Limited Partnership Agreement (California)

CALIFORNIA LIMITED PARTNERSHIP AGREEMENT

Formed Under the California Uniform Limited Partnership Act of 2008
[LP NAME], L.P.

CALIFORNIA-SPECIFIC PRACTITIONER NOTES

California's limited partnership statute is the Uniform Limited Partnership Act of 2008, codified at Cal. Corp. Code §§ 15900–15912.07 (the "Act" or "ULPA 2008"). ULPA 2008 became fully effective January 1, 2010, and replaced the older California Revised Limited Partnership Act (Corp. Code § 15611 et seq.) for all newly-formed LPs.

Key ULPA 2008 features:

• Formation. A California LP is formed by filing a Certificate of Limited Partnership (Form LP-1) with the California Secretary of State, consistent with Corp. Code § 15902.01.
• Limited Partner Shield. Corp. Code § 15903.03 protects limited partners from liability even if they participate in management — a significant change from the former "control" rule.
• Safe Harbors. Section 15903.05 provides a non-exhaustive list of activities that do not constitute participation in control.
• General Partner Fiduciary Duties. Under § 15904.08, the GP owes the LP and the limited partners duties of loyalty, care, and good faith. These may be modified only within the limits of § 15901.10.
• $800 Minimum Franchise Tax. Cal. Rev. & Tax. Code § 17935 requires each California LP and each foreign LP transacting intrastate business in California to pay $800 annually to the Franchise Tax Board.
• Securities Compliance. Offers and sales of limited partnership interests are "securities" under both federal law and Cal. Corp. Code § 25019, so counsel must confirm the availability of an exemption under Corp. Code § 25102(f) and file a Limited Offering Exemption Notice ("LOEN", Form 260.102.14) with the California Department of Financial Protection and Innovation (DFPI) within 15 days of the first sale.
• Nonresident Withholding. Nonresident limited partners are subject to California withholding under Cal. Rev. & Tax. Code § 18662.

1. FORMATION AND PARTIES

1.1 Name. The name of the limited partnership is [________________________________], L.P. (the "Partnership"), which includes the term "limited partnership" or "L.P." as required by Cal. Corp. Code § 15901.08(a).

1.2 Formation. The Partnership was formed on [__/__/____] as a California limited partnership by the filing of a Certificate of Limited Partnership (Form LP-1) with the California Secretary of State under Cal. Corp. Code § 15902.01, Secretary of State file number [____________].

1.3 Parties. This Limited Partnership Agreement (this "Agreement") is entered into by and among:

(a) General Partner: [________________________________], a [________________________________] ("General Partner" or "GP"); and

(b) Limited Partners: The persons listed on Schedule A (each a "Limited Partner" or "LP" and collectively the "Limited Partners"), who have subscribed for Partnership interests in accordance with Schedule A.

1.4 Principal Office. The principal office of the Partnership shall be at [________________________________], California [____].

1.5 Agent for Service of Process. The agent for service of process in California is [________________________________] whose address is [________________________________], consistent with Corp. Code § 15902.01(a)(3).

1.6 Purpose. The purpose of the Partnership is [________________________________] and any lawful activity related thereto.

1.7 Term. The Partnership shall continue until dissolved in accordance with Article 10.

1.8 Governing Law. The Partnership is governed by the California Uniform Limited Partnership Act of 2008, Cal. Corp. Code §§ 15900–15912.07 ("Act"), this Agreement, and the Certificate of Limited Partnership.

2. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS

2.1 Initial Contributions. Each Partner shall contribute to the Partnership the cash, property, or services set forth on Schedule A consistent with Cal. Corp. Code § 15905.01.

2.2 Additional Contributions. No Limited Partner shall be required to make any additional Capital Contribution except as expressly agreed by that Limited Partner in writing.

2.3 Failure to Contribute (§ 15905.02). A Limited Partner's failure to make a committed contribution is subject to the remedies of Cal. Corp. Code § 15905.02, including the consequences specified on Schedule B, which may include reduction or elimination of the Limited Partner's interest, forfeiture, subordination, or payment of a reduced interest.

2.4 Capital Accounts. Separate capital accounts shall be maintained for each Partner consistent with Treas. Reg. § 1.704-1(b)(2)(iv) and Cal. Rev. & Tax. Code § 17851.

2.5 No Interest on Capital. No Partner shall be entitled to interest on Capital Contributions.

2.6 Return of Capital Limited. Consistent with Cal. Corp. Code § 15905.08 and California's prohibition on distributions that render an LP insolvent, no distribution that would leave the Partnership unable to pay its debts as they become due, or whose total assets would be less than total liabilities plus preferential distribution rights, may be made.

