New York Partnerships and Limited Partnerships

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Overview
Partnerships, limited partnerships and limited liability partnerships are forms of organization that can be used to pursue social objectives and are recognized as statutory entities under New York law.  Until the advent of LLCs in 1994, partnerships were the most oft-used alternative to a nonprofit corporation.

Partnerships provide almost unlimited flexibility in governance and management.  Profits and losses are allocated according to the capital contributions of each partner but unlike LLCs and nonprofit corporations, the total assets of each partner in a general partnership are at risk, not just the capital that has been put into the enterprise.  Limited partnerships changed this by permitting the creation of a special class of partners, known as “limited partners,” who provide capital but do not participate in management.  In limited partnerships, the limited partners are shielded from liability beyond their capital contributions, but the general partner—who manages the affairs of the limited partnership—does not have this liability protection.  Limited partnerships are often used as financing vehicles and are most useful when investors are to have no role in management and a simple or flexible governance structure is needed.

Limited liability partnerships (“LLPs”) function like general partnerships but provide extra protections for the general partners.  Such protections include personal immunity for liability arising from the negligence and wrongful acts of other partners, unless the other partners were under their direct supervision.  Thus, a partner’s loss with respect to the LLP is usually limited to his/her investment in the partnership.

General Partnerships
The New York Partnership Law (“NYPL”), governs the formation, operations and dissolution of New York general partnerships.  A general partnership is formed when there is an association of two or more persons to carry on as co-owners a business for profit, whether or not the persons intend to form a partnership. An association formed under a statute other than (i) the NYPL, or (ii) any statute adopted by authority, other than the authority of New York, is not a general partnership under NYPL, unless such association would have been a general partnership prior to the adoption of the NYPL. 

No filings with the NY Department of State are required to form a general partnership.  A general partnership, however, is required to file an Assumed Name Certificate (following an agreement of the partners) with the clerk of the county or counties in which the business is conducted.  Except for wrong acts where the partners’ personal liability is joint and severally, personal liability for all other debts and obligations of the partnership is held jointly by the partners.

Once formed, as a general matter, a partnership agreement governs the relations among the partners, and among the partners and the partnership.  The partnership agreement may modify many of the default provisions of NYPL that concern the relations among the partners and among the partners and the partnership.  Subject to the effect of a general partnership’s statement of partnership existence and its partnership agreement, each partner has equal rights in the management of the partnership.
The books and records of the general partnership must be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every partner must have access to and may inspect the partnership’s books and records at any time. The partners are also required to render on demand true and full information of all things affecting the partnership to any partner. It is important to note when a partner sells his, her or its interest in the partnership, the buyer is not entitled to interfere in the management or administration of the partnership’s business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books.  The buyer is merely entitled to receive in accordance to her, his or its contract the profits to which the selling partner would otherwise have been entitled to receive.

Limited Partnerships
The NYPL, Article 8-A, the Revised Limited Partnership Act (“NY LP Act”), governs New York limited partnerships.  A New York limited partnership is formed when (1) at least two persons have an agreement to form and operate a limited partnership with at least one being a general partner and at least one being a limited partner, and (2) the general partner executes a partnership agreement, and executes and files a certificate of limited partnership with the NY Department of State.  The certificate of limited partnership needs to only contain the following information:
  1. the name of the limited partnership, which must contain the word “Limited Partnership” or the abbreviation “L.P.”;
  2. the county within New York, in which the office of the limited partnership if to be located;
  3. a designation of the Secretary of State as agent of the limited partnership upon whom process against the limited partnership may be served and the post office address within or without New York to which the Secretary of State is to mail a copy of any process served upon him or her;
  4. if the limited partnership is to have a registered agent, such registered agent’s name and New York address and a statement that the registered agent is to be the agent of the limited partnership upon whom process against the limited partnership may be served;
  5. the name and business or residence address of each general partner; and
  6.  the latest date upon which the limited partnership is to dissolve.
The limited partnership is formed upon the filing of the certificate of limited partnership with the NY Department of State, or such later time specified in the certificate, not to exceed 60 days from the date of filing.  The filing fee is $200. 

A generic form of the certificate of limited partnership for a New York limited partnership may be found the at NY Department of State website at the following web address: http://www.dos.ny.gov/corps/lpcorp.html#certlp.

Section 121-201 of the NY LP Act requires that within 120 days after the filing of the certificate of limited partnership, a limited partnership must publish in two newspapers,  once a week for six consecutive weeks, a copy of the certificate of limited partnership or a notice containing the substance thereof.  The newspapers must be designated by the county clerk of the county in which the office of the limited partnership is located.  After publication, the printer or publisher of each newspaper will provide the limited partnership with an affidavit of publication. A certificate of publication, with the affidavits of publication of the newspapers attached, must be submitted to the NY Department of State.  The fee for filing the certificate of publication is $50.

A generic form of the certificate of publication may be found the at NY Department of State website at the following web address: http://www.dos.ny.gov/corps/lpcorp.html#certlp.

