Business Associations, Partnerships

Copyright 2008 by Christian Hammerl

General Partnerships Statutory Background

Uniform Model Law created by the Commissioners of Uniform State Laws. 1914 UPA (Uniform Partnership Act) 1997 RUPA (Revised Uniform Partnership Act)

Each of the federal states is free to adopt the law or not Most do, but with significant variations.

Digression: Uniform Laws National Conference of Commissioners on Uniform State Laws (“NCCUSL”) founded

1892. non-profit unincorporated association, comprised of state commissions on uniform

laws from each state (e.g., in New York, appointed by Governor (300 commissioners nationwide).

Historically associated with American Bar Association Working Method:

determine which areas of law should be uniform. promote the principle of uniformity by drafting and proposing specific statutes in

areas of the law where uniformity between the states is desirable can only propose—no Uniform Law effective until a state legislature adopts it. more than 200 uniform laws, UCC (jointly with ALI) in 1940 most successful. Most prominent failure: UCITA ("Uniform Computer Information Transactions Act

1999") Aborted revision of Art. 2B UCC, 1999 revived as standalone uniform model law.

Business Associations, Partnerships

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Current Status of Enactment

Uniform Partnership Act (1914)

Alaska (enacted 1997 Act 1/1/2001, repealed 1914 Act effective 1/1/2004) Arkansas (enacted 1997 Act, repealed §§ 4-42-101 to 4-42-702 of 1914 Act effective 1/1/2005) - §§ 4-42-101 to 4-42-806. Colorado (enacted 1997 Act without repealing 1914 Act) - §§ 7-60-101 to 7-60-154. Georgia - Ga. Code §§ 14-8-1 to 14-8-61. Illinois Indiana Kentucky Maine Massachusetts Michigan Mississippi - Miss. Code §§ 79-12-1 to 79-12-119 Missouri Nevada New Hampshire §§ 304-A New York - Partnership, Articles 1-6 North Carolina Ohio - §§ 1775.01 to 1775.42, 1775.61 to 1775.65. Pennsylvania Rhode Island - §§ 7-12-12 to 7-12-59 South Carolina Utah Wisconsin

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Current Status of Enactment (continued) Revised Uniform Partnership

Act (1997) (RUPA) Alabama - Code §§ 10-8A-101 to 10-8A-1109. Alaska - §§ 32.06.201 to 32.06.997 Arizona - §§ 29-1001 to 29-1111 Arkansas - §§ 4-46-101 to 4-46-1207 California - Corp. Code §§ 16100 to 16962 Colorado - §§ 7-64-101 to 7-64-1206. Connecticut - §§ 34-300 to 34-434 Delaware - Del. Code, Title 6 §§ 15-101 to 15-1210 District of Columbia - DC Code, Div. V, Title 33,

§§ 33-101.01 to 33-112.04 Florida - §§ 620.81001 to 620.9902 Hawaii - §§ 425-101 to 425-145 Idaho - §§ 53-3-101 to 53-3-1205

Illinois - §§ 805.206 Iowa - §§ 486A.101 to 486A.1302. Kansas - §§ 56a-101 to 56a-1305 Maryland - Md. Code, Corporations and

Associations, §§ 9A-101 to 9A-1205 Minnesota - §§ 323A.1-01 to 323A.12-03 Montana - §§ 35-10-101 to 35-10-710 Nebraska - §§ 67-401 to 67-467 New Jersey - §§ 42:1A-1 to 42:1A-56 New Mexico - §§ 54-1-47, 54-1A-101 to 54-1A-

1206 North Dakota - §§ 45-13-01 to 45-21-08 Oklahoma - 54 §§ 1-100 to 1-1207 Oregon - §§ 67.005 to 67.815 South Dakota - §§ 48-7A-101 to 48-7A-1208 Tennessee - Tenn. Code §§ 61-1-101 to 61-1-1208 Texas - Art. 6132b-1.01 to 6132b-11.04 Virgin Islands - VI Code, Title 26 §§ 1 to 230 Virginia - §§ 50-73.79 to 50-73.149 Washington - §§ 25.05.005 to 25.05.907 West Virginia - §§ 47B-1-1 to 47B-11-5 Wyoming - §§ 17-21-101 to 17-21-1003

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Partnership Defined:

Review: Albanese v. Grossen, 1998 Ohio App. Lexis 671

SECTION 201. PARTNERSHIP AS ENTITY.