3. LIMITED PARTNER LIABILITY SHIELD

3.1 Limited Liability (§ 15903.03). A Limited Partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for any obligation of the Partnership solely by reason of being a Limited Partner, even if the Limited Partner participates in the management and control of the Partnership. This represents a fundamental change from pre-2008 California law.

3.2 Safe Harbor Activities (§ 15903.05). Without limiting the liability shield of Section 3.1, the following activities by a Limited Partner do not constitute participation in the control of the Partnership:

(a) consulting with or advising the General Partner;
(b) acting as surety, guarantor, or endorser for the Partnership;
(c) approving or disapproving an amendment to this Agreement;
(d) voting on matters reserved to Limited Partners under this Agreement or the Act, including dissolution, merger, conversion, sale of substantially all assets, admission or removal of a GP, or amendment of the Certificate;
(e) winding up the Partnership under Corp. Code § 15908.03;
(f) serving on a committee of the Partnership or the Limited Partners;
(g) other activities enumerated in § 15903.05.

3.3 Cap on Contribution Obligations. Except for the Limited Partner's committed Capital Contribution and previously-distributed amounts properly recoverable under Corp. Code § 15908.12, no Limited Partner is liable for any Partnership obligation.

4. GENERAL PARTNER FIDUCIARY DUTIES (§ 15904.08)

4.1 Duties of Loyalty and Care. The General Partner owes the Partnership and the Limited Partners the fiduciary duties of loyalty and care set forth in Cal. Corp. Code § 15904.08.

4.2 Duty of Loyalty (§ 15904.08(b)). The GP's duty of loyalty includes:

(a) accounting to the Partnership for any property, profit, or benefit derived from Partnership business, including appropriation of Partnership opportunities;
(b) refraining from self-dealing transactions unless fair to the Partnership or approved after full disclosure;
(c) refraining from competing with the Partnership before dissolution.

4.3 Duty of Care (§ 15904.08(c)). The GP's duty of care is limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or knowing violations of law.

4.4 Good Faith and Fair Dealing (§ 15904.08(d)). The GP shall discharge its duties consistently with the contractual obligation of good faith and fair dealing.

4.5 Modification Limits (§ 15901.10). Pursuant to Cal. Corp. Code § 15901.10, this Agreement may not (i) eliminate the duty of loyalty, (ii) unreasonably reduce the duty of care, (iii) eliminate the obligation of good faith and fair dealing, (iv) unreasonably restrict a Limited Partner's right of access to books and records, or (v) vary certain enumerated statutory rights.

5. MANAGEMENT, VOTING, AND LP CONSENT

5.1 Exclusive GP Authority. Except as otherwise expressly provided in this Agreement or the Act, management of the Partnership is vested exclusively in the General Partner under Corp. Code § 15904.06.

5.2 Matters Requiring LP Consent. The following shall require the affirmative vote or written consent of Limited Partners holding a majority in Percentage Interests (or a higher threshold specified below):

☐ (a) amendment of this Agreement or the Certificate adversely affecting the Limited Partners' rights;
☐ (b) merger or conversion under Cal. Corp. Code §§ 15911.01–15911.19 (requiring the vote specified therein);
☐ (c) sale of all or substantially all Partnership assets outside the ordinary course;
☐ (d) voluntary dissolution of the Partnership;
☐ (e) admission of a new General Partner (consistent with Corp. Code § 15904.01);
☐ (f) removal of the General Partner for cause as set forth in Section 5.4.

5.3 LP Information Rights. Limited Partners are entitled to the information rights set forth in Cal. Corp. Code § 15903.04, including access to required records and accounting information.

5.4 Removal of GP for Cause. The General Partner may be removed for cause by a vote of Limited Partners holding at least [____]% of Percentage Interests. "Cause" means fraud, willful misconduct, gross negligence, or material breach of fiduciary duty by the GP.

6. SECURITIES LAW COMPLIANCE

6.1 California Corporate Securities Law of 1968. The Partners acknowledge that limited partnership interests are "securities" within the meaning of Cal. Corp. Code § 25019 and must be issued pursuant to an exemption from qualification under the California Corporate Securities Law of 1968, Corp. Code § 25000 et seq.

