Uniform Limited Partnership Act: Everything You Need to Know
The Uniform Limited Partnership Act, also known as The Delaware Revised Uniform Limited Partnership Act, is a statute covering limited partnerships.3 min read
2. What Is the Partner's Legal Relationship to the Partnership?
3. Why Does the Act Regulate Partner Disputes?
4. How Does the Uniform Limited Partnership Act Regulate Partner Disassociation?
5. Other Parts of the Act
The Uniform Limited Partnership Act, also known as The Delaware Revised Uniform Limited Partnership Act, is a statute covering limited partnerships. Despite the name of Delaware appearing in name, the original act of 1914 was adopted by almost every state except Louisiana, and 37 states have adopted all of the revisions. In 1996, all the amendments were combined into the Act itself.
What Does the Uniform Limited Partnership Act Cover?
The most important parts of the act cover laws relating to how Limited Partnership (LP) corporations are formed. The act also regulates the relationship among the partners, as well as how each partner may take distributions and withdrawals from the business and the dissolution of the relationship when one or more partners leaves the corporation. Mergers, conversions, and protections for the partners and partnership are all detailed within the act. Specific legal issues often arising in large Limited Partnership organizations are addressed within the act also.
What Is the Partner's Legal Relationship to the Partnership?
ULPA states that a partnership, as a separate legal entity, may be involved in legal action under its own name. As such, civil cases will be based around the assets of the partnership itself rather than of any individual partners. Furthermore, no specific property or interest can be claimed by an individual partner. For example, if the partnership owns a company car, no individual partner can claim the rights to the car (even if he or she is the one most often using it).
In fact, any type of property can be acquired in the name of the partnership, and all such property cannot be claimed by any individual partner. Furthermore, a creditor or civil pursuer of a single partner may not pursue any property or assets belonging to the partnership itself, only to the individual.
Why Does the Act Regulate Partner Disputes?
Handling disputes in a fair and equitable way is one of the largest pieces of the act, most often used in legal disputes. Courts have long used the generic 'derivative suit' remedy in corporate dispute cases, but unfortunately the generic remedy does not account for the specific type of association held by members of an LLP or LLC (Limited Liability Corporation). LLCs or LLPs, for instance, are often closely-held and the members are also involved in management of the firm rather than disengaged parties. Thus the derivative suit remedy should not be used in the case of partnership disputes.
Resolution possibilities available to partnerships can be much simpler and less costly than those regulating other types of corporations. For instance, straightforward remedies might involve:
- A contractual arbitration, in or out of court
- Member-authorized lawsuits raised on behalf of the partnership
- Direct lawsuits on an individual partner or on the partnership brought by injured members
How Does the Uniform Limited Partnership Act Regulate Partner Disassociation?
The 1997 version of the act defined the partnership differently than previous versions. The corporation itself is now considered an entity between partners and partner assets. Prior to this, if one partner disassociates his or her role in the partnership, the entire aggregate was considered dissolved and would have to start over the process of incorporation as a new entity. Now, the partnership itself remains incorporated automatically, unless the members decide otherwise within 90 days of the member's disassociation that they want dissolution.
Other Parts of the Act
RUPA essentially defines the incorporation of a partnership as a separate entity with rules on its own governance. In order to incorporate, a partnership agreement is also required, which will govern the relationship between partners themselves and partners to corporation. The agreement is considered a legal contract, and can be used as evidence in legal proceedings. However, partners are able to agree to the provisions within the contract as they see fit, rather than upholding to any set legal standard.
While RUPA does cover LLC, LLP and general partnerships, it does not cover limited partnerships, as legally these are not considered true partnerships. As such, a limited partnership would still default to the derivative suit remedy.
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