Limited Partnerships (LP)

Question 1

LP

Answer 1

Partnership formed by two or more persons with at least one general partner (GP) and at least one limited partner

Limited partner’s liability for the LP’s obligations is limited to her capital contribution (no personal liability)

Question 2

Formaton

Answer 2

Partners need to file certificate of limited partnership with secretary of state

Question 3

Partnership Agreement

Answer 3

An LP also needs a partnership agreement, which must be signed by all of the GPs

Limited partners do not need to sign

Question 4

Amending Partnership Agreement

Answer 4

Amending the partnership agreement requires approval of each limited partner who might be adversely affected by the amendments

Question 5

Biennial Report

Answer 5

LP must file biennial report with secretary of state and pay required fee

Question 6

Records

Answer 6

LP must keep certain records available for inspection/copying at the reasonable request of any partner during ordinary business hours

Question 7

General Partner

Answer 7

Personally liable to third parties for obligations of the LP

Has rights and powers of a partner in a general partnerships without limited partners

May contribute to LP, share in its losses/profits, and receive distributions

Question 8

Adding New General Partners

Answer 8

Can only be admitted by written consent of all partners after LP created

Question 9

Limited Partner

Answer 9

Typically does not participate in management of LP

Not personally liable for LP’s obligations

Question 10

Contributions

Answer 10

Any partner may contribute cash, property, services, or a promise

Limited partner are obligated to LP for any written, signed promise of a future contribution

Question 11

Profits and Losses

Answer 11

Default Rule: Allocation based on each partner’s contribution to the partnership

However, may be allocated on any basis if in writing

Question 12

Distributions

Answer 12

Partner is entitled to receive distributions from LP only to extent provided in LP agreement

Question 13

Assignment of Partnership Interest

Answer 13

Can be assigned in whole or in part

Limited partner will cease to be partner if assigns interest

Question 14

Indemnification

Answer 14

An LP may indemnify partners, employees, officers, and agents from liability for partnership business

Question 15

Withdrawal Notice

Answer 15

Limited Partner: 6 months written notice to each general partner

General Partner: Any time by giving written notice to other partners

Question 16

Limited Partner’s Derivative Action

Answer 16

A limited partner may bring a derivative action on behalf of the LP

Essentially a proceeding to compel the LP to pursue a legal claim against a GP manager

Question 17

Termination

Answer 17

Termination of an LP is very similar to the termination of a general partnership

LP is first dissolved and then it will wind up its business affairs

Question 18

Partnership Conversions and Mergers

Answer 18

Is possible to convert or merge any partnership into another type of partnership or different business entity (such as an LLC)

Made pursuant to a plan of conversion or merger and will typically require the positive vote of ALL partners