6.2 Cal. Corp. Code § 25102(f) Exemption and LOEN Filing. The Partnership intends to issue limited partnership interests in reliance on the § 25102(f) limited offering exemption. Accordingly:

(a) sales shall be made to not more than thirty-five (35) non-accredited investors (plus an unlimited number of accredited investors);
(b) each purchaser shall have a preexisting relationship with the Partnership or its General Partner, or business or financial experience sufficient to protect their own interests;
(c) each purchaser shall acquire the interest for the purchaser's own account and not with a view to distribution;
(d) the offering shall not be accomplished through advertising; and
(e) the General Partner shall file a Limited Offering Exemption Notice ("LOEN", Form 260.102.14) and pay the prescribed fee with the California Department of Financial Protection and Innovation (DFPI) within fifteen (15) calendar days after the first sale of securities in California, per Cal. Code Regs. tit. 10 § 260.102.14.

6.3 Federal Reg D Compliance. To the extent the offering also relies on federal Regulation D (Rule 506(b) or 506(c)), the General Partner shall file Form D with the U.S. Securities and Exchange Commission within fifteen (15) days after the first sale.

6.4 Investor Representations. Each Limited Partner represents that it is an "accredited investor" within the meaning of 17 C.F.R. § 230.501(a) or, if a non-accredited investor permitted under § 25102(f), that it has the requisite preexisting relationship or sophistication.

7. ALLOCATIONS, DISTRIBUTIONS, AND TAX MATTERS

7.1 Allocations. Profits and losses shall be allocated among the Partners in proportion to their Percentage Interests, consistent with IRC § 704(b) substantial economic effect and Cal. Rev. & Tax. Code § 17851 (California conformity).

7.2 Distributions. Distributions shall be made in the following order:

(a) First, to Limited Partners until each has received a [____]% per annum preferred return on Unreturned Capital Contributions;
(b) Second, to Limited Partners until each has received a return of Unreturned Capital Contributions;
(c) Thereafter, [____]% to Limited Partners and [____]% to the General Partner as carried interest.

7.3 Insolvency Limitation (§ 15905.08). No distribution shall be made that would cause the Partnership to be unable to pay its debts as they become due in the ordinary course or that would leave total assets less than total liabilities plus preferential distribution amounts.

7.4 California Franchise Tax (Cal. Rev. & Tax. Code § 17935). The Partnership shall timely remit the $800 annual California LP franchise tax to the Franchise Tax Board and file California Form 565 each year.

7.5 Nonresident Withholding (Cal. Rev. & Tax. Code § 18662). The GP shall withhold California tax on distributions to nonresident Limited Partners at the rates prescribed by Cal. Rev. & Tax. Code § 18662 and Cal. Code Regs. tit. 18 § 18662-0 et seq.

7.6 Partnership Representative. The General Partner is designated the "partnership representative" under IRC § 6223 and the equivalent under California law.

8. TRANSFERS OF INTEREST

8.1 Restrictions on Transfer. No Limited Partner may transfer its Partnership interest without the prior written consent of the General Partner, which may be withheld in the GP's sole and absolute discretion.

8.2 Economic Interest vs. Partnership Interest. Consistent with Cal. Corp. Code § 15907.01, a transferee of an economic interest does not become a Limited Partner except upon admission pursuant to Section 8.3.

8.3 Admission of Transferee. A transferee may be admitted as a substitute Limited Partner only with the GP's consent and the written agreement of the transferee to be bound by this Agreement.

8.4 Securities Law Restrictions. Any transfer must comply with applicable federal and California securities laws and may not be made unless the transfer (a) is registered or qualified, or (b) qualifies for an exemption supported by an opinion of counsel satisfactory to the GP.

9. DISSOCIATION OF A PARTNER

9.1 Dissociation of a Limited Partner (§ 15906.01). A Limited Partner is dissociated upon the events listed in Cal. Corp. Code § 15906.01, including express withdrawal (to the extent permitted by this Agreement), death, incapacity, or bankruptcy. Consistent with ULPA 2008, a dissociated Limited Partner is generally not entitled to an automatic buyout; the Partner's interest becomes a transferable interest held by the estate or successor until redeemed or liquidated.

9.2 Dissociation of General Partner (§ 15906.03). Dissociation of the General Partner under Cal. Corp. Code § 15906.03 (including withdrawal, removal, bankruptcy, death, or dissolution) may cause the dissolution of the Partnership unless a majority in interest of the Limited Partners consent within 90 days to continue the Partnership and appoint a successor General Partner.

9.3 No Fair Value Buyout. Unlike a CUPA general partnership under § 16701, an LP under ULPA 2008 does not automatically require a fair-value buyout upon dissociation. Any buyout right is contractual and governed by this Agreement.

