Limited Partnerships (Business and organisational characteristics)- FS Flashcards
(8 cards)
What is the key difference between general partners and limited partners in a limited partnership (LP)?
General partners have unlimited liability and can manage the business, while limited partners have liability limited to their contribution and must not take part in management.
What statutory provision defines the structure of a limited partnership?
The Limited Partnerships Act 1907, specifically Section 6(1), defines an LP as consisting of at least one general partner (with full liability) and at least one limited partner (with limited liability).
What is the rule on management roles for limited partners in an LP
Limited partners must not take part in management or make decisions that bind the firm. If they do, they are treated as general partners and become personally liable for debts incurred during that time.
What happens if a limited partner participates in managing the LP or binds the business?
They lose their limited liability status and are deemed to be general partners for the period in which they managed or bound the business, incurring unlimited liability.
Can a limited partner inspect the firm’s books or advise other partners?
Yes. A limited partner may inspect the books, examine the state and prospects of the firm, and advise with the partners — but cannot bind or manage the business.
What liability model applies to all general partners in an LP?
General partners have joint and several liability, meaning each can be held individually responsible for the full amount of the LP’s debts and obligations.
What are the required roles in a valid limited partnership under the Limited Partnerships Act 1907?
An LP must have at least one general partner and at least one limited partner. Both roles are essential to the structure of a lawful LP.
Can a person’s marital status or education level affect their partner status in a limited partnership?
No. A partner’s marital status or educational qualifications have no bearing on their role or liability in a limited partnership.
