Limited Partnership

Question 1

What is a limited partnership?

Answer 1

• partnership formed by two or more persons having
  
  • @ least one general partner &
  • @ least one limited partner

Question 2

What is a general partner?

Answer 2

• treated the same as general partners in a general partnership are treated
  
  • unlimited personal liability for partnership debts

Question 3

What is a limited partner?

Answer 3

• partners who have
  
  • NO RIGHT to manage the partnership affairs******
    
    • if they do, they can be recategorized as general partners
  • NOT LIABLE for the obligations of the partnership beyond the amount of their capital contribution

Question 4

How is a limited partnership formed?

Answer 4

1. filing with the Secretary of State the Certificate of limited partnership signed by the general partner
   
   • provides constructive notice to all persons conducting business w/the LP of the limited partner’slimited liability
   • contains the name of the limited partnership & name & address of all general partners
2. W/IN 120 of filing of the initial certificate, a copy of it must be published in:
   
   • @ least 2 news papers
   • in the county in which the limited partnership office is location
   • for 6 consecutive weeks
     
     • failure to do so, results in an inability to do business untilt aht is done
3. MUST contain in its name “LP” or “limited partnership” to indicate its limited liability status

Question 5

What are the obligations/benefits of a limited partner?

Answer 5

1. passive investor who benefits fro a liability shield
2. Liability Shield is limited and does not protect from:
   
   • the wrongful limited conduct of the limited partner
   • unfulfilled contribution promises for the limited partner
   • distributions the limited partner received in error
   • the mistaken belief that the proported limited partner is a limited partner
3. Limited partner’s last name maynot appear in the name of the partnership or he may be reclassified as a general partner
4. Shall not become liable as a general partner unless in takes part in the control of business
5. May rightfully demand the return of his contribution when:
   
   • date specified in certificate has arrive
   • after giving 6 months written notice to the other partners if no time is specified or in the event of disoolution
6. Economic interest is assignable to 3rd ptys

Question 6

HYPO

Pascal is the general partner in a small import/export business he runs with his wife, Pauline. Pauline, whose family owns significant real estate throughout the state, holds a limited partnership stake in the business. Over the years, Pauline has tended to the paperwork duties of the business, such as responding to correspondence, ordering supplies, and paying the bills. When Pascal is away on overseas trips to visit clients, Pauline tends to the partnership’s business. A trade creditor has since attempted to attach Pauline’s rights to the family property on the grounds that she is more than a mere limited partner. Will the creditor succeed? Would the outcome be different if Pascal and Pauline deposited their profits into a joint checking account? If Pauline were given a salary, would that change the outcome?

Answer 6

• Propably the creditor will succeed b/c she manages when husband is away
• it does not matter if they deposit in the same checking acct
• salary would not matter if it is paid for passive, clerical things