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Advising California Partnerships

Successfully navigate California’s complex business environment with this authoritative guide.

Successfully navigate California’s complex business environment with this authoritative guide.

  • Is a partnership the right entity for my client?
  • Planning general partnerships, limited partnerships, and LLPs
  • Drafting partnership agreements
  • Detailed agreement forms, which include numerous annotated clauses
  • Issuing partnership interests
  • Taxation of partnership income
  • Taxation of transfers and terminations of partnership interests
  • Partnership litigation
  • Dissociation
  • Dissolving and winding up
  • Change of entity
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Successfully navigate California’s complex business environment with this authoritative guide.

  • Is a partnership the right entity for my client?
  • Planning general partnerships, limited partnerships, and LLPs
  • Drafting partnership agreements
  • Detailed agreement forms, which include numerous annotated clauses
  • Issuing partnership interests
  • Taxation of partnership income
  • Taxation of transfers and terminations of partnership interests
  • Partnership litigation
  • Dissociation
  • Dissolving and winding up
  • Change of entity

1

Attorney's Role

Jerome Sapiro, Jr.

  • I. SCOPE OF CHAPTER 1.1
  • II. ETHICAL DUTIES 1.2
  • III. DETERMINING WHETHER REPRESENTATION IS APPROPRIATE 1.3
  • IV. ASSESSING ATTORNEY'S PROFESSIONAL COMPETENCE 1.4
  • V. CONFLICTS OF INTEREST
    • A. Conflicts Among Parties 1.5
    • B. Conflicts Between Attorney and Client
      • 1. Disclosure Requirements 1.6
      • 2. Ownership Interest in Exchange for Services 1.7
    • C. Avoidance or Waiver of Conflicts of Interest 1.8
      • 1. Conflicts of Interest Checking 1.9
      • 2. Ethical Walls 1.10
    • D. Representing Partnership 1.11
  • VI. DUTY OF CONFIDENTIALITY
    • A. Representing Entities 1.12
    • B. Withdrawal From Representation 1.13
  • VII. ESTABLISHING SCOPE OF ATTORNEY'S ROLE
    • A. Maintaining Lines of Communication 1.14
    • B. Conflicting Instructions From Partners 1.15
  • VIII. DOCUMENTING ATTORNEY-CLIENT RELATIONSHIP 1.16
    • A. Nonengagement Letters 1.17
    • B. Engagement Letters
      • 1. Written Fee Agreement 1.18
        • a. Statutory Requirements Governing Fee Agreements 1.19
        • b. Prohibition of Unconscionable Fee 1.20
        • c. Advance Fees 1.21
        • d. Nonrefundable Fees 1.22
        • e. Financial Arrangements Among Attorneys 1.23
      • 2. Arbitration Provisions 1.24
      • 3. Judicial Reference as Alternative to Arbitration 1.25
      • 4. Checklist: Elements to Consider for Inclusion in Engagement Letter 1.26
    • C. Disengagement Letters 1.27
  • IX. FORMS
    • A. Form: Nonengagement Letter 1.28
    • B. Engagement Letter
      • 1. Form: Salutation 1.29
      • 2. Form: Introduction 1.30
      • 3. Form: Scope of and Limitations on Duties 1.31
      • 4. Form: Required Securities Disclosures 1.32
      • 5. Form: Association of Specialists 1.33
      • 6. Form: Who Will Work on Matter 1.34
      • 7. Form: Fees 1.35
      • 8. Form: Expenses 1.36
      • 9. Form: Nonrefundable Fees 1.37
      • 10. Form: Billings 1.38
      • 11. Form: No Apportionment Among Multiple Clients 1.39
      • 12. Form: Warranties as to Fees and Costs 1.40
      • 13. Form: Arbitration Clause 1.41
      • 14. Form: Judicial Reference of Disputes 1.42
      • 15. Form: Termination 1.43
      • 16. Form: Document Retention 1.44
      • 17. Form: No Tax Advice 1.45
      • 18. Form: Conflicts of Interest 1.46
      • 19. Form: Disclosure of Conflicts From Prior Representation 1.47
      • 20. Form: Waiver of Conflicts 1.48
      • 21. Form: Entire Agreement 1.49
      • 22. Form: Closing 1.50
      • 23. Form: Acceptance 1.51
    • C. Form: Disengagement Letter on Completion of Services 1.52
    • D. Form: Notice Letter to Former Client Regarding Potential Conflict with New Client 1.53
    • E. Disengagement Letter on Termination of Representation Before Services Completed 1.54

