not unreasonably
(3) fiduciary duty issues
the duty of care and duty of loyalty kick in only for current partners
they do not apply to potential partners, only contractual
they apply to partners who are preparing to quit the partnership
(4) The obligation of good faith and fair dealing
Bad faith partnership: the partners cannot eliminate this duty by agreement
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finacial matters
(1) Partnership profits and losses
Default rule: Each partner is entitled to an equal share of the profits and losses
the partners can change this default
the partners can set different percentages for sharing profits and losses (e.g., partner Joe gets 40% of the profits but just 10% of the losses)
(2) Partnership account
The account is increased by contributions and profits
The account is decreased by liabilities, distributions, and losses *(3) Partnership distributions* Each partner’s account will be credited with their share of the profits. A partner cannot demand a distribution of these profits. *(4) Partnership interest* The right to share in profits and losses and receive any distributions if they are declared Not an interest in the underlying property of the partnership. a partner transfer this interest to a third party, in part or in whole, as long as partnership agreement does not restrict the transfer * this does not trigger dissolution * this does not trigegr a dissociation * the transferee does not become a partner * The transferee just has the right to receive the distributions that the transferring partner would have received; no control and no management rights
Charging order: Judicial lien on the partnership interest (typically levied to enforce a judgment
* enables the judgment creditor to receive that member’s distributions.
* The judgment creditor may not foreclose the member’s interest and replace the member in the LLC, as a charging order is the judgment creditor’s only remedy against a member of a multi-member LLC.
(5) property ownership
All property acquired by the partnership is partnership property.
Titled property acquired in the name of the partnership is partnership property.
When property is not titled in the partnership name or otherwise explicitly deemed partnership property, then the intent of the partners will control whether the property belongs to the partnership or individual partners.
* like where partners have expressly or impliedly agree to use partnership funds a certain way (for personal use). THIS WILL BEAT THE PRESUMPTIONS LISTED BELOW.
Two presumptions govern:
* Presumed to be partnership property: when purchased with partnership assets or partnership credit
* Presumed to be a partner’s separate property: when acquired in the name of the partner, titled in a person’s name without reference to the partnership, or purchased without the use of partnership assets
a partner may transfer partnership property held in one or more partner’s names to a 3rd party by executing a instrument of transfer (deed) in the partners’ names
* the ability exists even if the original transfer instrument did not reflect the partnership’s existence
* if the partner transfers this property, the partnership may recover the property IF A PARTNER TRANSFERS IT FOR VALUE AND THE TRANSFEREE KNEW THAT THE PROPERTY BELONGED TO THE PARTNERSHIP
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Partnership decisions
A decision to admit a new partner must be approved by all the existing partners, limited and general
Management rights: By default, each partner has equal rights in management.
* Ordinary partnership business (matters done in ordinary course of business) requires a majority vote.
* Special or extraordinary partnership business (outside the ordinary course of the partnership’s business) require the consent of all partners.
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- Indemnification: a partnership must indemnify each partner for personal liability incurred in the ordinary course of conducting the partnership’s business.
- Access to records: each partner has the right to inspect and copy records, including the financing of the partnership. BUT under florida revised uniform partnership act (FRUPA), a partnership may restrict access to partnership records in partnership agreement so lond as it is reasonable
- Lawsuits
* As a distinct legal entity, a partnership can sue or be sued in its own name
* A partnership may sue an individual partner for breach of partnership agreement or for violating a duty owed to the partnership.
* A partner may sue the partnership, or another partner, to enforce the partner’s rights under the partnership agreement. This includes the right to an accounting of the business.
dissociation
Dissociation: Termination of an individual partner’s relationship with the partnership
Dissolution: Termination of the entire partnership entity
A partner’s dissociation may be either voluntary or involuntary.