(a) A partnership is an entity distinct from its partners.

(b) A limited liability partnership continues to be the same entity that existed before the filing of a statement of qualification under Section 1001. Continuity of Partnership as entity throughout changes.

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Whether partnership exists or not is a purely factual determination => Inadvertent formation of partnerships. Martin v. Peyton, 246 N.Y. 213, 158 N.E. 77 (1927)

Knauth, Nachod & Kuhne received , a financial firm received credit in form of a pool of securities against which they could borrow from a group of investors, including a Mr. Peyton. When the firm collapsed, a creditor sought to recover from Mr. Peyton on the theory that he had entered into a general partnership with K, N &K and was thus liable for the debts of the partnership. Far reaching security and control arrangements in agreement were insufficient to support a record of finding a partnership. Decisive criterion: all clauses were reasonably necessary to secure the loan made by the investors. No excessive operational control or profit sharing.

Agency and partnerships distinguished: Partners share profits Partners share in the losses, agents don’t No right to control conduct => Right to co-management

Partnership by Estoppel problem

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SECTION 202. FORMATION OF PARTNERSHIP. (a) Except as otherwise provided in subsection (b), the association of two or more persons to carry

on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.

(b) An association formed under a statute other than this [Act], a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under this [Act].

(c) In determining whether a partnership is formed, the following rules apply:

(1) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.

(2) The sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.

(3) A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:

(i) of a debt by installments or otherwise;(ii) for services as an independent contractor or of wages or other compensation to an employee;(iii) of rent;(iv) of an annuity or other retirement or health benefit to a beneficiary, representative, or designee

of a deceased or retired partner;(v) of interest or other charge on a loan, even if the amount of payment varies with the profits of the

business, including a direct or indirect present or future ownership of the collateral, or rights to income, proceeds, or increase in value derived from the collateral; or(vi) for the sale of the goodwill of a business or other property by installments or otherwise.

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Partnership Distinguished from other Business Relationships

Aggregate Subjective- Objective Test: => No single controlling factor. Subjective Intent Test: Professed Intent of parties to carry on a business as co-owners Objective Intent Test: parties acted as if they were owners.

attribute of co-ownership distinguishes a partnership from a mere agency relationship. “durative element” : Business is a series of acts directed toward an end. Ownership involves the power of ultimate control. To state that partners are co-owners of a business is to state that they each have the power of

ultimate control.

SECTION 203. PARTNERSHIP PROPERTY. Property acquired by a partnership is property of the partnership and not of the partners individually.

SECTION 103. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE PROVISIONS.(a) Except as otherwise provided in subsection (b), relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this [Act] governs relations among the partners and between the partners and the partnership.

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SECTION 103 (continued). EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE PROVISIONS.

(b) The partnership agreement may not:

(1) vary the rights and duties under Section 105 except to eliminate the duty to provide copies of statements to all of the partners;

(2) unreasonably restrict the right of access to books and records under Section 403(b);

(3) eliminate the duty of loyalty under Section 404(b) or 603(b)(3), but:

(i) the partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable; or

(ii) all of the partners or a number or percentage specified in the partnership agreement may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;

(4) unreasonably reduce the duty of care under Section 404(c) or 603(b)(3);

(5) eliminate the obligation of good faith and fair dealing under Section 404(d), but the partnership agreement may prescribe the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;

(6) vary the power to dissociate as a partner under Section 602(a),except to require the notice under Section 601(1) to be in writing;

(7) – (9) omitted

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Section 103 =>“Magna Charta” of Partnership Law Right to Access to Information (Books, Filings)

Minimum Standards of:

Due Care - (not unreasonably reduced)

Good Faith and Fair Dealing

Loyalty, subject to:

contractual definition and refinement

Ratification upon full disclosure

Right of Dissociation.

