How is a Limited Partnership created?

What must a limited partnship include?

Based on statute; so you have to file paperwork with the state. In order to create a limited partnership or any other entity we talk about from now on, you need to file something with a state (particularly with the secretary of state) and the filing has to be approved by someone in  a state  (and pay some moola) and then  you come into existence.

You have to file a certificate of limited partnership with your juridiction.

Must create this in accordance with the state stature. There is at least one general partner and at least one limited partner.

An entity or person who cannot participate in the management and the limited partners liability is only for the what they put into the business.

Go to the division of corporations- even go there for limited partnerships. And look for the limited partnership stuff on website and look at formation laws.

Find the law on the website. Figure out  how much it will cost. Search to see if the name you want is available.- ask for multiple choices from client. You also want to see if the name has reserved- so check the name availability.

Always reserve a name.

Trailer- ask them to choose if they want L.P.; LP, Limited Partnerships; do they want a comma after their name before the trailer.

We have to find a registered agent  to  be the agent for service

Look at assignment and bring a copy to class. Each part will have a separate memo of the first- due in three weeks. (July 3rd)- limited partnership will be in Delaware, but any other entity you will not be forming in Delaware

What happens if a limited partner acts like a general partner?

Can limited partners be agents of general partners?

How is this determined?

He or she may be held accountable for their actions. So if you are a limited partner but do things like hire and fire employees, negotiate contracts, etc., you may be acting as a general partner. General partners only become agents of limited partner and vice versa if the limited partner acts as a general partner for something that ends up the subject of a law suit, the other side may ask for the limited partner to be treated as gen partner.

Each state will have a list of activities that the limited partner can do.

Go to case law to actually determine what a limited partner cannot do without being found a gen partner.

The limited partner will only be considered a gen partner for the action that is the subject of a law suit (the relevant transaction) and NOT for everything.

The state will accept the day you file it unless you put another date into the certificate, then the filing will be effective  the date  you designated in the ceritifcate.

In lp agreements, you don’t want to have such a limited purpose that you have to amend your certificate of lp if your business grows into something else.

For LP’s  the state will default to distribution of profits along percentage of  investment (as opposed to equal distributions as in gen partnership).

How is taxation determined for limited partnerships?

Do limited partnerships file tax returns?

LP's have pass-through taxation

Limited partnerships file tax returns for informational purposes only.

What is good to keep track of with partnership agreements?

Where is it good to put this?

With partnership agreements, good to keep track of percentage of investment, etc. in an appendix because then you just have to amend the appendix and not the entire agreement.

If you want to end your lp, then you must file a certificate of dissolution. In order to draft you may need to get the written consent of all partners to dissolve.  So you would document all of this in a written consent form. And draft the written consent to dissolve.

How can you dissolve a Limited Partnership?

Can you save it if you loose all general partners?

If all gen partners die, then you can in some states have limited partner step in and find another gen partner. If not,  the lp must be wound up. Can also dissolve via court.

First you pay the creditors and then you pay loans and taxes and then and only then can you distribute the remaining assets. A limited partner can wind up business if all gen partners are incapacitated or guilty of fraud, etc. the limited partner can wind up the business.

Easy to transfer in and out limited partners b/c they’re just investors and don’t have any fiduciary interest.

Key features, under 2001 limited partners may manage and control limit parnership’s business w/o incurring  personal liability.

Disadvantages-

1) lack of control for limited partners;

2) unlimited liability for general partner;

3) formalities and expense of organization. (Requires money to file for registered agency, filing fee, etc.)

1) Pass through taxation

2) Limited Liability for silent partners

3) General Partners can still retain control over the business 

4) Because you have silent partners with limited liablity, it is easier to raise capital form wealth individuals who do not want expose themselves to unlimited liability