Events Causing Dissociation
The following events will cause a LIMITED partner to AUTOMATICALLY dissociate from a partnership:
1. Partner gives notice to the partnership of her express will to withdraw
2. Occurrence of an event specified in the partnership agreement
3. Partner is expelled pursuant to the partnership agreement
4. Partner is expelled by unanimous vote of the other partners, if it is unlawful to carry on the partnership business with that partner (the Tony Soprano problem)
5. Partner is expelled by court order (usually for engaging in misconduct toward other partners)
6. Partner files for bankruptcy
7. Partner dies or an entity partner is terminated
8. Guardian is appointed for the partner, or judicial determination is rendered that the partner
cannot perform her duties
Rightful versus Wrongful Dissociation
A partner always has the power to dissociate from a partnership, whether its rightful or wrongful
Wrongful dissociation is still effective, but this will have some other legal consequences:
Partnership not for a term (e.g., an at-will partnership): Wrongful dissociation only occurs when there is an express breach of a provision in the partnership agreement
Partnership for a term (e.g., a five-year partnership): Dissociation by a partner prior to the end of this term is wrongful if (facts could say it dissolves before termination of limited partnership):
certain events trigger a general partner’s dissociation from a limited partnership, including
* assignment of one’s partnership interest, unless the partnership agreement provides otherwise
* removal in accordance with the partnership agreement
* financial difficulties– bankruptcy and insolvency
* death or adjudicated incompetent
* termination of the general partnership as a business entity
wrongful dissociation is still effective, but the partner is liable to the partnership and other partners for damages
After a Partner’s Dissociation
Dissociation of a partner does not automatically cause dissolution of the partnership.
(1) Consequences of dissociation
* Loss of management rights
* Elimination of fiduciary duties of that partner to the partnership (especially the duty not to compete)
* The partnership must buy out the dissociated partner’s interest
(2) valuation
* The interest is valued as if the partnership was wound up on the day of dissociation (the greater of either the liquidation value or the going concern value of the partnership).
* This payment must be made, by default, within 120 days from the dissociated partner’s demand for payment.
* If the dissociated partner disagrees with the partnership’s estimate of what the interest is worth, she may bring judicial action.
(3) indeminification
When purchasing the partner’s interest, a partnership must generally indemnify the dissociated partner against all partnership liabilities.
* this includes liabilities incurred before the dissociation
* this does not include liaibilities incurred by the partnership for acts of the dissociated partner after the dissociation date
a dissociated partner is liable for partnership obligations incurred before dissociation, unless
* A partnership creditor, with notice of the dissociation and without the dissociated partner’s consent, agrees to a material change in terms; or
* A partnership creditor, and the remaining partners grant the dissociated partner a release from liability
a dissociated partner is not generally liable for partnership obligations incurred after dissociation, but can be. if:
* The partnership does not dissolve and wind up
* The obligation takes place within one year of the dissociation
* The obligation is one for which she would have been liable if she were a partner
* The other party reasonably believed the dissociated partner was a partner at the time of
the transaction (no notice of the dissociation)
a dissociated partner can bind the partnership after dissociation
* The third party does not have knowledge of the dissociation
* The third party reasonably believes that the dissociated partner is still a partner
* The third party is not deemed to have knowledge of the dissociated partner’s lack of
authortity to bind the partnership
* The transaction is conducted within one year of the dissociation
* Statement of dissociation: This will be treated as giving all third parties notice of the dissociation as of 90 days after the filing.
* if the dissociated partner’s name remains on the name of the partnership, this Does not make the dissociated partner liable for the debts of the continuing business
partnership relations with third parties
power of a partner to bind the partnership
(1) authority
A partnership is not liable when all of the partners do not consent to an agent’s representation of herself as a purported partner, but each partner who consented to the agent’s representation, and the agent herself, can be held personally liable
Each partner is an agent of the partnership
any partner can bind the partnership in a contract—so long as that agent has actual or
apparent authority
Actual authority: Depends on a communication from the partnership to the partner granting them authority to form a contract.
Actual express authority: An explicit grant from:
* Partnership agreement
* Authorization of the partners
* Filed statement of authority
Actual implied authority: Does not depend on an explicit instruction; the partner is understood to be given authority to contract for activities that are properly related to that partner’s reasonable understanding of her objectives
Apparent authority: Depends on a manifestation from the partnership to a third party.
* for this to apply, the act must be performed in the ORDINARY COURSE of apparently carrying out the partnership’s business AND the third party must lack knowledge of the partner’s lack of authortity OR not have received notification of such
* partner who has dissociated can bind partnership if third party if the above elements are satisfied
* would hold the person who bound you, as well as the corporation you thought he was part of, and the rest of the partners PERSONALLY LIABLE TOO! EVERYONE IS LIABLE!
(2) The transfer of titled partnership property
Partnership property titled in the name of the partnership: The partner needs to execute a title transfer document in the partnership’s name.
* you can limit or remove the right of a partner to do this, by filing a statement of partnership authority
Partnership property titled in the name of one or more partners:
An individual partner will still have authority to execute an instrument of transfer in the partners’ names.
if partnership property is transferred by a partner without authority to do so, The partnership may be able to recover the property.