Review => Labovitz v. Dolan, 189 Ill. App. 3d 403, 136 Ill. Dec.780, 545 N.E.2d 304 (1989).

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External Relationships of Partner(ship) SECTION 301. PARTNER AGENT OF PARTNERSHIP. Subject to the effect of a statement of partnership authority under Section

303:(1) Each partner is an agent of the partnership for the purpose of its

business. An act of a partner, including the execution of an instrument in the partnership name, for apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership, unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had received a notification that the partner lacked authority.

(2) An act of a partner which is not apparently for carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership only if the act was authorized by the other partners.

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Notes to Section 301: Scope of Agency maybe modified by filing a “Statement of

Partnership Authority” pursuant to Section 303 Must be signed by two partners. Transfer of real estate held in name of partnership. Deviation of rule that

partnership is bound by any and all act of partners within the limitations of 303. Being claimed as a partner in a statement of authority does not make me a

partner =>Statement of Denial.

Partner can bind partnership for transactions in ordinary course of business of partnership.

Measure of Authority: “apparently carrying on .. “ rules of Apparent authority apply. the business of the partnership or the kind of business carried on by the

partnership. This is a clarification compared to the UPA 1914. It followed the narrower

“English Rule” contemplating only the actual business carried on by the partnership.

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COMPARE OLD Uniform Partnership Act 1914

NRS 87.090 Partner agent of partnership; restrictions on authority.

1. Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.

2. (omitted) .3. Except as otherwise provided in subsection 5, unless authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to:(a) Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of the partnership; (b) Dispose of the goodwill of the business; (c) Do any other act which would make it impossible to carry on the ordinary business of a partnership;

(d) Confess a judgment; or(e) Submit a partnership claim or liability to arbitration or reference.4. No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction.5. One or more of the partners designated in an agreement among all of the partners may sell all or substantially all of the property of the partnership without the unanimous approval or consent of the partners if:(a) The sale is approved by a vote; or (b) The prior consent of the partners for a sale of all or substantially all of the property has been given in an agreement among the partners, and written notice of the sale is sent by registered or certified mail to all partners at least 15 days before the date of the sale.

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TORT LIABILITY

SECTION 305. PARTNERSHIP LIABLE FOR PARTNER’S ACTIONABLE CONDUCT.

(a) A partnership is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of business of the partnership or with authority of the partnership.

(b) If, in the course of the partnership’s business or while acting with authority of the partnership, a partner receives or causes the partnership to receive money or property of a person not a partner, and the money or property is misapplied by a partner, the partnership is liable for the loss.

Scope of Liability:

Different than authority to bind. “ordinary course of partnership” or, regardless of scope of business, for any tort if authorized by partnership.

“other actionable conduct” also no-fault liability schemes.

Who can sue: also partner can sue partnership for tort committed by other partners. Otherwise, they would be limited to the remedies of dissolution and accounting.

Strict Liability for misappropriated monies => 305(b).

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REVIEW: Daniel S. Kleinberger, Agency, Problem 90 (p.342 -343).

Were the funds handled in the ordinary course of business of the p-ship?

Was there actual authority?

Did the p-ship receive the money – if so in the ordinary course of its business?

If Mrs. Rouse prevails on the apparent authority issue (doubtful because investment activity is outside of scope of lawyer’s services) may be she can recover pursuant to Section 305 (b).

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SECTION 306. PARTNER’S LIABILITY.(a) Except as otherwise provided in subsections (b) and (c), all partners are

liable jointly and severally for all obligations of the partnershipunless otherwise agreed by the claimant or provided by law.

(b) A person admitted as a partner into an existing partnership is not personally liable for any partnership obligation incurred before the person’s admission as a partner.

