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Limited Partnerships Flashcards

1
Q

Dependent on state law for its existence. Cannot be

A

created informally
- file a certificate of limited partnership with the state

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2
Q

Partners needed

A

At least 1 general partner + at least 1 limited partner

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3
Q

General partners v. Limited partners

A
  • General partner(s) manage the operations and have unlimited liability. (RULPA 1985 §403)
  • Limited partner (s) do not manage the operations and have limited liability.
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4
Q

Limited parterships are taxed as

A

a partnership/pass-through entity

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5
Q

Default rule is profits are split based on

A

contributions

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6
Q

Limited Partnerships

Uniform Limited Partnership Act (RULPA 1976)

A
  • Increased the importance of the Limited Partnership Agreement vs. the Certificate of Limited Partnership
  • Reduced chances of a limited partner loosing limited liability
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7
Q

Revised Uniform Limited Partnership Act

RULPA 1985 or RUPA 1976 with 1985 amendments)

A
  • Increased the importance of the Limited Partnership Agreement vs. the Certificate of
    Limited Partnership
  • Reduced chances of a limited partner loosing limited liability
  • What a majority of states have adopted
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8
Q

Uniform Limited Partnership Act (ULPA 2001)

A
  • Got rid of the possibility of a limited partner loosing limited liability
  • Eliminates dissociation buyout rights
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9
Q

Linkage

A

General partnership rules apply to limited
partnerships where limited partnership law
is silent or adopts the general partnership
rules.

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10
Q

Companies have to decide where they want to operate
and have their chief executive office.
Things to look at for when deciding

A
  • Real Estate
  • Work Force
  • Cost of Living/Salaries
  • Where founders/management wants to live
  • Taxes
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11
Q

Can you create a limited partnership by
accident?

A

No

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12
Q

2 types of partners in a limited partnership

A

limited and general

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13
Q

Limited Partnerships: Fiduciary Duties of General Partners

Linkage to General Partnership Provisions in RULPA 1985

A
  • RULPA 1985 doesn’t specifically address fiduciary duties for the general partners.
  • Fiduciary duties of partners in a general partnership apply to the general partners of a limited partnership. (RULPA 1985
    §403(a); RULPA 1985 §1105)
  • Same rules for waivers of fiduciary
    duties as well
  • References loans/transactions to or with the partnership (RULPA 1985 §107) and information rights upon demand (RULPA
    1985 §305)
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14
Q

Limited Partnerships: Fiduciary Duties of General Partners

ULPA 2001 Provisions

A

(ULPA 2001 has its own provisions that copy RUPA 1997 (ULPA 2001 §408))
* Same limitations on reducing/scaling back duties through the partnership agreement as in RUPA 1997. (ULPA 2001 §110)
* Has required information for record keeping. (ULPA 2001 §111)
* References loans/transactions to or with the partnership ((ULPA 2001 §112)

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15
Q

Limited Partnerships: Fiduciary Duties of General Partners

duties of general partners

4

A
  1. loyalty
  2. care
  3. good faith and fair dealing
  4. record keeping/information rights/disclosure
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16
Q

Unique Problems for Limited Partnerships

Contractual Modification/Waiver

A

Most of the push to contractually
modify fiduciary duties occurs in the limited partnership context

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17
Q

Unique Problems for Limited Partnerships

Entities as the General
Partner.

A
  • Can create a double level of fiduciary duties.
  • Some courts have found
    directors/managers/officer of an
    entity General Partner owe fiduciary duties to the General Partner AND the Limited Partnership/Limited Partners.
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18
Q

Limited Partnerships

partnershipss are pass through entities for tax purposes

A
  • no double tax
  • could be required to make a tax paymnet even if they havent recieved money
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19
Q

Limited Partnerships

required distributions for taxes

A

enough to cover the highest tax rate of any of the partners

20
Q

“sole discretion” modifyer in partnership agreement for distributions for taxes

A
  • does not change the rule that you must make the mandatory distribution for tax purposes
21
Q

Oweing duties to one, doesn’t excuse you from

A

owing duties to others

22
Q

Limited Partnerships: Fiduciary Duties of Limited Partners

Linkage: Rules of General Partnerships apply if the rules for Limited Partnerships are

A

silent
- General Partnership rules don’t specifically address limited partners because they don’t have limited partners

23
Q

General Partnership rules don’t specifically address limited partners because they don’t have

