Part 9- Partnerships, Chapter 40: Limited Liability Companies, Limited Partnerships, and Limited Liability Limited Partnerships, Doc 4

This text focuses on the intricacies of limited partnerships (LPs) and limited liability limited partnerships (LLLPs), as established by the Uniform Limited Partnership Act (ULPA), highlighting the default rights, liabilities, and regulations governing these entities, along with provisions for altering default rules in partnership agreements. Key points include: 1. Limited Partnership (LP) Structure and Roles: o General Partners: Manage the LP and hold unlimited liability for its obligations, subject to fiduciary duties of loyalty and care. They may be compensated only through profit shares unless otherwise agreed. o Limited Partners: Primarily invest without management rights, enjoying liability limited to their capital contributions. They do not owe fiduciary duties but must act in good faith. 2. Limited Liability Limited Partnerships (LLLPs): o LLLPs offer all partners limited liability, even those involved in management, aligning them more closely with LLCs or LLPs while retaining an LP structure. 3. Voting and Admission of New Partners: o The ULPA restricts voting rights for limited partners by default, requiring specific provisions in partnership agreements to grant them voting on key matters. o Admission of New Partners: Default rules require unanimous partner consent for new admissions, though agreements can permit general partners to admit new limited partners without full partner approval. 4. Transferable Interest and Partner Withdrawal: o Each partner’s share of the LP can be transferred or pledged as collateral, but the transferee gains no management rights without partner approval. o Withdrawal: While partners can withdraw at any time, limited partners have no default right to be repaid for their interest unless specified in the agreement. The ULPA also prohibits forced payouts to withdrawing partners if the LP is insolvent. 5. Fiduciary Duties and Liabilities: o General Partners: Must avoid conflicts of interest and cannot compete with the LP. They are protected from liability for errors unless grossly negligent or unlawful. o Limited Partners: Are not fiduciaries but must act fairly with respect to the LP, particularly if engaged in business dealings with it. 6. Partner Dissociation and LP Dissolution: o A partner’s death, incapacity, or other qualifying event leads to dissociation. Limited partners, upon dissociation, retain a right to distributions but no management rights. o Dissociation of a general partner typically requires public notice to release them from liability on future obligations. 7. Customizing the Partnership Agreement: o The ULPA allows partnerships to override many default provisions. Agreements may specify voting rights, partner expulsion criteria, buyout terms upon withdrawal, and competitive restrictions on former partners. This structure underlines the flexibility offered to tailor limited partnerships to specific business needs, balancing control, liability protection, and investment returns for diverse partner roles.