(c) Omitted (Limited Liability Partnership, partner not liable per definitionem.

Prior law distinguished between: Tort (joint and several liability)

Contract (joint but not several).

SECTION 307A partnership may sue and be sued in the name of the partnership.

New. Under prior law, all partners had to be joined.

Most States had enabling statutes anticipating this change.

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INTERNAL RELATIONS OF PARTNER(SHIP)SECTION 401. PARTNER’S RIGHTS AND DUTIES.a ) FINANCIAL PROVISIONS:

(a) Each partner is deemed to have an account that is:(1) credited with an amount equal to the money plus the value of any other property,

net of the amount of any liabilities, the partner contributes to the partnership and the partner’s share of the partnership profits; and

(2) charged with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner’s share of the partnership losses.(b) Each partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits.

(c) A partnership shall reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business of the partnership or for the preservation of its business or property.

(d) A partnership shall reimburse a partner for an advance to the partnership beyond the amount of capital the partner agreed to contribute.

(e) A payment or advance made by a partner which gives rise to a partnership obligation under subsection (c) or (d) constitutes a loan to the partnership which accrues interest from the date of the payment or advance.

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SECTION 401. PARTNER’S RIGHTS AND DUTIES.

(b) MEMBERSHIP PROVISIONS:

(f) Each partner has equal rights in the management and conduct of the partnership business.

(g) A partner may use or possess partnership property only on behalf of the partnership.

(h) A partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership.

(i) A person may become a partner only with the consent of all of the partners.

(j) A difference arising as to a matter in the ordinary course of business of a partnership may be decided by majority of the partners. An act outside the ordinary course of business of a partnership and an amendment to the partnership agreement may be undertaken only with the consent of all of the partners.

(k) This section does not affect the obligations of a partnership to other persons under Section 301.

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Notes on Section 401: Not mentioned in Section 103! Rights Flowing from Ownership v. Rights flowing from Membership Profits and Losses:

401(b) Profits are shared per capita, Losses are shared in proportion to each partner’s share in the profits.

REVIEW => Kovacic v. Reed, 49 Cal.2d 166, 315 P.2d 314 (1957)Kitchen Remodeling business; Kovacic contributes all the money, Reed only his labor as estimator and job-superintendent. Agreement that they would share 50-50 in the profits, no discussion about losses. The venture fails and Kovacic sues Reed to recover 50% of the losses.

General Rule: equal share of profits and losses regardless of nature or respective value of contributions.

Exception: Partner A (money only) and partner B (labor only): Presumption of equal value of contributions, thus by expending his labor Reed has already borne 50% of the losses.

See: Bainbridge, Stephen M., Contractarianism in the Business Associations Classroom: The Puzzling Case of Kovacik v. Reed and the Allocation of Capital Losses in Service Partnerships. as published in Georgia Law Review, Vol. 34, pp. 631-668, 2000

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Note on Subsection (j) This implies the unanimity requirement for changes of the partnership agreement, while in ordinary business matters, a simple majority suffices.

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Concept of Business Judgement Rule; Corporate Law Concept: Presumption that directors did not breach

their fiduciary obligations can be overcome only if plaintiff proves on of the following elements: Directors made no decision; Decision was uninformed, Directors were not disinterested or independent; or Decision involved gross negligence.according to Aronson v. Lewis, 473 A.2d. 805 (Del. 1984)

Confusion: test commingles duty of care components with duty of loyalty elements.

Failure to Pass Muster under Business Judgment Rule not tantamount to proof of breach.

Directors may still prove entire fairness of transaction and avoid liability. Courts will furnish compensatory safeguards by imposing an exacting burden of establishing the

utmost propriety and fairness of their actions. Van der Walle v. Unimation, Inc., Fed .Sec. L. Rep. (CCH) ¶ 95,834 at 99,030-31 (Del. Ch. Mar. 6, 1991)

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Standard of Review, not Standard of Due Care Why not applying usual method of determining whether a breach of

a fiduciary duty has occurred? => Expert testifies to applicable standard, trier of fact determines whether standard has been met.

