Limited And Limited Liability Partnerships

Limited Partnerships

In a limited partnership (LP), at least one partner (the general partner) has unlimited liability, and at least one partner (the limited partner) has limited liability. Such arrangements often are used in deals that involve real property or oil and gas. A written partnership often is used in an LP, although that's not necessarily the case. A Certificate of Limited Partnership must be filed with the Secretary of State to form an LP.

In an LP, the general partner acts as a manager, while the limited partner does not control any of the day-to-day operations of the LP. The limited partner has to be careful - if he or she starts to act like a general partner, then he or she also will take on the liability of one.

There are several formal requirements that an LP must comply with. The LP must keep these records at the designated office: (1) a list of the names and addresses of each partner in alphabetical order, (2) a copy of the certificate of limited partnership and all amendment and copies of any powers of attorney, (3) copies of all of the LP's complete tax returns for the three most recent years, (4) copies of any current written partnership agreements and certain documents about contributions, as well as copies of any financial statements for the three most recent years, and (5) a statement that the general partners have certified as accurate and describing rules about contributions, terminations and distributions, unless all of this has already been covered in a written partnership agreement.

In a limited partnership, unless the partnership provides otherwise, a partner is no longer a partner when he or she assigns all of their partnership interests, but such an assignment does not dissolve the partnership.

Limited Liability Partnerships

A limited liability partnership (LLP) is a form of a general partnership that is beneficial over the standard general partnership. In the standard general partnership, each partner has unlimited liability for the acts of every other partner. But in an LLP, the liability of each general partner is limited to the amount of property and money that he or she has contributed to the partnership.

An LLP has to be registered with the Secretary of State.

Limited Liability Limited Partnerships

The limited liability limited partnership (LLLP) is a relatively new entity, and Colorado is one of a handful of states that actually recognizes it. The LLLP is similar to the limited liability partnership (LLP), but is different in one crucial respect: in an LLP, the general partner has unlimited liability but the limited partner has limited liability; but in an LLLP, both the general and limited partners have limited liability for the obligations of the partnership. The LLLP, then, affords greater protection to everyone involved.

To form an LLLP, an existing limited partnership (LP) must file a Statement of Registration of a Limited Liability Limited Partnership with the Secretary of State.

Limited Partnership Associations

A limited partnership association (LPA) is not used very often and is basically unique to Colorado. It is governed by the Colorado Limited Partnership Association Act.

The LPA is a kind of a hybrid between a corporation and a partnership and is formed by filing Articles of Association with the Secretary of State. The owners of an LPA are known as members, and they have limited liability for the LPA's obligations. The LPA is taxed like a partnership rather than as a corporation.

Any member of an LPA is not liable for any debt, obligation or liability of the association. Unless otherwise agreed, an LPA can last forever and does not end upon the resignation, death, incompetence or bankruptcy of a member. Strangely enough, an LPA may have only one member. Moreover, the LPA is not even required to be in business, but may be formed for any lawful activity. Either members of an LPA or designated managers may run it.