2

Choice of Entity and Collecting Client Information

Paul J. Derenthal

  • I. SCOPE OF CHAPTER 2.1
  • II. OVERVIEW 2.2
    • A. Corporation (Including S Corporation) 2.3
    • B. General Partnership 2.4
    • C. Limited Partnership 2.5
    • D. Limited Liability Partnership 2.6
    • E. Limited Liability Company 2.7
  • III. FACTORS IN SELECTING MOST APPROPRIATE FORM OF ENTITY
    • A. Ease of Formation; Transaction Costs 2.8
      • 1. Corporation 2.9
      • 2. General Partnership 2.10
      • 3. Limited Partnership 2.11
      • 4. Limited Liability Partnership
        • a. Registration With Secretary of State 2.12
        • b. Security Requirement 2.13
        • c. Registration With State Governing Body 2.14
      • 5. Limited Liability Company 2.15
    • B. Income Tax Considerations 2.16
      • 1. Classification of Entities for Tax Purposes 2.17
      • 2. Tax Consequences of Formation 2.18
        • a. Cash Contributions 2.19
        • b. Contributions of Property 2.20
        • c. Contributions of Services 2.21
      • 3. Taxation of Entity and Its Owners
        • a. C Corporations
          • (1) Entity Level Tax; Double Taxation 2.22
          • (2) Inability to Use Losses 2.23
          • (3) At-Risk Rules; Passive Loss Rules 2.24
          • (4) Method of Accounting 2.25
          • (5) Taxable Year 2.26
        • b. S Corporations 2.27
          • (1) Pass-Through Entity 2.28
          • (2) Requirements to Qualify as S Corporation 2.29
          • (3) Distributions to Shareholders 2.30
          • (4) At-Risk Rules; Passive Loss Rules 2.31
          • (5) Method of Accounting 2.32
          • (6) Taxable Year 2.33
          • (7) Differing Tax Treatment Between Partnerships and S Corporations 2.34
        • c. Partnerships
          • (1) Pass-Through Entity 2.35
          • (2) Distributions 2.36
          • (3) Special Allocations 2.37
          • (4) Debt Increases Basis; Recourse and Nonrecourse Debt 2.38
          • (5) Section 754 Election 2.39
          • (6) At-Risk Rules 2.40
          • (7) Passive Loss Rules 2.41
          • (8) Termination of Partnership for Tax Purposes 2.42
          • (9) Method of Accounting 2.43
          • (10) Taxable Year 2.44
        • d. Limited Liability Companies 2.45
      • 4. Taxation on Disposition of Interests and Liquidation
        • a. Corporations 2.46
        • b. Partnerships 2.47
        • c. Limited Liability Companies 2.48
    • C. State Taxation
      • 1. Corporations 2.49
      • 2. S Corporations 2.50
      • 3. Partnerships 2.51
      • 4. Limited Liability Companies; Fee Table 2.52
    • D. Other Tax Considerations
      • 1. Self-Employment Income 2.53
      • 2. Fringe Benefits
        • a. Corporations 2.54
        • b. S Corporations 2.55
        • c. Partnerships 2.56
        • d. Limited Liability Companies 2.57
    • E. Management and Control
      • 1. Corporations 2.58
      • 2. General Partnerships 2.59
      • 3. Limited Partnerships 2.60
      • 4. Limited Liability Partnerships 2.61
      • 5. Limited Liability Companies 2.62
    • F. Liability of Owners for Business Obligations
      • 1. Corporations 2.63
      • 2. General Partnerships 2.64
      • 3. Limited Partnerships 2.65
      • 4. Limited Liability Partnerships 2.66
      • 5. Limited Liability Companies 2.67
    • G. Transferability of Interests; Liquidity 2.68
      • 1. Corporations 2.69
      • 2. General Partnerships 2.70
      • 3. Limited Partnerships 2.71
      • 4. Limited Liability Partnerships 2.72
      • 5. Limited Liability Companies 2.73
    • H. Ability to Raise Capital
      • 1. Corporations 2.74
      • 2. General Partnerships 2.75
      • 3. Limited Partnerships 2.76
      • 4. Limited Liability Partnerships 2.77
      • 5. Limited Liability Companies 2.78
    • I. Continuity of Business 2.79
      • 1. Corporations 2.80
      • 2. General Partnerships 2.81
      • 3. Limited Partnerships 2.82
      • 4. Limited Liability Partnerships 2.83
      • 5. Limited Liability Companies 2.84
    • J. Other Factors Influencing Choice of Entity
      • 1. Anonymity of Owners 2.85
      • 2. Professionals 2.86
      • 3. Reorganizations, Conversions, and Mergers 2.87
  • IV. TABLE: BUSINESS ASPECTS OF COMMONLY USED ENTITIES 2.88
  • V. CHECKLISTS 2.89
    • A. Checklist: Information About Participants, Their Roles, and Interests in Business 2.90
    • B. Checklist: Information About Business 2.91
    • C. Checklist: Information Necessary to Organize Partnership 2.92

3

Tax Considerations on Formation of and Contributions to Partnership

Mark M. Tucker

John C. Suttle

  • I. SCOPE OF CHAPTER 3.1
  • II. TAX CLASSIFICATION AS PARTNERSHIP: CHECK-THE-BOX REGULATIONS
    • A. Introduction; Pre-1997 Partnerships 3.2
    • B. Business Entity: Corporation or Partnership 3.3
      • 1. Partnership and Corporation Defined 3.4
      • 2. Election of Classification 3.5
      • 3. Employment Tax Treatment of Partners in Partnership That Owns Disregarded Entity 3.5A
      • 4. Default Classification
        • a. Entities in Existence Before 1997 3.6
        • b. Entities Formed On or After January 1, 1997 3.7
    • C. California Conformity 3.8
    • D. Publicly Traded Partnerships Treated as Corporations 3.9
  • III. NONRECOGNITION FOR PROPERTY TRANSFERS TO PARTNERSHIP 3.10
    • A. Property Defined
      • 1. Money and Installment Obligations 3.11
      • 2. Intangibles 3.12
        • a. Letters of Intent and Trade Secrets 3.13
        • b. Interests in Another Partnership 3.14
        • c. Accounts Receivable 3.15
        • d. Partner's Promissory Note 3.16
        • e. Noncompensatory Options 3.16A
        • f. Partnership's Obligation 3.17
        • g. Leasehold Interests 3.18
        • h. Mere Rights to Use Property 3.19
        • i. Intangibles: Goodwill; Going Concern Value; Patents, Copyrights, Trademarks 3.20
    • B. Foreign Partnerships; Partners 3.21
    • C. Reallocation of Income 3.22
    • D. Contributions by Corporate Partners 3.23
    • E. Contributions of Recapture Property 3.24
    • F. Contributions of Investment Credit Recapture Property 3.25
    • G. Depreciation 3.26
  • IV. ISSUANCE OF PARTNERSHIP INTEREST IN EXCHANGE FOR SERVICES
    • A. General Considerations 3.27
    • B. Capital Interests 3.28
    • C. Profits Interests 3.29
    • D. Restricted Partnership Interests; Options to Acquire Partnership Interests 3.30
  • V. DISGUISED SALE RULES
    • A. Disguised Sale Rules Treat Transfers as Sales 3.31
    • B. Transfer of Property by Partner; Transfer of Consideration by Partnership to Partner 3.32
    • C. Special Rules Applicable to Guaranteed Payments, Preferred Returns, Operating Cash Flow Distributions, and Reimbursements of Preformation Expenses 3.33
      • 1. Reasonable Guaranteed Payments 3.34
      • 2. Reasonable Preferred Returns 3.35
      • 3. What Are "Reasonable" Preferred Returns and Guaranteed Payments 3.36
      • 4. Operating Cash Flow Distributions 3.37
      • 5. Reimbursements of Preformation Expenses 3.38
    • D. Special Rules Relating to Liabilities 3.39
    • E. Disguised Sales by Partnerships to Partners 3.40
    • F. Exception for Certain Partnership Terminations 3.41
    • G. Disclosure 3.42
  • VI. LIABILITY SHIFTS
    • A. Effect on Contributing Partner 3.43
    • B. Effect on Noncontributing Partners 3.44
    • C. Example 3.45
    • D. Impact of Collapsible Partnership Provisions 3.46
  • VII. INVESTMENT COMPANY RULES
    • A. Gain on Transfer Is Recognized 3.47
    • B. Transfer to Investment Company Defined 3.48
    • C. Diversification Test 3.49
    • D. Diversified Portfolio Test 3.50
    • E. Real Estate Partnerships 3.51
  • VIII. PARTNERSHIP ELECTIONS 3.52
    • A. Method of Accounting 3.53
      • 1. Limits on Use of Cash Method 3.54
        • a. Inventory Business 3.55
        • b. C Corporation Partner 3.56
        • c. Tax Shelter 3.57
      • 2. Changing to Accrual Method 3.58
    • B. Selection of Taxable Year 3.59
      • 1. Conformity Rules 3.60
        • a. Majority Interest Rule 3.61
        • b. Principal Partner Rule 3.62
        • c. Least Aggregate Deferral Rule 3.63
      • 2. Maintaining Accounting Segments for Partners' Varying Interests 3.64
      • 3. Exclusive Procedures for Automatic Approval to Adopt, Change, or Retain an Annual Accounting Period 3.65
        • a. Natural Business Year 3.66
        • b. Facts and Circumstances Test 3.67
      • 4. Deferral Election With Tax Payment 3.68
      • 5. Form: Application to Adopt, Change, or Retain a Tax Year (IRS Form 1128) 3.69
    • C. Start-Up Costs 3.70
    • D. Organizational Fees and Syndication Expenses 3.71
    • E. Involuntary Conversion Elections 3.72
    • F. Depreciation Elections; Expense Election 3.73
    • G. Choice of Inventory Methods 3.74
    • H. Electing Out of Installment Method 3.75
    • I. Electing Out of Self-Charged Interest Rule Under IRC ?469 3.76
    • J. Requesting Extensions for Filing Returns 3.77
    • K. Election to Make Basis Adjustments 3.78
    • L. Electing Large Partnerships for Tax Years Ending Before January 1, 2018 3.79
    • M. Electing Out of Subchapter K 3.80
      • 1. Investment Organizations 3.81
      • 2. Joint Operating Agreements 3.82
    • N. Federal Elections Generally Satisfy California Requirements 3.83
    • O. Election by Nonresident Partners 3.84