Rationale: Because review of business decisions involves internal facts not

readily accessible for extrinsic review.

Typical approach to discretionary decisions: procedural due process replaces substantive justice.

Entrepreneurial Activity involves risk taking. (Economic Analysis of law School argument). Managers should not be paralyzed with fear.

Corporate environment: Limited liability privilege lessens level of protection shareholders are entitled to. Limited risk, huge up-side potential. Must accept possibility of loss of value of shares.

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Standard of Review, not Standard of Due Care

Addresses only the consequences of potential breach, i.e., liability, without affecting applicable standards of due care.

Rationale: Courts dealt primarily with duty of loyalty, not duty of care.

Some courts have applied the Business Judgment Rule to Partnerships.

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GENERAL STANDARDS OF PARTNER’S CONDUCT.

Duty of Care and Duty of Loyalty, however, not under general common law standard, but in accordance to statutory modification.

Principal consideration: Partner does not violate a duty or obligation merely because he furthers his own interest.

A) Duty of Loyalty

SECTION 404. (a) The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care as set forth in subsections (b) and (c).

(b) A partner’s duty of loyalty to the partnership and the other partners is limited to the following:

(1) to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity;

(2) to refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership; and

(3) to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.

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GENERAL STANDARDS OF PARTNER’S CONDUCT.

Duty of Care and Duty of Loyalty, however, not under general common law standard, but in accordance to statutory modification.

B) Duty of Care: SECTION 404 (c )

(c) A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(d) A partner shall discharge the duties to the partnership and the other partners under this [Act] or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing.

(e) A partner does not violate a duty or obligation under this [Act] or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest.

(f) A partner may lend money to and transact other business with the partnership, and as to each loan or transaction the rights and obligations of the partner are the same as those of a person who is not a partner, subject to other applicable law.

(g) This section applies to a person winding up the partnership business as the personal or legal representative of the last surviving partner as if the person were a partner.

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Are Partners Fiduciaries? Compare Meinhard v. Salmon Core question of scholarly debate. Partnership result of a

horizontal contractual relationship. Element of “entrustment” of control typical for separation of ownership and management missing, at least in unstructured GPs. By Default, all partners have equal management rights. Thus, where is the justification for imposing fiduciary duties.

Contractualists, such as Ribstein or Bainbridge argue against indiscriminate extension of fiduciary duties.

Jones v. Wagner, 90 Cal. App. 4th 466, 108 Cal. Rptr. 2d 669 (2001)

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RUPA Approach: Maintains definition of partners as fiduciaries, butLimitation of Duty of Loyalty to specified incidents;Duty of Care limited to gross negligence; andSpecific acknowledgment of “Duty of Good Faith and

fair Dealing” as counterweight.

Good faith obligation distinguished: arises in contractual paradigm. “Duty of good faith and fair dealing is implied in each and every contract as an implied term to give effect to the legitimate expectations of the parties.” (Oregon RSA no.6 v. Castle Rock Cellular of Oregon, 840 F. Supp.770. 776-8 (D. Oregon 1993).

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“Good faith”and “fair dealing” explained .

“Good faith” clearly suggests a subjective element, while “fair dealing”implies an objective component.

It was decided to leave the terms undefined in the RUPA and allow the courts to develop their meaning based on the experience of real cases.

Some commentators, moreover, believe that good faith is more properly understood by what it excludes than by what it includes. See Robert S. Summers, “Good Faith” in General Contract Law and the Sales Provisions of

the Uniform Commercial Code, 54 Va. L. Rev. 195, 262 (1968): “Good faith, as judges generally use the term in matters contractual, is best understood as an “excluder” – a phrase with no general meaning or meanings of its own. Instead, it functions to rule out many different forms of bad faith. It is hard to get this point across to persons used to thinking that every word must have one or more general meanings of its own – must be either univocal or ambiguous.”

