MBE Rules · Business Associations
Limited Partnerships
Cal. Corp. Code § 15903.03 (ULPA)
The rule
A limited partnership requires a filed certificate and at least one general partner with unlimited liability; limited partners now retain limited liability even when participating in management under ULPA (2008).
In plain English
A limited partnership consists of at least one general partner who has unlimited liability and one or more limited partners who have liability only up to their investment. Under the Uniform Limited Partnership Act of 2008, limited partners can participate in management without losing their limited liability status, provided they do not take on the role of a general partner.
Worked example
In a limited partnership formed to invest in real estate, Sarah is the general partner and has unlimited liability, while Tom and Lisa are limited partners. Tom decides to help manage the property by making decisions about renovations and tenant relations. Despite his active role, Tom retains his limited liability status because he does not act as a general partner. Therefore, he is only liable for the amount he invested.
Memory hook
Limited partners can manage without liability – just don’t be a general partner!
The trap
Exams may present scenarios where limited partners take on significant management roles, leading students to incorrectly conclude they lose their limited liability. It's crucial to remember the distinction between management participation and general partnership duties.
How examiners test it
Questions often test the nuances of limited partners' roles and their liability, particularly focusing on scenarios involving management decisions and the implications of the ULPA (2008).
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