10. DISSOLUTION AND WINDING UP

10.1 Events of Dissolution (§ 15908.01). The Partnership shall dissolve upon the earliest of:

(a) the occurrence of an event specified in this Agreement;
(b) the written consent of the General Partner and a majority in interest of the Limited Partners;
(c) the dissociation of the last General Partner, unless a successor is appointed within 90 days under § 15908.01(3);
(d) entry of a decree of judicial dissolution under Cal. Corp. Code § 15908.02.

10.2 Winding Up (§ 15908.03). After dissolution, the GP (or a court-appointed winder-up) shall wind up the Partnership's activities, liquidate assets, and distribute proceeds.

10.3 Priority of Distribution (§ 15908.10). Assets shall be distributed in the following order:

(i) to creditors, including Partners who are creditors, to the extent permitted by law;
(ii) to Partners for previously-declared but unpaid distributions;
(iii) to Partners in respect of their Unreturned Capital Contributions; and
(iv) to Partners in proportion to their Percentage Interests.

10.4 Certificate of Cancellation. Upon winding up, the General Partner shall file a Certificate of Cancellation (Form LP-4/7) with the California Secretary of State under Cal. Corp. Code § 15902.03.

10.5 Final Franchise Tax Return. The Partnership shall file a final California Form 565 with the Franchise Tax Board.

11. DISPUTE RESOLUTION

11.1 Governing Law. This Agreement is governed by California law, including ULPA 2008, without regard to conflict-of-laws principles.

11.2 Forum. The Superior Court of California, County of [________________________________], shall have exclusive jurisdiction over disputes arising out of this Agreement. Judicial dissolution petitions under Cal. Corp. Code § 15908.02 must be filed in California.

11.3 Arbitration (Optional). ☐ At the election of any Party, disputes may be referred to binding arbitration under the California Arbitration Act, Cal. Code Civ. Proc. §§ 1280 et seq., administered by JAMS in California.

11.4 Dissenters' Rights. Limited Partners opposing specified mergers, conversions, or similar transactions may have dissenters' rights under Cal. Corp. Code §§ 15911.20–15911.33.

11.5 Attorneys' Fees. The prevailing party in any proceeding to enforce this Agreement shall recover reasonable attorneys' fees and costs under Cal. Civ. Code § 1717.

12. GENERAL PROVISIONS

12.1 Indemnification of GP. The Partnership shall indemnify the General Partner for Losses arising out of actions taken on behalf of the Partnership in good faith, except for acts of fraud, gross negligence, willful misconduct, or knowing violations of law, consistent with Cal. Corp. Code § 15904.08.

12.2 Amendment. This Agreement may be amended only by written instrument signed by the General Partner and Limited Partners holding at least [____]% of Percentage Interests.

12.3 Entire Agreement. This Agreement, together with the Certificate of Limited Partnership and Schedule A, constitutes the entire agreement among the Partners.

12.4 Severability. Invalid provisions shall be reformed to the minimum extent necessary, and the remainder shall remain in effect.

12.5 Notices. All notices shall be in writing and delivered in accordance with the addresses on Schedule A.

12.6 Electronic Signatures. Signatures delivered electronically pursuant to Cal. Civ. Code §§ 1633.1–1633.17 are binding originals.

13. SIGNATURES

GENERAL PARTNER:

[________________________________]

By: [________________________________]

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

LIMITED PARTNERS: See Schedule A.

SCHEDULE A — Limited Partners, Capital Contributions, Percentage Interests

SCHEDULE B — Consequences of Failure to Make Committed Contribution (Corp. Code § 15905.02)

[________________________________]

Sources and References

• California Uniform Limited Partnership Act of 2008, Cal. Corp. Code §§ 15900–15912.07: https://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=CORP&division=&title=2.&part=&chapter=4.5.
• California Secretary of State LP Forms (LP-1, LP-4/7): https://www.sos.ca.gov/business-programs/business-entities/forms
• Cal. Rev. & Tax. Code § 17935 (LP $800 franchise tax): https://www.ftb.ca.gov/
• Cal. Rev. & Tax. Code § 18662 (nonresident withholding)
• Cal. Corp. Code § 25102(f) limited offering exemption: https://leginfo.legislature.ca.gov/
• DFPI LOEN (Form 260.102.14): https://dfpi.ca.gov/regulated-industries/securities/
• Cal. Code Regs. tit. 10 § 260.102.14: https://www.law.cornell.edu/regulations/california/10-CCR-260.102.14