As applied to partnerships, good faith obligation to uphold the spirit of the partnership agreement, but no obligation to look out for the interests of the other partners at the expense of legitimate economic self interest of the partner concerned.

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Business Judgment Rule in Partnership Context: Not all state laws follow the RUPA approach; Texas Statute: Partner’s duty of care is to act “with the care an ordinarily

prudent person would exercise in similar circumstances.” An error of judgment does not by itself constitute a breach of this duty of care. A partner is presumed to satisfy this duty if the partner acts on an informed basis, in good faith, and in a manner he reasonably believes to be in the best interests of the partnership.

Rosenthal v. Rosenthal, 543 A. 2d 348, 352 (Me. 1988), cited as seminal case for introducing the business judgment rule as applicable to partnership law. Henkels & McCoy v. Adochio, 138 F.3d 491, 502 (3d Cir. 1998) rejects it. Rosenthal, Kuznik v. Bees Ferry Assocs., 538 S.E.2d 15, 28 (S.C. Ct. App.

2000) deems it applicable.

Labovitz v. Dolan, 189 Ill. App 3d 403 (1989)

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Dissociation, Winding up and Termination. New Concept of Dissociation

Now, the fiction that partnership “dies” with change of one of its members has been abandoned. Decision to withdraw is effective at any time upon notice. Nobody can be forced to carry on as a

partner against his will. However, may trigger liability of Wrongful Dissociation (RUPA 602) However, partner may also be expelled

for breach Dissociation ipso facto upon partner’s (an individual):

Becoming mentally unsound Death Bankruptcy Financially unstable

Bankruptcy clause potentially problematic. Why?

Consequences of partner becoming dissociated: Possibility: I business is being wound up and Partnership terminated. Possibility: II partnership continues. What happens with the interest of the dissociated partner

=> RUPA 701 Purchase of dissociated partner’s interest.

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Limited Partnerships ULPA 2001 but first, antecedents

•1916 Act •1976 Act •1985 Act •2001 Act (f/n/a “Re-RULPA”)

STATE ADOPTIONS:Arkansas MaineCalifornia MinnessotaFlorida NevadaHawaii New MexicoIdaho North DakotaIllinois OklahomaIowa VirginiaKentucky

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Main Objective of ULPA (2001)

was drafted for a world in which limited liability partnerships and limited liability companies can meet many of the needs formerly met by limited partnerships

targets two types of enterprises that seem largely beyond the scope of LLPs and LLCs: (i) sophisticated, manager-entrenched commercial deals whose participants

commit for the long term, and (ii) estate planning arrangements (family limited partnerships)

assumes that, more often than not, people utilizing the Act will want:

•strong centralized management, strongly entrenched, and •passive investors with little control over or right to exit the entity

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Salient Differences between ULPA (2001) and RULPA (1985).

The new Act: Is a stand alone act . . . incorporating essentially verbatim many important

provisions from RUPA;• provides constructive notice, 90 days after appropriate filing, of general partner

dissociation and of limited partnership dissolution, termination, merger, and conversion;•

has a perpetual duration, subject to change by the partnership agreement (and to earlier dissolution following the dissociation of a general partner and otherwise by partner consent);•

expressly delineates the permissible scope and effect of the partnership agreement;• provides a complete, corporate-like liability shield for limited partners "even if the

limited partner participates in the management and control of the limited partnership";•

permits a limited partnership to be a limited liability limited partnership (LLLP), and thereby makes a complete, corporate-like liability shield available to general partners;•

eschews the UPA's open-ended approach to general partner fiduciary duties and incorporates essentially verbatim RUPA's provision on fiduciary duty and the obligation of good faith and fair dealing;

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Control Rule

Cf. Section 2483 of the Calif. Civil Code:

A limited partner shall not become liable as general partner unless, in addition to the exercise of his rights and powers as a limited partner, he takes part in the control of the business.”

=> Holzman v. de Escamilla, 86 Cal.App.2d 858, 195 P.2d 833 (1948).

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