4

Partnership Name

  • I. SCOPE OF CHAPTER 4.1
  • II. SELECTION OF NAME
    • A. Preliminary Considerations 4.2
      • 1. Type of Partnership 4.3
      • 2. Other Uses Contemplated? 4.4
      • 3. Is Name a "Fictitious Business Name"? 4.5
      • 4. Prohibited Names 4.6
    • B. Is Proposed Name Available? 4.7
      • 1. Fictitious Business Name Search 4.8
      • 2. Checking Name Availability With Secretary of State 4.9
      • 3. Special Rules for Limited Partnerships
        • a. Name Requirements for Limited Partnerships 4.10
        • b. Limited Partnership Name Must be Distinguishable 4.11
        • c. Limited Partnership's Use of Conflicting Name 4.12
        • d. Name Reservation for Limited Partnerships 4.13
      • 4. Special Rules for Limited Liability Partnerships 4.14
      • 5. Searching for Unregistered Users 4.15
      • 6. Checking for Conflicts With Trade Names or Marks 4.16
        • a. Sources for Preliminary Search 4.17
        • b. Trademark Search Services 4.18
    • C. Will Proposed Name Be Protectible?
      • 1. Protection Generally 4.19
      • 2. Table: Devices for Protecting Partnership Name 4.20
      • 3. Trade Names and Marks as They Relate to Partnership Names
        • a. Definitions and Examples 4.21
        • b. "Strong" Versus "Weak" Names and Marks 4.22
          • (1) Fanciful or Arbitrary Marks 4.23
          • (2) Suggestive Marks 4.24
          • (3) Descriptive Marks With Secondary Meaning 4.25
          • (4) Generic Terms 4.26
        • c. Registration of Trade Names and Marks 4.27
        • d. First Use as Basis for Rights 4.28
  • III. CALIFORNIA FILING REQUIREMENTS
    • A. General Partnerships
      • 1. Fictitious Business Name Statement
        • a. Who Must File 4.29
        • b. Where and When to File; Fee 4.30
        • c. Form: Fictitious Business Name Statement 4.31
        • d. Publication 4.32
        • e. Expiration and Renewal 4.33
        • f. Effect of Partner's Withdrawal 4.34
        • g. Presumptions Arising From Filing 4.35
        • h. Penalties for Noncompliance 4.36
        • i. Abandonment of Use of Fictitious Name 4.37
      • 2. Statement of Partnership 4.38
    • B. Limited Partnerships
      • 1. Form: Name Reservation Request (Secretary of State Form) 4.39
      • 2. Certificate of Limited Partnership
        • a. Filing and Recordation 4.40
        • b. Penalties for Noncompliance 4.41
      • 3. Fictitious Business Name 4.42
    • C. Limited Liability Partnership
      • 1. Registration as Limited Liability Partnership 4.43
      • 2. Fictitious Business Name 4.44
  • IV. TRANSFER AND TERMINATION OF RIGHTS IN NAME
    • A. Transfer of All Rights in Trade Name or Mark
      • 1. Trade Name Transferred With Other Assets 4.45
      • 2. Assignment of Mark Under State Law 4.46
      • 3. Federally Registered Mark 4.47
    • B. Transfer of Less Than All Rights: Licensing 4.48
    • C. Expiration or Abandonment of Trade Name or Mark 4.49
    • D. Abandonment of Fictitious Name 4.50

