Partnerships: LLPs and LPs

Question 1

Limited liability partnerships

Answer 1

In an LLP, partners’ personal liability for partnership obligations are eliminated, although individual partners are liable for their own torts.

Partners, however, are still agents of the LLP.

Question 2

Limited liability partnerships: formation

Answer 2

Forming an LLP requires filing a statement of qualification with the state.

Limited liability partnership status generally is effective on the date that the statement of qualification is filed with the state.

Failure to form an LLP will typically result in a general partnership.

Question 3

Conversion to limited liability partnership: pre-conversion liability

Answer 3

If a general partnership incurs liability and then becomes an LLP, the LLP is liable for those obligations.

If an individual partner in a general partnership is liable, and then an LLP is formed, the partner is still liable for that obligation.

But a new partner admitted to an LLP is not liable for pre-transition obligations—although any capital contribution made by an incoming partner to the partnership is at risk for the satisfaction of such partnership obligations.

Question 4

Limited partnerships

Answer 4

Limited partnerships are formed by two or more people: at least one general partner and one limited partner.

A limited partner’s liability is limited to the amount contributed to the LP.

Question 5

Limited partnerships: formation

Answer 5

To form a limited partnership:

• a certificate of limited partnership must be filed with the state;
• the certificate must include the name and address of each general partner; and
• all of the general partners must sign the certificate.

The limited partnership comes into existence upon the filing of the certificate of limited partnership—or on the effective date, if included.

Substantial compliance is sufficient to be effective.

Question 6

Limited partnerships: limited partners

Answer 6

By default, a limited partner does not vote.

She may, however, perform the following activities without assuming control of (and the concomitant obligations of) the partnership:

• Be an officer, director, or shareholder of the general partner;
• Consult the general partner on partnership affairs;
• Act as a surety of the partnership;
• Request to attend meetings of the partnership;
• Wind up the partnership; and
• Propose or approve of partnership matters.

Removal of a general partner does not constitute “control” of the partnership.

To withdraw as a limited partner, the limited partner must give six months written notice.

Question 7

Limited partnerships: limited partners’ liability to third parties

Answer 7

A limited partner is only liable to third parties who reasonably believe that the limited partner is a general partner.

Question 8

Conversion to limited liability partnership

Answer 8

A partnership may be converted into a limited liability partnership.

Unless the partnership agreement specifies otherwise, the conversion must be approved by all of the partners of the general partnership.

Once the conversion is approved, the partnership must file the articles of qualification with the state.