Limited Partnerships (LPs) & Limited Liability Limited Partnerships (LLLPs)

Question 1

LPs & LLLPs

Taxation

Answer 1

Generally the same as a general partnership

Income and losses are allocated and passed through

Question 2

LPs & LLLPs

Formation

Answer 2

Filing a Certificate that is signed by all general partners with the State

Question 3

LPs & LLLPs

Certificate Requirements

Answer 3

Certificates of Limited Partnerships tend to be “bare bones” because they are public documents

Requirements:
1. Name of the LP
2. Registered Office and Agent
3. Names and Addresses of General Partners
4. Dissolution Date
5. Other Matters

Question 4

LPs & LLLPs

Certificate Requirements:
Naming

Answer 4

Must contain some form of “LP”

May not include a limted partner’s name, unless there is a GP with the same name, otherwise the limited partner may be liable as a GP

Question 5

LPs & LLLPs

Certificate Requirements:
Effect of Errors & Deficiencies

Answer 5

If the LP has substantially complied –> Court may treat the entity as an LP

If the LP has not substantially complied –> court may treat all owners as partners in a **general partnership **

Question 6

LPs & LLLPs

General Partners:
Rights, Duties, & Liabilities

Answer 6

1. Equal Rights in Management & Control (Default)
2. Are Agents of the LP
3. Owe Fiduciary Duties to the LP and other partners (Default)
4. Have Unlimited Personal Liability for LP obligations

Question 7

LPs & LLLPs

General Partners:
Liability

Answer 7

If there is more than one GP –> Joint-and-several liability

NOTE: LPs may appoint entities as GPs to limit liabilities

Question 8

LPs & LLLPs

Limited Partners:
Rights & Duties

Answer 8

Limited Partners **DO NOT:
1. Have statutory rights to manageand control (Default Rules)
2. Owe Fiduciary Duties to the LP and other partners
3. Have unlimited personal liabilityfor LP obligations, even if they participate in managementand control

Limited Partners **DO:
Owe a contractual obligation of good faith and fair dealing

Question 9

LPs & LLLPs

Limited Partners:
Liability

Answer 9

Limited Partners are not liable for the debts and obligations of the LP based solely on their status as a Limited Partner.

Limited Partners may lose their liability shield if the act like a General Partner (Control Rule), unless it is a safe harbor activity

Question 10

LPs & LLLPs

Partners’ Interest

Answer 10

A partners’ interest in an LP is personal property

1. Partnership Status Rights (Management & Control)
2. Financial Rights
3. Other Rights

Question 11

LPs & LLLPs

Partners’ Interest:
Financial Rights

Answer 11

Like a general partnership, partners may transfer only their financial rights, and not management rights

Default Rule:
Distributions are not automatically equal –> correlate to the value of contributions

Question 12

LPs & LLLPs

Limited Partners:
Derivative Suit Requirements

Answer 12

1. Parter at the time of the action at issue
2. Demand on General Partners
   a. General Partners wrongfully refuse
   b. Limited Partner can demonstrate demand futility

Question 13

LPs & LLLPs

End Game

Answer 13

1. Dissolution generally requires some amount of partner consent
2. Dissolution is not automatic (unless no GP or LP remain)
3. After winding up, a Certificate of Cancellation, signed by all GPs must be filed with the state

Question 14

LPs & LLLPs

Limited Partners:
Effect of Dissolution

Answer 14

1. No right to dissociate before winding up
2. Altered Obligations

Question 15

LPs & LLLPs

General Partners:
Effect of Dissolution

Answer 15

1. GPs may dissociate at any time, wither rightfully or wrongfully
2. Altered Obligations, Powers, & Rights
   a. Management
   b. Fiduciary Duties
   c. Agency Authority

Question 16

LPs & LLLPs

Special LP Forms

Answer 16

1. Family Limited Partnerships (FLiPs) (family estate planning tool)
2. Master Limited Partnerships (Publicly traded + listed on national exchange)
3. Limited Liability Limited Partnerships (GPs have same liablity as LPs)
4. Foreign Limited Partnerships (LP formed in one state, doing business in another)