* Partnership’s interest indicated in the transfer document: The property can be recovered from the initial transferee.
* No indication of the partnership’s interest: The property can only be recovered from a transferee who was aware that the property belonged to the partnership, and that the rogue partner lacked authority for the transfer.
(3) The shelter rule: A partnership cannot recover property transferred without authority from a subsequent purchaser if it could not have recovered from an earlier transferee (i.e., an initial transferee can shelter a subsequent one).
(4) Imputation: An individual partner’s knowledge of a fact related to the partnership is generally imputed to the entire partnership (exception: fraud).
(5) Effective title: If a partner holds all of the partnership interests (e.g., death of another partner), then she has effective title to transfer the property (even to herself).
(6) Statements of partnership authority and denial: Statements of partnership authority and denial may be filed with the state to clairfy the authority of a partner.
Grant of authority: Filed to provide conclusive evidence that a partner has authority to bind the partnership. This will not protect a counterparty if he has actual knowledge that the partner lacks authority.
Limitation of authority: Filed to publicly state the limitation of a partner’s authority.
* this does not provide general constructive notice to third parties about this lack of authority
* It will operate as constructive notice for the transfer of real property held in the name of the partnership if a certified copy is filed in the transfer recording office.
Statement of denial: Filed to deny facts stated in a prior grant of authority or to specifically deny any grant of authority to a partner.
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The Effect of a Partner’s Tort
A partnership is liable for torts committed by a partner in the ordinary scope of business.
* this includes intentional torts like fraud
* not intentional battery, only if within ordinary scope of business
* if a partner enjoys immunity for liability from the tort, that immunity does not transfer to the partnership
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General Liability to Third Parties
(1) Liability for partnership obligations
A partnership can be sued as a separate entity for its legal obligations
A partner is typically jointly and severally liable.
* Newly admitted partner: Not personally liable for prior partnership obligations before his admission as a partner (but any capital contribution made by in incomding partner to the partnership will remain at risk for satisfaction of such obligations).
* Dissociated partner: Generally remains liable for partnership obligations incurred before the dissociation.
* In some cases, he might be liable for partnership obligations incurred within one year of dissociation.
* where partners in an actual partnership consent to representation of a person as a partner (even though he is not) to a third party, the partners who CONSENTED will be jointly and severally liable for the transaction
(2) Effect of a judgment against the partnership
Partners in a general partnership are jointly and severally liable for the obligations of a partnership. * A creditor may obtain a judgment against a partner when the partnership’s assets are clearly insufficient.
* the partner is entitled to indemnification for any personal liabilities incurred either in the ordinary course of business or to preserve partnership assets.
individual partners need to be named in the judgment for the plaintiff to recover their personal assets
A plaintiff must generally exhaust partnership assets before he can recover personal assets from the partners.
(3) crimes
a partnership can be convicted of a crime
one partner will not be criminally liable for the acts of another partner based solely on their partnership status
partnership changes and termination
conversion
(1) from General Partnership to Limited Partnership
This conversion usually requires whatever approval is required to amend the partnership agreement.
If there are no provisions made for amending the general partnership, then conversion requires a unanimous vote of the partners.
After approval, the partnership must file a statement of conversion.
if a general partner (GP) becomes a limited partner in the conversion and there is a lawsuit, the former gp is personally liable if
* if the obligation was incurred by the partnership prior the conversion (resulting partnership is also still subject to suit for its obligations)
* Yes, if the counterparty has no notice of the conversion and reasonably believes at the time that the limited partner was still a general partner.
(2) From Limited Partnership to General Partnership
This conversion will typically require the positive vote of all partners, even if there is a contrary provision in the limited partnership agreement.
After these approvals, the partnership will file to cancel its certificate of limited partnership—at which time the conversion takes effect.
if a limited partner becomes a general partner in the conversion and there is a former lapsuit, the former lp has:
* WILL NOT INCUR personal liability if the obligation was incurred by the partnership prior to the conversion.
* WILL INCUR personal liability for legal obligations incurred by the partnership after the conversion.
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merger
A distinct legal operation where an entity merges into another legal entity. It is different from a conversion but effectively allows multiple partnerships to be combined and/or a general partnership to be merged into a limited partnership.
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Termination of a Partnership
Two-step process:
1. dissolution (the beginning of the end)
2. winding up (the process of liquidating the assets to creditors and the
individual partners)
(1) dissolution
What triggers dissolution?