Once formed, the limited partnership’s partnership agreement and the NY LP Act govern the operation and management of the limited partnership.  The partnership agreement can modify many of the default provisions of NY LP Act.  Typically, the general partner manages the business and activities of the limited partnership.  Unless otherwise provided in the partnership agreement, the general partner has the authority to delegate its rights and powers to manage the limited partnership.

The limited partnership agreement should set forth how to keep and maintain the books and records of the limited partnership.  Any partner has the right, subject to reasonable standards set forth in the partnership agreement or otherwise established by the general partner, to obtain from the partnership upon reasonable demand for any purpose reasonably related to the partner’s interest as a partner of the limited partnership, the following records:
  • a current list of the last known mailing address of each partner together with the contribution and the share in profits and losses of each partner;
  • copy of the certificate of limited partnership and all amendments thereto;
  • a copy of the limited partnership agreement and any amendments thereto; and
  • a copy of the limited partnership’s federal, state and local income tax or information returns and reports, if any, for the 3 most recent fiscal years.  
The NY LP Act also describes the liabilities of the partners.  The general partner has general liability for the debts and obligations of the limited partnership to third parties.  So long as a limited partner is not also a general partner and does not otherwise participate in the control of the business of the limited partnership, a limited partner does not have liability for the obligations of a limited partnership.  A limited partner does have liability for any unperformed contributions that such limited partner has agreed to make to the limited partnership, the amount of any distribution that such limited partner is required to return to the limited partnership pursuant to the NY LP Act, and their own tortious or wrongful acts.

Registered Limited Liability Partnerships (“LLPs”)
The NY LP Act, pursuant to Article 8-B, Registered Limited Liability Partnerships, governs New York LLPs.  An LLP is a general partnership that has elected to become an LLP and each of the partners is a professional authorized by law to render a professional service within the State of New York.  A general partnership may be formed as, or may become, an LLP pursuant to Section 121-1500 of the NY LP Act by filing with the NY Department of State a registration.  The registration needs to only contain the following information:
  • the name of the registered LLP, which must contain the words “Registered Limited Liability Partnership” or “Limited Partnership” or the abbreviations “R.L.L.P.,” “RLLP,” “L.L.P.,” or “LLP”;
  • the address of the LLP’s principal office;
  • the profession or professions to be practiced by the LLP and statement that it eligible to register as an LLP;
  • a designation of the Secretary of State as agent of the LLP upon whom process against the LLP may be served and the post office address within or without New York to which the Secretary of State is to mail a copy of any process served upon him or her;
  • if the LLP is to have a registered agent, such agent’s name and New York address, and a statement that the registered agent is to be the agent of the limited partnership upon whom process against it may be served;
  • a statement that the partnership without limited partners is filing a registration for status as a registered limited partnership;
  • if the registration of the LLP is to be effective on a date later than the time of filing, the date, not to exceed 60 days from the date of such filing; and
  • a statement detailing whether all or specified partner of the LLP are to be liable in their capacity as partners for all or specified debts, obligations or liabilities of the LLP.
A generic form of the certificate of registration may be found the at NY Department of State website at the following web address: http://www.dos.ny.gov/corps/llpcorp.html.  The filing fee for the certificate of registration is $200. 

Section 121-1500 of the NY LP Act requires that within 120 days after the filing of the certificate of LLP, a LLP must publish in two newspapers, once a week for six consecutive weeks, a copy of the certificate of registration or a notice containing the substance thereof.  The newspapers must be designated by the county clerk of the county in which the office of the LLP is located.  After publication, the printer or publisher of each newspaper will provide the LLP with an affidavit of publication.  A certificate of publication, with the affidavits of publication of the newspapers attached, must be submitted to the NY Department of State.  The fee for filing the certificate of publication is $50.

A generic form of the certificate of publication may be found the at NY Department of State website at the following web address:  http://www.dos.ny.gov/corps/llpcorp.html.

Each registered LLP must within 60 days prior to the 5th anniversary of the effective date of its registration and every five years thereafter, furnish a statement to the NY Department of State setting forth:
  • the name of the registered LLP;
  • the address of the LLP’s principal office;
  • a statement that it eligible to register as an LLP; and
  • the address within or without New York to which the Secretary of State is to mail service of process.
The filing fee for the statement is $20.

In general, an LLP is managed and operated the same as a general partnership.  The partnership agreement governs relations among the partners and between the partners and the LLP.  The partnership agreement may modify many of the default provisions of NY LP Act that concern the relations among the partners and between the partners and the LLP.

Partners of an LLP have different liabilities than partners of a general partnership.  Partners of an LLP are not liable for any debts or obligations or liabilities of, or chargeable to, the LLP or each of the partners, whether arising in contract, tort or otherwise, which are created, incurred or assumed by the LLP.  Notwithstanding the above, each partner of the LLP is personally liable for such partner’s negligent or wrongful acts or misconduct.  The partners may under a partnership agreement or under another agreement agree to be personally liable for all or specified debts, obligations or liabilities of the LLP. Furthermore, a partner is responsible for the amount of any distribution that such partner is required to return to the LLP pursuant to the NY LP Act.  

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