5

Planning General Partnerships

Charles E. Toombs

  • I. SCOPE OF CHAPTER 5.1
  • II. CHARACTER OF GENERAL PARTNERSHIP
    • A. Uniform Partnership Act of 1994 (RUPA) 5.2
    • B. Definition of Partnership 5.3
    • C. Ostensible Partnership 5.4
      • 1. Joint Venture Distinguished From Partnership 5.5
      • 2. Agency Distinguished From Partnership 5.6
    • D. Partnership as Distinct Entity 5.7
    • E. Authority to Bind Partnership
      • 1. Mutual Agency 5.8
      • 2. Transfers of Partnership Property 5.9
    • F. Partners' Liability 5.10
  • III. PARTNERS' OBLIGATIONS
    • A. Fiduciary Duties 5.11
      • 1. Duty of Loyalty 5.12
        • a. Duty to Account 5.13
        • b. Duty to Refrain From Self-Dealing 5.14
        • c. Duty Not to Compete 5.15
        • d. Role of Partnership Agreement 5.16
      • 2. Duty of Care 5.17
      • 3. Potential for Additional Fiduciary Duties 5.18
      • 4. Obligation of Good Faith and Fair Dealing 5.19
    • B. Permissible Exceptions to Partner's Duties and Obligations 5.20
    • C. Enforcement of Partners' Obligations 5.21
  • IV. APPLICATION OF CALIFORNIA LAW
    • A. Taxation of California Partnerships 5.22
    • B. Similarity to California Corporations 5.23
  • V. FACTORS TO CONSIDER IN STRUCTURING PARTNERSHIP AND DRAFTING PARTNERSHIP AGREEMENT
    • A. California or Foreign Jurisdiction 5.24
    • B. Partners' Rights and Obligations 5.25
    • C. Ownership of Partnership Property 5.26
    • D. Liability for Partnership Obligations
      • 1. Partnership Liability to Third Parties 5.27
      • 2. Partnership Liability to Partners 5.28
      • 3. Partner's Liability for Partnership Obligations 5.29
        • a. After Dissociation 5.30
        • b. After Dissolution 5.31
      • 4. Partnership Indemnification 5.32
      • 5. Insurance 5.33
    • E. Initial Contributions and Capital Structure
      • 1. Checklist: Planning for Initial Contributions and Capital Structure 5.34
      • 2. Default Provisions 5.35
    • F. Additional Financing 5.36
    • G. Failure to Make Contributions 5.37
    • H. Profit and Loss Sharing 5.38
    • I. Distributions 5.39
    • J. Transfer or Assignment of Partnership Interests 5.40
    • K. Withdrawal of Partner 5.41
    • L. Liquidating and Dissolving Partnership
      • 1. Partnership at Will 5.42
      • 2. Partnership for Definite Term or Particular Undertaking 5.43
      • 3. Dissolution on Happening of Event 5.44
      • 4. Dissolution on Petition of Partner or Transferee of Partner's Interest 5.45
      • 5. Winding Up Process 5.46
    • M. Resolving Disputes Without Litigation 5.47
  • VI. FORMATION
    • A. Partnership Agreement
      • 1. Issues to Include in Agreement 5.48
      • 2. Issues Not Affected by Agreement 5.49
    • B. Statement of Authority
      • 1. Effect of Filed Statement 5.50
      • 2. Form: Statement of Partnership Authority (Secretary of State Form GP–1) 5.51
    • C. Other Partnership Filings 5.52
    • D. Statement of Address and Principal Place of Business
      • 1. Effect of Filed Statement 5.53
      • 2. Form: Statement by Unincorporated Association (Secretary of State Form UA-100) 5.54

6

General Partnership Agreements

Charles E. Toombs

  • I. SCOPE OF CHAPTER 6.1
  • II. SHORT FORM PARTNERSHIP AGREEMENT
    • A. Form: Parties, Date, and Recitals 6.2
    • B. Form: Name 6.3
    • C. Form: Place of Business 6.4
    • D. Form: Term of Partnership 6.5
    • E. Form: Business of Partnership 6.6
    • F. Form: Powers 6.7
    • G. Form: Statutory Filings 6.8
    • H. Form: Capital 6.9
    • I. Form: Division of Profits and Losses 6.10
    • J. Form: Distributions to Partners in Proportion to Initial Capital Contributions 6.11
    • K. Form: Accounting 6.12
    • L. Form: Records and Reports 6.13
    • M. Form: Management 6.14
    • N. Form: Partners' Fiduciary Duty and Duty of Care 6.15
    • O. Form: Changes in Membership 6.16
    • P. Form: Consent of Spouses 6.17
    • Q. Transfer of Partnership Interests 6.18
      • 1. Form: Valuation of Interest 6.19
      • 2. Form: Payment of Purchase Price 6.20
    • R. Form: Miscellaneous Clauses 6.21
    • S. Form: Execution 6.22
    • T. Form: Consent of Spouses 6.23
  • III. LONG FORM PARTNERSHIP AGREEMENT
    • A. Form: Parties, Date, and Recitals 6.24
    • B. Formation Issues: Name, Term, Purposes, and Powers
      • 1. Form: Basic Operative Clause 6.25
      • 2. Form: Firm Name 6.26
      • 3. Form: Chief Executive Office 6.27
      • 4. Form: Term of Partnership 6.28
      • 5. Form: Purposes Clause 6.29
      • 6. Form: Powers 6.30
    • C. Form: Statutory Filings 6.31
    • D. Capital
      • 1. Initial Contributions
        • a. Form: Contributions in Money or Property 6.32
        • b. Form: Contributions of Services 6.33
      • 2. Form: Contributed Property; Special Tax Allocations Because of Carryover Basis 6.34
      • 3. Form: Failure to Make Initial Contribution 6.35
      • 4. Form: Deferred Contributions 6.36
      • 5. Form: Additional Capital 6.37
      • 6. Form: Withdrawals of Capital 6.38
      • 7. Form: No Interest on Capital Contributions 6.39
      • 8. Form: Loans to Partnership 6.40
    • E. Form: Division of Profits and Losses 6.41
    • F. Distributions to Partners
      • 1. Form: Distribution of Profits 6.42
      • 2. Form: Distributions of Proceeds From Sale of Capital Assets 6.43
      • 3. Form: Limit on Distributions 6.44
    • G. Accounting
      • 1. Form: Fiscal Year of Partnership 6.45
      • 2. Form: Accounting Method 6.46
      • 3. Capital Accounts
        • a. Form: Capital Accounts—Initial Contributions 6.47
        • b. Form: Adjustment of Capital Accounts 6.48
      • 4. Form: Determination of Profit and Loss 6.49
    • H. Records and Reports
      • 1. Form: Partnership Books 6.50
      • 2. Form: Annual Report to Partners 6.51
    • I. Management
      • 1. Form: Control of Business 6.52
      • 2. Form: Acts Requiring Majority Consent 6.53
      • 3. Form: Handling Funds 6.54
      • 4. Partners' Remuneration
        • a. Form: Remuneration to Partner 6.55
        • b. Form: Effect of Assignment of Interest 6.56
    • J. Partner's Fiduciary Duty
      • 1. Form: Duty of Loyalty 6.57
      • 2. Form: Duty of Care 6.58
      • 3. Form: Duty of Good Faith and Fair Dealing 6.59
      • 4. Form: Furtherance of Partner's Own Interests 6.60
    • K. Changes in Membership and Partner Dissociation
      • 1. Form: New Partners 6.61
      • 2. Form: Partner's Dissociation 6.62
      • 3. Form: Partner's Expulsion by Partner Vote 6.63
      • 4. Form: Expulsion by Judicial Determination 6.64
      • 5. Retirement
        • a. Form: Retirement From Partnership Management 6.65
        • b. Form: Retirement From Partnership 6.66
      • 6. Form: Noncompetition Covenant 6.67
      • 7. Purchase of Dissociated Partner's Interest
        • a. Form: Payment When Business Not Wound Up 6.68
        • b. Form: Payment of Purchase Price by Mutual Agreement When Business Not Wound Up 6.69
    • L. Transfer of Partnership Interests
      • 1. Form: Definition of Transferable Interest 6.70
      • 2. Form: Transferability of Interest 6.71
      • 3. Form: Transfers Under Dissolution of Marriage 6.72
      • 4. Form: Right of First Refusal 6.73
      • 5. Form: Valuation of Interest 6.74
      • 6. Form: Payment of Purchase Price 6.75
      • 7. Form: Assumption of Outstanding Partnership Liabilities 6.76
    • M. Dissolution and Termination
      • 1. Form: Dissolution 6.77
      • 2. Form: Termination of Partnership After Dissolution; Waiver of Termination 6.78
      • 3. Form: Persons Eligible to Wind Up Partnership 6.79
      • 4. Form: Distribution of Assets 6.80
    • N. Form: Indemnification 6.81
    • O. Form: Miscellaneous Clauses 6.82
    • P. Form: Execution 6.83
    • Q. Form: Consent of Spouses 6.84

