Corporation and Business

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CHAPTER 4
1.Is a limited partnership treated as a separate entity for all purposes? If not, give an example of an instance in which a limited partnership is treated as an aggregate of its partners.

No, they are not always considered separate entities when dealing with substantive liabilities and duties of the partners, the limited partnership is considered an aggregate of the individual partners.

2.Why is the fiduciary duty between the general partner and limited partners even greater than the fiduciary duty between partners in a general partnership?

Because the general partner holds majority of the interest and the limited partners are prohibited for participating in the control of the business.

3.Suppose that Beth Henderson is a limited partner of the ABC Limited Partnership, a limited partnership formed for the purpose of purchasing and developing real estate. Beth wanted to be a limited partner because she has considerable personal assets that she wants to protect. Soon after the formation of the limited partnership, Beth becomes concerned about its management by the general partners. She starts attending the general partners’ meetings and participating in all major decisions concerning the limited partnership. However, the partnership becomes insolvent anyway. Creditors are left with thousands of dollars’ worth of unpaid bills. The limited partnership and the general partners have no substantial cash or other assets. If the partnership is in a state that follows RULPA, might creditor prevail in a lawsuit against Beth Henderson personally to recover their losses? Why or why not?

Yes, because she attended the general partners’ meetings and participated in all major decisions concerning the limited partnership which caused her to lose her limited liability partner status.

4.Brian, Jeanne, and William have formed Oak Ridge Limited Partnership, a limited partnership for shopping center development and management. William is the general partner and Brian and Jeanne are limited partners. The limited partnership is about to enter into an agreement to purchase a new shopping center; however, the bank that is lending them the money wants personal guarantees from each partner. If the limited partnership is governed by the laws of a state that follows the Revised Uniform Limited Partnership Act, would Brian and Jeanne be able to guarantee the obligation of the Oak Ridge Limited Partnership without risking their limited liability status?

Yes they would because under the activities set forth in the safe harbor provisions of the Revised Uniform Limited Partnership Act. They would, of course be personally liable for the bank loan to the extent agreed upon in their a personal guarantees.

5.Suppose that Jake, Bryan, and Jill decide to form a limited partnership for the purpose of owning and operating a liquor store. They are all concerned about their personal liability, so they decide that they will all be limited partners. Would this be possible? Why or why not? What if Jill agreed to be both a general partner and a limited partner?

No, because all limited partnership must have at least one general partner and one limited partner. Jill could be both a general and limited partner but she would not get any additional profits and her contributions would be limited and protected for debtors.

6.Why might a limited partnership want to put only the minimum required information in the limited partnership certificate and go into more detail in the limited partnership agreement or other documents?

The full partnership agreement of the partners are not kept on public record.

7.What is one advantage the limited partnership has over the general partnership with regard to raising capital for the business?

By attracting passive investors and by adding additional new limited partners.

8.Who may initiate a derivative action?

A derivative action is brought by a shareholder to enforce a claim of...
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