Partnership at will (open-ended partnership): Dissolved when a partner chooses to dissociate by giving notice of withdrawal.
NOTE: other methods of dissociation will not automatically cause the dissolution of at-will partnerships
Partnership for a definite term or undertaking is dissolved:
* When the term expires or the undertaking is completed;
* If all partners agree to dissolve the partnership; or
* A partner is dissociated by death, bankruptcy, or other circumstances and at least
half of the remaining partners agree to dissolve the partnership within 90 days.
What happens if a partnership for a defined term continues conducting business past the expiration of the term? The partnership survives as a partnership at will.
Any type of partnership dissolved if one of the following occurs:
* A dissolving event as defined in the partnership agreement
* An event occurs making it unlawful for all or substantially all of the partnership business to continue (if not cured within 90 days of notice)
* Judicial determination is made that the purpose of the partnership is frustrated or that a partner has engaged in conduct that makes it not reasonably practicable to carry on the business with that partner
* The transferee of a partnership interest obtains a judicial determination that it is
equitable to wind up the business
NOTE: A partner in a general partnership may transfer her interest in the partnership to another, and the transferee may seek a judicial order of dissolution of the partnership.
(2) winding up
note: A partner is generally not entitled to remuneration for services performed for the partnership.
* However, a partner is entitled to reasonable compensation if he renders services in winding up the business of the partnership.
Who winds up the business?
Any partner who has not wrongfully dissociated from the partnership
The legal representative of the last surviving partner
Any partner, representative, or transferee may seek judicial supervision
What does it mean to wind up the business?
The person winding up the business has the power to dispose of and transfer partnership property and to discharge the partnership’s liability
May also preserve the partnership as a going concern for a short time to maximize its value
Some questions that might arise during the winding up:
the partnership is bound by a partner’s act that is appropriate for dissolution
the partnership is bound by a partner’s act that relates to the partnership busineess but not dissolution, if the act would have bound the partnership before the dissolution and the third party does not have notice of the dissolution, BUT
* The acting partner will be liable to the other partners for post-dissolution acts
* If a partner undertakes an inappropriate act for the winding up, that partner is liable
for any damages
After dissolution, any partner who has not wrongfully dissociated may file a statement of dissolution. This is treated as giving notice of the dissolution to third parties beginning 900 days after the filing.
What are the rules for winding up the partnership assets?
FIRST, Upon dissolution of a partnership, partnership assets are first used to discharge obligations to creditors, including partners who are creditors, then to repay partners their capital contributions.
THEN, each partner’s account will be settled.
* if this results in a negative balance for a partner, the partner must make a contribution to bring the balance to zero.
* if this results in a positive balance for a partner, the partner is entitled to receive that amount from the partnership.
A partnerhsip can change its mind and resume the business after dissolution, as long as the winding up is not complete, and all partners agree to waive the right to terminate.
* Liability incurred by the partnership or a partner is treated exactly as if there had been no dissolution.
* The waiver of termination will not adversely impact any third party who dealt with the partnership before knowing about the waiver.
NOTE:
A general partner is personally liable to third parties for the obligations of the limited partnership.
* A limited partner is not personally liable, either directly or by contribution, for obligations of the limited partnership solely by reason of being a limited partner, even if the limited partner participates in the management and control of the business.
* Upon dissolution of a partnership where the assets are insufficient to repay all capital contributions, those partners who made capital contributions will receive the remaining assets, and all partners split the losses equally.
other partnership entities: limited liability partnerships (LLP)
legal entity where a partner’s liability for obligations of the LLP
as a partner is eliminated.
(1) Forming an LLP
File a statement with Florida Department of State.
Generally effective on the date of the registration
The name must contain a special word: “Registered Limited Liability Partnership,” “Limited
Liability Partnership,” “R.L.L.P.,” “L.L.P.,” “RLLP,” or “LLP”
* The name of a limited partnership must contain the phrase “limited partnership,” the word “limited,” or any abbreviation thereof
The hallmark of an LLP is the limitation of personal liability of the partners for obligations of
the LLP.
* This is true for obligations in both tort and contract law.
* A partner may still be personally liable for any personal misconduct
* LLP itself may still be liable for a contract or tort claim
(2) Termination of an LLP
By cancelling a statement of qualification; transforms the LLP into a general partnership.
State regulators may also revoke the statement of qualification for certain events, such as
the failure to file an annual report.