7

Planning Limited Partnerships

Colby A. Campbell

George Grellas

  • I. SCOPE OF CHAPTER 7.1
  • II. FACTORS DISTINGUISHING LIMITED PARTNERSHIPS FROM GENERAL PARTNERSHIPS
    • A. Primary Distinction 7.2
    • B. Primary Advantages 7.3
    • C. Primary Disadvantages 7.4
    • D. Primary Use of Limited Partnerships 7.5
    • E. Obtaining Personal Liability Protection for General Partners 7.6
  • III. GOVERNING LAW
    • A. California Law
      • 1. Uniform Limited Partnership Act of 2008 (Re-RULPA) 7.7
      • 2. "Legacy Limited Partnerships": Effect of Re-RULPA on Limited Partnerships Formed Before January 1, 2008 7.8
      • 3. Predecessor Statutes Affecting Limited Partnerships 7.9
      • 4. Application of General Partnership Law 7.10
      • 5. Differences Between Re-RULPA and NCCUSL Uniform Act That May Affect California Limited Partnerships 7.11
    • B. Tax Law
      • 1. Federal Taxation
        • a. Tax Treatment 7.12
        • b. Tax Classification 7.13
      • 2. California Taxation 7.14
    • C. Securities Law 7.15
  • IV. CHARACTERISTICS FUNDAMENTAL TO LIMITED PARTNERSHIPS
    • A. Permissible Business 7.16
    • B. Management by General Partners 7.17
    • C. Rights of Limited Partners 7.18
    • D. Liability
      • 1. General Partners 7.19
      • 2. Limited Partners 7.20
      • 3. Liability of Investor Who Erroneously Believes in Good Faith in Limited Partner Status; Right of Withdrawal 7.21
      • 4. Insurance Coverage 7.22
    • E. Fiduciary Responsibilities
      • 1. In General 7.23
      • 2. Duty of Loyalty 7.24
      • 3. Duty of Care 7.25
      • 4. Duty of Good Faith and Fair Dealing 7.26
    • F. Books and Records 7.27
    • G. Copies and Reports 7.28
  • V. FORMATION REQUIREMENTS
    • A. Certificate of Limited Partnership
      • 1. Filing Requirement 7.29
      • 2. Execution and Acknowledgment Requirement
        • a. By General Partners 7.30
        • b. By Persons Other Than General Partners 7.31
      • 3. Payment Requirement 7.32
      • 4. Effective Date 7.33
      • 5. Recordation Option 7.34
      • 6. Liability For Misstatements 7.35
      • 7. Amendment to Certificate of Limited Partnership 7.36
      • 8. Restated Certificate of Limited Partnership 7.37
    • B. Fictitious Business Name 7.38
    • C. Trademarks, Service Names, and Trade Names 7.39
    • D. Limited Partnership Agreement
      • 1. Requirement of Agreement 7.40
      • 2. Provisions That May Be Varied 7.41
    • E. Additional Filings
      • 1. Federal Employer Identification Number 7.42
      • 2. Securities Filings 7.43
      • 3. Employer Requirements 7.44
        • a. EDD Registration 7.45
        • b. Workers' Compensation 7.46
      • 4. Licensing
        • a. Business Licenses 7.47
        • b. Seller's Permit 7.48
      • 5. Qualification to Do Business Outside California 7.49
  • VI. FACTORS TO CONSIDER IN STRUCTURING LIMITED PARTNERSHIP AND DRAFTING LIMITED PARTNERSHIP AGREEMENT 7.50
    • A. Scope of Business 7.51
    • B. Financing and Guaranties 7.52
    • C. Capital Contributions
      • 1. Initial Capital 7.53
      • 2. Additional Capital 7.54
      • 3. Contribution of Specific Assets 7.55
      • 4. Debt 7.56
      • 5. Tax Considerations 7.57
        • a. Contribution of Nonnegotiable Promissory Note 7.58
        • b. Contribution of Services 7.59
      • 6. Remedies for Failure to Contribute 7.60
    • D. Distributions
      • 1. Manner of Distribution 7.61
      • 2. Time of Distribution 7.62
      • 3. Reserve Rights 7.63
    • E. Allocations of Profits and Losses 7.64
    • F. Rights of General Partners 7.65
    • G. Voting Rights of Limited Partners 7.66
    • H. Compensation 7.67
    • I. Time and Opportunities 7.68
    • J. Indemnification 7.69
    • K. Transfers of Partnership Interests 7.70
    • L. Buy-Out Rights 7.71
    • M. Removal of General Partners 7.72
    • N. Admission of Additional Partners 7.73
    • O. Events of Dissolution 7.74
      • 1. Consent of Partners 7.75
      • 2. Cessation of General Partner 7.76
  • VII. SECRETARY OF STATE LIMITED PARTNERSHIP FORMS
    • A. Form: Certificate of Limited Partnership (Secretary of State Form LP-1) 7.77
    • B. Form: Amendment to Certificate of Limited Partnership (Secretary of State Form LP-2) 7.78
    • C. Other Limited Partnership Forms 7.79
  • VIII. CHECKLISTS
    • A. Checklist: Preformation 7.80
    • B. Checklist: Formation 7.81
  • IX. ESTATE PLANNING WITH LIMITED PARTNERSHIPS
    • A. Family Limited Partnerships (FLPs) 7.82
    • B. IRS Challenges to FLPs 7.83
    • C. Family Limited Liability Companies (FLLCs) as Alternatives to FLPs 7.84

