1. Chapter Four Limited Partnerships

2. Business entity created in accord with state statutes that provides limited liability to some of its members, called limited partners

3. Limited Partner and General Partner Defined  Limited Partner  Limited Partner: A member of a limited partnership who does not participate in managing the business and whose liability is limited to amount invested in the business  General Partner:  General Partner: Member in a limited partnership who manages and controls the business and has unlimited personal liability

4. RULPA  RULPA is the Revised Uniform Limited Partnership Act; the model for limited partnership legislation in all states (except Louisiana)

5. Advantages of Limited Partnerships  Attracting capital  Limited liability for limited partners  Easy transferability of partnership interest for limited partners  Continuity of existence  Pass-Through Taxation

6. Disadvantages of Limited Partnerships  Lack of control for limited partners  Unlimited liability for general partner  Formalities and expenses of organization

7. Key Features of Limited Partnerships Continued next slide  Must have at least one general partner and one limited partner  The general partner in a limited partnership functions identically to and has the same risks as a general partner in a general partnership  Limited partners do not have personal liability for the limited partnership’s obligations (so long as they don’t manage the business); their liability is limited to the amount invested in the enterprise

8. Key Features of Limited Partnerships  Formation of limited partnerships requires filing a Certificate of Limited Partnership with the appropriate state agency  Limited partners can freely enter and exit the partnership  Limited partnership agreement may be oral or written; if no agreement on profits and losses, they are allocated on basis of contributions made by partners

9. Key Features of Limited Partnerships  Limited partners offer “pass through” taxation, meaning that the entity does not pay tax, but, rather, all income is passed through to the partners who pay at their respective tax rates  Under the 2001 Act, limited partners may manage and control the limited partnership’s business without incurring personal liability, and if the limited partnership elects to be a registered limited liability partnership, the general partner will also be fully shielded from personal liability.