Business Structure - Limited Partnerships

Front 1

What is Limited Partnership Law governed by?

Back 1

ULPA - Uniform Limited Partnership Act

RULPA - Revised Uniform Limited Partnership Act

Front 2

If questions regarding Limited Partnership law cannot be answered by ULPA or RULPA, how then is the question answered?

Back 2

By the General Partnership Law

Front 3

Important CPA Exam Note:

Back 3

Traditionally the AICPA has not asked too many questions about limited partnerships specifically.

Front 4

Define a Limited Partnership.

Back 4

A partnership consisting of at least one general partner (GP) and at least one limited partner (LP).

Front 5

Give four characteristics of a Limited Partnership.

Back 5

1. Limited Liability for LPs.

2. Partnership (Pass-Through) Taxation.

3. Transferability of LP interests.

4. Centralized management by GPs.

Front 6

Regarding Limited Partnerships, what is Forfeit of Control?

Back 6

Limited partners forfeit right to control their investment and, in exchange, are accorded limited liability.

Front 7

Regarding Limited Partnerships, how can General Partners become Limited Partners?

Back 7

By Purchasing Limited Partnership Interests

Front 8

Regarding Limited Partnerships, what is the governing law in most states?

Back 8

RULPA

Front 9

Regarding Limited Partnership Formation, what is the only way a Limited Partnership can be formed?

Back 9

By filing the appropriate documents at the secretary of State's Office

Front 10

Regarding Limited Partnerships, of the appropriate documents filed with the Secretary of State's office, what must one of those documents be?

Back 10

A written Limited Partnership Agreement

Front 11

The Limited Partnership name should indicate its status by use of what?

Back 11

"Limited Partnership" or "L.P.," or "Ltd.," etc.

Front 12

Regarding the Limited Partnerships, Creditors of a limited partnership who go unpaid will seek to do what?

Back 12

Impose personal liability upon limited partners.

Front 13

Limited Partners can, in some circumstances, forfeit their limited liability. How does this happen?

Back 13

1. Defective Formation
2. False Statements
3. Excercising Control
4. Use of Name

Front 14

If a limited partnership is Defectively Formed, an LP may be held liable if what occurs?

Back 14

If he knew or should have known that no certificate had been filed -- OR that one erroneously referred to him as a general partner.

Front 15

Liability for a LP for forming a Defective Limited Partnership extends only to what?

Back 15

(a) extends only to third parties who, reasonably believed based on the LP's conduct that he was a GP, extended credit to the partnership, and (b) may be terminated by the filing of an appropriate certificate with the Secretary of State's office and the withdrawing from participation in profits.

Front 16

Regarding False Statements, how does a LP forfeit limited liability?

Back 16

Whan an LP (a) signs an LP certificate knowing that it contains false statements or omissions, or (b) learns of such misrepresentations and fails to amend or cancel it.

Front 17

If an LP takes part in the CONTROL of the partnership business, he may forfeit limited liability, extending ony to what?

Back 17

Persons who transact business with the LP believing, based on the LP's conduct, that the LP is a GP.

Front 18

A limited partner does not take part in control by virtue of the following:

Back 18

a. being a contractor for or an agent or employee of the limited partnership,

b. consulting with and advising a general partner,
c. acting as surety for the limited partnership or guaranteeing its loans,

d. taking any action required or permitted by law to sue on behalf of the limited partnership,

e. requesting or attending a meeting of the partners,
f. winding up the partnership,

g. exercising any right permitted to limited partners, or

h. voting on any important partnership matter.

Front 19

If an LP knowingly PERMITS HIS NAME to be used in the name of the limited partnership, FORFEITS his limited liaability only extending to what?

Back 19

Persons who extend credit to the limited partnership and have no knowledge that the LP is not a GP.

Front 20

What are three rights and responsibilities of Limited Partners?

Back 20

1. LP powers should be set out in LP agreement.

2. LPs often have veto power over certain "extraordinary" acts by GPs.

3. LPs usually have power to replace GPs.

Front 21

What are the Information and Inspection Rights of a Limited Partnership?

Back 21

1. A limited partnership must maintain and permit the inspection by limited partners of all important partnership records.

2. Access to Courts

3. LPs have the right to file derivative suits, just like corporate shareholders.

Front 22

In a Limited Partnership, what is assignable and not assignable?

Back 22

1. A limited partner's INTEREST (share of profits and assets on dissolution) IS ASSIGNABLE.

2. A limited partner's rights to inspect, to bring derivatives suits, etc. are not assignable NOT ASSIGNABLE, unless they are assigned to a substitute limited partner.

Front 23

In a Limited Partnership, what are the general partner's right and responsibilities?

Back 23

A. Unlimited personal liability, and

B. Greater fiduciary (trust) duty owed to limited partners.

Front 24

In a Limited Partnership, how should Profits and Losses be allocated?

Back 24

In the manner provided in the written partnership agreement.

Front 25

How should Partners who lend money to the Limited Partnership be repaid?

Back 25

They should share in distributions along with outside creditors.

Front 26

Regarding allocation of Profits and Losses in a Limited Partnership, can the partnership agreement provide that the LPs and GPs be treated equally?

Back 26

Yes