8

Limited Partnership Agreements

Colby A. Campbell

George Grellas

  • I. SCOPE OF CHAPTER 8.1
  • II. FORM: SHORT FORM AGREEMENT FOR A SMALL CALIFORNIA LIMITED PARTNERSHIP 8.2
  • III. ANNOTATED FORM OF AGREEMENT OF LIMITED PARTNERSHIP
    • A. Form: Title of Agreement, Date, and Parties 8.3
    • B. Defined Terms
      • 1. Format 8.4
      • 2. Form: Definitions 8.5
    • C. Organization
      • 1. Form: Formation and Name 8.6
      • 2. Form: Designated Office 8.7
      • 3. Form: Certificate of Limited Partnership 8.8
      • 4. Form: Term 8.9
      • 5. Form: Business of Partnership 8.10
      • 6. Form: Financing and Partner Guaranties of Repayment 8.11
    • D. Capital Contributions
      • 1. Form: Initial Capital Contributions 8.12
      • 2. Additional Capital Contributions
        • a. Form: General Partners' Additional Capital Contributions 8.13
        • b. Form: Limited Partners—No Obligation to Contribute Additional Capital 8.14
      • 3. Form: Capital Accounts 8.15
      • 4. Form: No Interest 8.16
      • 5. Form: No Withdrawal of Capital 8.17
    • E. Form: Distributions 8.18
    • F. Profits and Losses
      • 1. Form: Determination and Allocation of Profits and Losses 8.19
      • 2. Form: Special Allocations of Profits and Losses 8.20
      • 3. Form: Qualified Income Offset 8.21
      • 4. Form: IRC ?704(c) Allocations 8.22
    • G. Rights and Powers of General Partners
      • 1. Form: Participation; Rights and Powers 8.23
      • 2. Form: Delegation of Authority 8.24
      • 3. Form: Compensation 8.25
      • 4. Form: Liability of General Partners 8.26
      • 5. Form: Reimbursement of Expenses and Indemnification 8.27
      • 6. Form: Devotion of Time 8.28
      • 7. Form: Employment or Retention of Affiliates 8.29
      • 8. Form: Other Business Activities 8.30
    • H. Rights and Powers of Limited Partners
      • 1. Form: Generally No Right to Participate 8.31
      • 2. Form: Power of Attorney 8.32
      • 3. Form: Consent Required 8.33
      • 4. Form: Liability of Limited Partners 8.34
      • 5. Form: Dissociation Rights 8.35
      • 6. Form: Transactions With Limited Partners 8.36
    • I. Administrative Matters
      • 1. Form: Books and Records 8.37
      • 2. Form: Reports and Copies 8.38
      • 3. Tax Matters
        • a. Form: Tax Returns 8.39
        • b. Form: Tax Matters Partner/Partnership Representative 8.40
      • 4. Form: Taxable Year 8.41
      • 5. Form: Accounting Method 8.42
      • 6. Form: Bank Accounts 8.43
      • 7. Form: Partnership Meetings 8.44
      • 8. Form: Insurance 8.45
    • J. Transfers of Partnership Interests
      • 1. Form: General Prohibition 8.46
      • 2. Form: Conditions of Transfer 8.47
      • 3. Form: Permitted Transfers 8.48
      • 4. Form: Right of First Refusal 8.49
      • 5. Form: Transferor's Rights in Partnership 8.50
    • K. Form: Admission of Additional Partners 8.51
    • L. Default of General Partner
      • 1. Form: Events of Default of General Partner 8.52
      • 2. Form: Notice of Default and Time to Cure 8.53
      • 3. Form: Election of Remedies After Default of General Partner 8.54
      • 4. Form: Determination of Fair Market Value 8.55
    • M. Dissolution, Winding Up, Liquidation, and Termination
      • 1. Form: Events of Dissolution 8.56
      • 2. Form: Winding Up 8.57
      • 3. Form: Distribution of Liquidation Proceeds 8.58
      • 4. Form: Deficit Restoration Requirement 8.59
    • N. Miscellaneous Provisions 8.60
      • 1. Form: Amendment 8.61
      • 2. Form: Arbitration 8.62
      • 3. Form: Binding Effect 8.63
      • 4. Form: Captions and Headings 8.64
      • 5. Form: Counterparts and Facsimiles 8.65
      • 6. Form: Counting of Days 8.66
      • 7. Form: Cumulative Remedies 8.67
      • 8. Form: Entire Agreement 8.68
      • 9. Form: Exhibits 8.69
      • 10. Form: Further Documents 8.70
      • 11. Form: Governing Law 8.71
      • 12. Form: Jurisdiction 8.72
      • 13. Form: Notice 8.73
      • 14. Form: Prevailing Party's Fees 8.74
      • 15. Form: Pronouns and Gender 8.75
      • 16. Form: Severability 8.76
      • 17. Form: Time of Essence 8.77
      • 18. Form: Waiver 8.78
    • O. Form: Signatures 8.79
    • P. Form: Separate Property Waiver and Acknowledgment 8.80

9

Planning Limited Liability Partnerships

James T. Freeman

  • I. SCOPE OF CHAPTER 9.1
  • II. NATURE OF LIMITED LIABILITY PARTNERSHIP (LLP)
    • A. Governing Laws 9.2
    • B. Available Only to Architecture, Public Accountancy, Law, Engineering, and Land Surveying, and Certain Affiliates 9.3
  • III. DISTINGUISHING CHARACTERISTIC OF LLP: LIMITED LIABILITY
    • A. Limited Liability of Partners 9.4
    • B. Exceptions to Limited Liability
      • 1. Liability Incurred When Partnership Not LLP 9.5
      • 2. Liability Imposed by Agreement 9.6
      • 3. Liability for Tortious Conduct 9.7
      • 4. Liability for Acts, Errors, and Omissions in Rendering Legal Services 9.8
      • 5. Liability as Guarantor 9.9
    • C. Restrictions on Distributions 9.10
  • IV. SECURITY FOR CLAIMS REQUIREMENTS
    • A. LLP Must Provide Security for Professional Liability Claims 9.11
      • 1. Insurance Requirements 9.12
      • 2. Deposit of Security 9.13
      • 3. Net Worth Requirements
        • a. Legal Requirements 9.14
        • b. Form: Alternative Security Provision of a Limited Liability Partnership (Secretary of State Form LLP–3) 9.15
    • B. Automatic Guaranty 9.16
    • C. Security on Dissolution or Insolvency 9.17
  • V. FORMATION OF LIMITED LIABILITY PARTNERSHIPS
    • A. Partnership Names 9.18
    • B. Registration With Secretary of State
      • 1. Legal Requirements 9.19
      • 2. Form: Application to Register a Limited Liability Partnership (Secretary of State Form LLP–1) 9.20
      • 3. Amending Limited Liability Partnership Registration 9.21
      • 4. Form: Amendment to Registration of a Limited Liability Partnership (Secretary of State Form LLP–2) 9.22
    • C. Additional Registration and Filing Requirements 9.23
      • 1. State Board of Architectural Examiners 9.24
      • 2. State Board of Accountancy 9.25
      • 3. State Bar of California
        • a. Legal Requirements 9.26
        • b. Form: Application for Issuance of Certificate of Registration as a Limited Liability Partnership (State Bar Form LLP 101) 9.27
    • D. Partnership Agreement 9.28
  • VI. CHANGE OF STATUS
    • A. Cessation of LLP Status 9.29
    • B. Form: Notice of Change of Status of a Limited Liability Partnership (Secretary of State Form LLP–4) 9.30
  • VII. CHECKLISTS
    • A. Checklist: Organizing New California LLP 9.31
    • B. Checklist: Registering Foreign LLP in California 9.32
    • C. Checklist: Converting Domestic Partnership to Registered LLP 9.33