A

limited partners

24
Q

A limited partner doesn’t have fiduciary duties of care or loyalty just because

A

it is a limited partner

25
A limited partner doesn’t have fiduciary duties of care or loyalty just because it is a limited partner
* Limited Partnership Agreement can expressly require fiduciary duties for limited partners * Roles that come with fiduciary duties will cause the limited partners to be subject to fiduciary duties
26
# limited partnership limited partners do have an obligation of
good faith and fair dealing
27
A limited partner based on their involvement in business decisions can owe
a fiduciary duty
28
# Withdrawal for Limited Partners under RULPA 1985 As specified in the partnership agreement (RULPA 1985 §603
- time - happening of an event
29
# Withdrawal for Limited Partners under RULPA 1985 If the partnership agreement is silent about withdrawal AND a definite time for dissolution,
6 months after written notice to each general partner | some states have eliminated this
30
Withdrawal for General Partners under RULPA 1985 | 6
1. approval of all partners 2. General partner can withdraw by giving written notice but is liable for damages if the withdraw violates the partnership agreement 3. assigns its limited partnership interest and is no longer a partner 4. removed in accordance with the partnership agreement 5. files for bankrupcy unless the partnership agreement alters this 6. natural or entity death/incapacity
31
Payout Amount Upon Withdrawal under RULPA 1985
* Whatever the partnership agreement says. (RULPA 1985 §604) * If the partnership agreement is silent, the fair market value as of the date of the withdrawal paid within a reasonable time.
32
In regards to withdrawl, difference between limited partners and genera partners
Harder to withdrawl as a limited partner under RULPA 1985 than a general partner - Rationale: no personal service role = limited liability
33
no personal service role=
limited liability
34
# Dissociation for Limited Partners under ULPA 2001 Default rule allows a limited partners to dissociate wrongfully upon
notice of express will of the dissociating partner | can be changed
35
# Dissociation for Limited Partners under ULPA 2001 As specified in the partnership agreement
- event agreed to - expulsion
36
# Dissociation for Limited Partners under ULPA 2001 Expulsion by unanimous concent of the partners for certain circumstances
- unlawful to carry on the partnership activites with the partner as a limited partner - limited partner transferred their interest - entity death
37
Dissociation for Limited Partners under ULPA 2001
1. Default rule allows a limited partners to dissociate wrongfully upon notice of express will of the dissociating limited partner 2. As specified in the partnership agreement 3. Expulsion by unanimous consentof the other partners for certain circumstances 4. Expulsion by judicial order for wrongdoing 5. Natural persons death or disability 6. Bankrupcy
38
# Effect of Dissociation under ULPA 2001 money
nobody gets their money when they dissociate
39
# Effect of Dissociation under ULPA 2001 Effect of dissociaition as a limited partner
* No further rights as a limited partner * Good faith and fair dealing only apply to matters occurring before dissociation * Treated as holding transferable economic interest
40
# Effect of Dissociation under ULPA 2001 Effect of Dissociation as a General Partner
* No further right to participate in management * Duty of loyalty and care wind down * Can file a statement of dissociation to provide notice/stop liability * Treated as holding transferable economic interest
41
Dissolution under RULPA 1985
* As specified in the certificate of limited partnership (RULPA 1985 §801(1)) * As specified in the partnership agreement (RULPA 1985 §801(2)) * Written consent of all partners (RULPA 1985 §801(3)) * Judicial decree that it’s not reasonably practicable to carry on the business according to the partnership agreement (RULPA 1985 §801(5) and 802 * Loss of a general partner unless (RULPA 1985 §801(4)) 1. There is another general partner and the partnership agreement says it can continue on 2.There isn’t another general partner but all partners agree to continue and a successor is selected within 90 days
42
Dissolution under ULPA 2001
As specified in the partnership agreement (ULPA 2001 §801(1)) * Written consent of all general partners + limited partners holding majority of rights to receive distributions ((ULPA 2001 §801(2)) * Dissociation of the last limited partner without a successor within 90 days (ULPA 2001 §801(4)) * Secretary of State dissolves it (ULPA 2001 §801(5)) * Judicial decree that it’s not reasonably practicable to carry on the business according to the partnership agreement (ULPA 2001 §802) * Loss of a general partner unless (ULPA 2001 §801(3)) 1. There is another general partner and the partners holding majority of rights to receive distributions let 90 days pass without exercising the option to dissolve 2. There isn’t another general partner but partners holding majority of rights to receive distributions decide to continue and a successor is selected within 90 days
43
# Limited Partnerships Extent of Good Faith and Presence of Duties
the amount of bite the good faith requirement has and if other fiduciary duties exist depends on whether discretion and trust is involved
44
Withdrawl/Dissociation of Limited Partners RULPA and ULPA
1. RULPA: what the partnership agreement says or if silent withdrawal upon 6 month- notice; get a fair market buyout 2. ULPA: no buout $
45
Withdrawl/Dissociation of General Partners RULPA and ULPA
* RULPA 1985 – certain circumstances, including bankruptcy and at will * ULPA 2001 – no buyout $

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