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10.1.4: Certain Terminology
Assuming election of the limited partnership form, the general partner is usually itself a partnership,
sometimes general and sometimes limited, the general partners of which are the managers of the
enterprise. The reason to interpose an additional entity is convenience.
[1]
Under the Revised Uniform
Limited Partnership Act (R.U.L.P.A.), if a general partner of a limited partnership dies or retires, the
partnership technically dissolves; the remaining general partners can continue the business (if the
agreement so states) but the admission of a new general partner may require the specific consent of all
the limited partners, a potentially difficult chore.
[2]
Accordingly, the individual general partners participate
through an intermediate entity, which continues in being even if one of its members dies or retires and to
whom new members may be appointed without consulting the limited partners. Because the terminology
overlaps-the general partner of a general partnership, which in turn is the general partner of a limited
partnership-experienced practitioners have invented discrete nomenclature to describe each entity. In the
authors firm, the limited partnership that holds the assets is the investor partnership. The general partner
of the investor partnership is the GPGP or GPLP, depending on whether it is a general or a limited
partnership. The individual partners of the GPGP or GPLP are the managers. The limited partners of the
investor partnership are the investors.
[1]
Some tax practitioners are concerned about the practice of using a vehicle as the general partner; they
believe that it strengthens the managers position on the so-called Sol Diamond issue, see 24.10, if each
individual is a partner directly in the investor partnership.
[2]
Depending on state law, the admission of a new general partner to a limited partnership may require
the specific consent of all the partners. See I Halloran at 1- 119. Uniform Limited Partnership Act
(U.L.P.A.) 9(1)(e) (1916). The Revised U.L.P.A., (R.U.L.P.A.) (adopted in 1976) expressly allows the
agreement to authorize advance consent. 6 Del. Code Ann. tit. 6, 17-401 (1985); R.U.L.P.A. 401.
Page 1 of 1 10.1.4: Certain Terminology - Encyclopedia - Library - VC Experts