10

Limited Liability Partnership Agreements

James T. Freeman

  • I. SCOPE OF CHAPTER 10.1
  • II. LIMITED LIABILITY PARTNERSHIP AGREEMENT FORM PROVISIONS
    • A. Form: Title, Introduction, Name 10.2
    • B. Form: Purpose and Term 10.3
    • C. Form: Place of Business 10.4
    • D. Form: Security Requirements 10.5
    • E. Form: Definitions 10.6
    • F. Form: Capital Contributions 10.7
    • G. Form: Capital Accounts; Allocations of Profit and Loss 10.8
    • H. Form: Qualified Income Offset 10.9
    • I. Form: Distributions 10.10
    • J. Form: Restrictions on Distributions 10.11
    • K. Form: Management 10.12
    • L. Form: Rights and Duties of Partners 10.13
    • M. Form: Fiscal Year, Accounting Method, Records and Reports, Tax Returns, and Banking 10.14
    • N. Form: Additional Partners 10.15
    • O. Form: Withdrawal, Expulsion, or Disability of Partner 10.16
    • P. Form: Payments to Terminated Partner 10.17
    • Q. Form: Continuation of Partnership 10.18
    • R. Form: Liquidating Events 10.19
    • S. Form: Winding Up 10.20
    • T. Form: Deficit Capital Accounts 10.21
    • U. Form: Indemnification 10.22
    • V. General Provisions
      • 1. Form: Amendments 10.23
      • 2. Form: Notices 10.24
      • 3. Form: Counterparts 10.25
      • 4. Form: Governing Law 10.26
      • 5. Form: Successors 10.27
      • 6. Form: Severability 10.28
      • 7. Form: Headings 10.29
      • 8. Form: Further Documents 10.30
      • 9. Form: Construction 10.31
      • 10. Form: Gender 10.32
      • 11. Form: Incorporation by Reference 10.33
    • W. Form: Attorney Fees 10.34
    • X. Form: Arbitration 10.35
    • Y. Form: Entire Agreement 10.36

11

Issuing Partnership Interests

Christopher Chediak

  • I. SCOPE OF CHAPTER 11.1
  • II. CHARACTER OF PARTNERSHIP INTEREST
    • A. General Partnership Interest Under RUPA
      • 1. Nature and Definition of "Partnership Interest" 11.2
      • 2. Existence of General Partnership 11.3
      • 3. Issuance of Partnership Interests in General Partnership 11.4
    • B. Limited Partnership Interests Under Re-RULPA
      • 1. Applicability 11.5
      • 2. "Partnership Interest" Defined 11.6
      • 3. Issuance of Partnership Interests in Limited Partnerships
        • a. Becoming a General Partner 11.7
        • b. Becoming a Limited Partner 11.8
  • III. APPLICATION OF FEDERAL SECURITIES LAWS TO ISSUANCE OF PARTNERSHIP INTERESTS
    • A. Securities Laws and Determining if Investment Is "Security" 11.9
      • 1. When Partnership Interest Is Investment Contract 11.10
        • a. Profits Derived From Efforts of Others: Howey Test 11.11
        • b. Investor Lacks Ability to Control Management: Williamson Test 11.12
      • 2. Other Tests of Interest as Security: "Similar Circumstances" and "Family Resemblance" 11.13
    • B. Registering Transactions Under Securities Act 11.14
    • C. Securities and Transactions Exempt From Registration Requirement 11.15
      • 1. Nonpublic Offerings 11.16
        • a. Requirements for Nonpublic Offering
          • (1) Information Available to Investors 11.17
          • (2) Securities Have "Come to Rest" 11.18
        • b. Investor Representations and Legend Requirements 11.19
      • 2. Limited Offerings: Regulation D 11.20
        • a. Rule 504: Offerings up to $1 Million 11.21
        • b. Rule 505: Offerings up to $5 Million [Deleted] 11.22
        • c. Rule 506: Offerings With No Monetary Limit 11.23
      • 3. Intrastate Offerings
        • a. Section 3(a)(11) Exemption 11.24
        • b. Rule 147 11.25
        • c. Rule 147A 11.25A
        • d. Using Intrastate Exemption With Other Exemptions 11.26
        • e. Form: Legend for Certificate and Partnership Agreement 11.27
      • 4. Coordination With California Exemption for Sales to Qualified Purchasers: Regulation CE 11.28
      • 5. Offerings Under Compensatory Benefit Plans 11.28A
      • 6. Crowdfunding 11.28B
      • 7. Regulation A+ 11.28C
    • D. Application of Federal Antifraud Provisions to Issuance of Partnership Interests 11.29
      • 1. Section 10(b) and Rule 10b–5 of Securities Exchange Act 11.30
      • 2. Section 17 of Securities Act 11.31
      • 3. Sections 11 and 12(a) of Securities Act 11.32
      • 4. Disclosure Documents 11.33
        • a. All Material Information 11.34
        • b. Type of Investor Determines Level of Disclosure 11.35
      • 5. Regulation D Information Delivery Requirement 11.36
  • IV. APPLICATION OF CALIFORNIA SECURITIES LAWS TO ISSUANCE OF PARTNERSHIP INTERESTS
    • A. Partnership Interests Defined as Securities
      • 1. Definition Based on Partners' Active Participation in Management 11.37
      • 2. Tests Used to Determine When Partnership Interest Is Investment Contract 11.38
        • a. "Risk Capital" Test 11.39
        • b. Howey Test 11.40
    • B. Qualification Required for Nonexempt Security Transactions 11.41
      • 1. Merit Regulation: "Fair, Just, and Equitable" Standard 11.42
      • 2. Transaction Definitions Essential for Determining Whether Qualification Is Required 11.43
    • C. Exemptions From Qualification 11.44
      • 1. Exempt Securities 11.45
      • 2. Exempt Transactions
        • a. Issuer, Nonissuer, and Reorganization Transactions Can Be Exempt 11.46
        • b. Limited Offering Exemption 11.47
          • (1) No More Than 35 Purchasers 11.48
          • (2) Qualified Purchasers 11.49
          • (3) Purchaser's Investment Representation 11.50
          • (4) No Advertising 11.51
          • (5) Filing Notice 11.52
          • (6) Form: Subscription Agreement 11.53
        • c. Exemption for Sales to Qualified Purchasers That Are Accompanied by General Announcement 11.54
          • (1) Purchaser Must Be Qualified 11.55
          • (2) Disclosure Document 11.56
          • (3) Information in General Announcement 11.57
          • (4) Filing Notice of Transaction 11.58
        • d. Nonissuer Exemptions 11.59
        • e. Other Transactions Exempt From Qualification 11.60
    • D. Qualifying Issuer Transaction 11.61
      • 1. Qualification by Coordination 11.62
      • 2. Qualification by Notification 11.63
      • 3. Qualification by Permit 11.64
        • a. Preparing the Application 11.65
        • b. Filing the Application 11.66
        • c. Division of Corporations' Review of Application 11.67
    • E. Liability for Violations Under California Securities Law 11.68
      • 1. Liability for Failure to Qualify Offers and Sales of Securities 11.69
      • 2. Liability for Manipulation of Prices or Appearance of Trading 11.70
      • 3. Liability for Misrepresentation of Material Facts 11.71
      • 4. Liability for Unlawful Insider Trading 11.72
      • 5. Vicarious Liability 11.73
      • 6. Common Law Liability 11.74