* This allows the state to transform the limited liability partnership into a simple partnership.
other partnership entities: limited partnerships (LP)
A partnership formed by two or more persons with at least one general partner and at least one limited partner.
The limited partner’s liability for the LP’s obligations is limited to her capital contribution (no personal liability).
general partners manage and are PERSONALLY LIABLE (unlimited liability) and limited partners only have an economic interest, they have no personal liability and cannot manage or control
(1) formation
To form an LP, the partners need to file a certificate of limited partnership with Florida containing:
* Name of the LP
* In-state address
* Name and address of in-state agent for service of process
* Name and address of each GP
* Statement about the duration of the LP
* All general partners must sign the certificate
The name of the LP also must contain a special word: “Limited Partnership,” “Limited,” or any abbreviation of these words
There are no special limits for the business activities of an LP
The LP is generally effective on the date of the filing
The certificate only needs to substantially comply with the requirements; if the parties fail
to file the certificate, the LP will not come into effect
* If a limited partnership has failed to file an initial certificate, it may still be able to bring a suit arising from its business dealings as a limited partnership.
* This is because one who has recognized an organization in business dealings may not be allowed to deny the organization’s existence in matters before the court and may be estopped from doing so.
a limited partner can be liable for acts of a purported limited
partnership even if she mistakenly believes in good faith that the LP is valid, to a third party who transacts with the purported LP and believes in good faith that the limited partner is a GP at the time of the transaction.
(2) The limited partner: arise with the creation of the LP, from the written consent of all partners, or as provided by the partnership agreement
voting
A limited partner does not have the general right to act for or bind the LP. But…
Certain actions will require approval of all limited partners (unless the agreement
provides otherwise:
* Amending the agreement
* Admitting a new limited partner
* Admitting a GP
* Compromising a partner’s obligation to make a distribution
* Expelling a limited partner (but that partner can’t vote)
* Disposing of all the LP’s property
inspection
A limited partner has the right to inspect information and demand business information.
Transacting business:
A limited partner may transact other business with the LP (including making loans) and will be treated the same as a non-partner.
liability
A limited partner is generally not liable to third parties for obligations of the LP.
* this true even if he participates in management and control of the business.
* But people who incorrectly think they are in an LP can be liable as general partners to a third-party if the third party believes in good faith that they are general partners.
A partner in a limited partnership may hold dual roles and will be liable for partnership obligations based on his general partner status.
duties
Limited partners do not owe fiduciary duties solely because of their LP status
IF the limited partner is vested with certain management powers or duties under the partnership agreement, then the limited partner has a duty of loyalty with respect to those powers or duties and may not:
* compete with the partnership business
* advance an interest adverse to the partnership or
* usurp a partnership opportunity.
Otherwise, a limited partner CAN do these things because normally they DO NOT have fiduciary duties
withdrawal
Only at the time specified or upon the happening of events specified in writing in the partnership agreement, or by judicial proceedings, the person’s death, or as the result of a merger or conversation (in some cases)
note: The partnership agreement can deny a limited partner (but not a general partner) the power to elect to dissociate from the partnership.
(3) The general partner: GPs arise during the creation of the LP or by admission via the written consent of all partners (unless the partnership agreement provides otherwise).
Generally functions just like a partner in a general partnership and is responsible for carrying on the ordinary business activity.
* May contribute to the LP, share profits and losses, and receive distributions
* May transact other business with the LP (including loans) and will be treated the same as a non-partner
Personally liable to third parties for the obligations of the LP
May terminate their relationship by:
* withdrawal via written notice to the other partners
* Assigning interest to another (unless the partnership agreement provides otherwise)
* Being removed under the partnership agreement
* Filing for bankruptcy, dying, or being declared incompetent
(4) Some financial issues
contributions
A general or limited partner may contribute cash, property, services, or a promise to provide cash, property, services
* Any promise of a future contribution must be written in order to be enforceable.
* And if a partner is unable to perform promised services due to death or disability, then the partner or the partner’s estate must pay the partnership the cash value of those services.
if the partner does not honor a promised contribution, She will be liable.
the promise can be adjusted, if ALL partners agree (not just a majority, you need ALL)
profits and losses
Allocated in any way the limited and general partners want.
if no terms are stated in the partnership agreement, Both profits and losses will be allocated among partners according to the amount of the contribution
distributions
partners decide on distributions, Any way the limited and general partners want.
if no terms are stated in the partnership agreement distributions will be allocated among the partners in the same manner that profits and losses are shared
partners do not have the right to insist on a distribution, unless stated in the partnership agreement. Distributions are not allowed if the LP would be unable to pay its debts as they come due (after the distribution) or if total assets would be less than total liabilities. *Assignment*
partners can assign their interest
the assignee can become a partner in the LP only if all parnters agree
(5) Termination
The LP is first dissolved and then winds up its business affairs.
