In California the Revised Uniform Limited Partnership Act of 2008 codified in California Corporations Code Section 15900, et seq., “which became fully effective January 1, 2010” The Uniform Limited Partnership Act of 2008: Text, Drafters’ Comments, and Correlation Tables, Continuing Education of the Bar (“CEB”) 2008, governs all of the rights and liabilities of the partners of a limited partnership. As a general rule, the limited partnership is comprised of one or more general partners, who are responsible for the management and control of the partnership, and one or more limited partners. Because the limited partnership interest is generally an investment, and the limited partners have no management powers for the partnership’s day-to-day business (the participation is passive), the limited partners incur no personal liability for the debts, obligations or liabilities of the partnership, and they risk only the value of their partnership contribution. Limited Partnership, Governor’s Office of Business and Economic Development.

While a limited partnership may exist under the terms of a written limited partnership agreement, which can vary the general rules regarding the relationship between partners, California Corporations Code Section 15901.10 prohibits that agreement from, among other things:

• Making the limited partners liable for partnership debts, under most circumstances
• Engaging in the business of banking, issuing policies of insurance and assuming insurance risks, or the trust company business
• Eliminating the requirement to keep accurate records of the partnership’s business and preventing the limited partners from reviewing those records
• Eliminating the duty of loyalty owed by the general partner(s) to partnership
• Unreasonably reducing the duty of care owed by the general partner(s) to the partnership
• Eliminating the obligations of good faith and fair dealing owed by the general partner(s) to the partnership
• Eliminating the power of a court to dissolve the partnership

So long as the limited partners take no active role in the management of the limited partnership, their only liability is the potential loss of their initial investment and any subsequent investments which may be required by the partnership agreement. One must, however, be careful to remain passive in the management of the partnership because if a limited partner becomes active in the day-to-day management of the limited partnership, that partner may lose its limited liability and become personally liable for the partnership’s debts and obligations.

If you are considering entering into a limited partnership agreement, you must understand your role. Michael Leonard, Esq. of San Diego Corporate Law can be counted on to provide you with the tools and knowledge you need to make an intelligent decision about the limited partnership, as well as any other business-related matter. To schedule a consultation with Mr. Leonard, you can visit San Diego Corporate Law or call (858) 483-9200.