Events causing dissolution:
1. The occurrence of an event specified in the partnership agreement
2. The termination of a date specified in the partnership agreement
3. The written consent of all partners
4. The withdrawl of a GP (or another event causing the GP to no longer serve as the GP) unless: There is at least one other GP to carry on the business, or All partners agree in writing to carry on the business and appoint a new GP
5. A decree of judicial dissolution
The task of winding up falls to the general partners who have not wrongfully dissolved the LP. If no one falls in this category, the limited partners or a court appointee may wind up the LP.
Assets will be distributed in the following order:
1. LP creditors (including any partners who are also creditors)
2. Partners and former partners entitled to distributions that have not been paid
3. Partners for the return of their contribution
4. Partners in proportions in which they share distributions
(6) Limited partner’s derivative action
* A limited partner may bring a derivative action on behalf of the limited partnership.
* to do so, she must first have either made a demand on the general partner to do so, or she must explain why she believed making such an effort would have been likely to fail.
* Think of this like a proceeding to compel the LP to pursue a legal claim (e.g., a lawsuit
against a GP manager for fraud).
requirements
- Demand: LP must show that the GPs have refused to bring the claim or argue (in detail in the complaint) that any attempt to cause the GP to bring the claim is likely to fail.
- Continuing status: LP must generally be a partner at the time the action is filed and at the time of the wrongful transaction.
- Recovery: Recovery of the judgment will go to the limited partnership. The limited partner may recover reasonable expenses, including attorney’s fees.
(7) Conversion
An organization other than a limited partnership can convert to a limited partnership, and a limited partnership can convert to another type of entity
A written plan of conversion will be executed with the name and form of organization before and after conversion, the terms and conditions, and the organizational documents of the converted entity.
After approval, a certificate of conversion must be signed by all general partners and filed with the Department of State
approvals
A plan of conversion must be consented to by all the general partners of a converting limited partnership and by limited partners who own a majority of distribution rights.
Approval will not be valid unless approved by a party who will have personal liability with respect to a converted or surviving organization, if any
effect of conversion
An organization that has been converted is the same entity that existed before conversion. For example, title to all real property remains with the entity, all debts and liabilities continue, all actions continue as if the conversion had not occurred, and all rights and privileges remain vested in the entity.
(8) merger
A limited partnership may merge with one or more other organizations.
A written plan of merger must include the name and form of each organization, the name and form of the surviving organization, the terms and conditions of the merger, and any amendments made by the merger to the surviving organization’s organizational documents.
After each constituent organization has approved a merger, a certificate of merger must be signed on behalf of each preexisting organization. It must include the name and form of each organization, the name and form of the surviving organization, the effective date, any amendments provided for in the plan of merger to the existing organization, and a statement of approval
Approvals
If a partner will have personal liability with respect to a converted or surviving organization, then approval of the merger will be ineffective unless the agreement provides for approval of the merger with the consent of fewer than all partners, and the partner has consented to the provision.
Changing from an LLP
A change from a limited liability limited partnership is ineffective without the consent of each general partner unless the agreement provides for amendment with the consent of fewer than all general partners and each general partner that does not consent to the change has consented to the provision.
Effect of merger
A certificate of merger will act as a statement of termination for any non-surviving limited partnership
When a merger becomes effective, the surviving organization continues, and each constituent organization ceases to exist as a separate entity.
All property owned by constituent entities vests in the surviving organization, and all debts, liabilities, rights, and privileges of the constituent organizations vest in the surviving organization
limited liability limited partnership LLLP
A legal entity that combines LLPs and LPs
LLLPs are an entity that operates like an LP except that all partners (even the GP) receive limited liability protection.
It is created like the other special partnership entities via a state filing.
The name of an LLLP must contain a special word: “Registered Limited Liability Limited Partnership,” “Limited Liability Limited Partnership,” “R.L.L.L.P.,” “L.L.L.P.,” “RLLLP,” or “LLLP.”
dissolution: unlawfulness
a partnership is dissolved when:
* an event makes it unlawful for all or substantially all of the partnership business to be continued and
* the partnership fails to cure the illegality within 90 days of receiving notice of that event.