12

Operating a Partnership

John E. Di Giusto

  • I. SCOPE OF CHAPTER 12.1
  • II. DECISION MAKING
    • A. Who Has Authority; Scope of Authority
      • 1. General Partnerships
        • a. Statutory Restrictions Applicable to Partnership Agreements 12.2
        • b. Equal Authority; Majority Rule 12.3
        • c. Voting; Deadlocks 12.4
        • d. Effect of Partnership Statement 12.5
        • e. Effect of Partner's Dissociation 12.6
      • 2. Limited Partnerships
        • a. Role of General Partner
          • (1) When General Partner Is Not Also a Limited Partner 12.7
          • (2) When General Partner Is Also a Limited Partner 12.8
        • b. Multiple General Partners 12.9
        • c. Classes of Partners 12.10
        • d. Liability Considerations 12.11
        • e. Meetings 12.12
    • B. How a Partnership Executes Documents
      • 1. General Partnerships 12.13
      • 2. Certificates for Limited Partnerships 12.14
  • III. LICENSING REQUIREMENTS OF TRADES AND PROFESSIONS 12.15
  • IV. CONVEYANCE OF PARTNERSHIP PROPERTY 12.16
    • A. Property Held in Name of Partnership 12.17
    • B. Property Held in Name of One or More Partners or Other Persons 12.18
    • C. Recovery of Improperly Transferred Property 12.19
    • D. Limited Partnerships 12.20
    • E. Property Tax Revaluations 12.21
  • V. GENERAL PARTNERSHIP STATEMENTS 12.22
  • VI. LIMITED PARTNERSHIP FORMS 12.23
  • VII. QUALIFYING TO DO BUSINESS IN ANOTHER JURISDICTION 12.24
  • VIII. FORM: RESIGNATION OF AGENT UPON WHOM PROCESS MAY BE SERVED (SECRETARY OF STATE FORM RA-100) 12.25

13

Taxation of Partnership Income

Charles E. Toombs

  • I. SCOPE OF CHAPTER 13.1
  • II. TAX ACCOUNTING
    • A. Pass-Through Treatment 13.2
    • B. Computing Taxable Income
      • 1. Income Computed at Entity Level 13.3
      • 2. Partnership Audits and Adjustments; Election Out 13.3A
      • 3. Disallowed Deductions 13.4
      • 4. Separately Stated Items 13.5
    • C. Federal and State Income Tax Reporting Requirements
      • 1. IRS Form 1065; Schedule K-1 (1065) 13.6
      • 2. Franchise Tax Board Form 565; Schedule K-1 (565) 13.7
    • D. Tax Matters Partner/Partnership Representative 13.8
  • III. PARTNER'S BASIS IN PARTNERSHIP INTEREST
    • A. Purposes of Calculation 13.9
    • B. Determining Partner's Initial Basis
      • 1. Acquisition by Capital Contribution 13.10
      • 2. Acquisition by Purchase 13.11
      • 3. Acquisition by Gift 13.12
      • 4. Acquisition by Inheritance 13.13
    • C. Adjustments to Partner's Basis
      • 1. Increases in Basis 13.14
      • 2. Decreases in Basis 13.15
    • D. Effect of Partnership Liabilities on Partner's Basis 13.16
      • 1. Increase and Decrease in Partner's Share of Partnership Liabilities Reflected in Basis 13.17
      • 2. Determining Partner's Share of Partnership Liabilities 13.18
        • a. Recourse Liabilities 13.19
        • b. Nonrecourse Liabilities 13.20
  • IV. PARTNER'S DISTRIBUTIVE SHARE
    • A. Significance of Distributive Shares 13.21
    • B. Determining Partner's Distributive Share 13.22
      • 1. Allocations With Substantial Economic Effect 13.23
        • a. Capital Account Maintenance 13.24
        • b. Liquidating Distributions 13.25
        • c. Capital Account Deficit Restoration Requirement 13.26
        • d. Qualified Income Offset 13.27
        • e. Substantiality of Economic Effect 13.28
          • (1) Shifting Tax Consequences Within 1 Year 13.29
          • (2) Transitory Allocations Over Successive Years 13.30
      • 2. Allocation in Accordance With Partner's Interest in Partnership 13.31
      • 3. Special Rules for Allocations of Nonrecourse Deductions 13.32
        • a. Safe Harbor Test 13.33
        • b. Minimum Gain Chargeback 13.34
      • 4. Allocations of Precontribution Gain, Loss, and Deduction 13.35
        • a. Allocations of Built-In Gain or Loss 13.36
        • b. Allocations of Cost Recovery Deductions 13.37
        • c. Ceiling Limitation and "Small Disparity" Rule 13.38
    • C. Allocations Relating to Family Partnerships 13.39
      • 1. Donating Partnership Interest to Family Member 13.40
      • 2. When Donee Recognized as Partner of Partnership 13.41
    • D. Limitations on Deductibility of Partner's Share of Partnership Losses 13.42
      • 1. Basis Limitation 13.43
      • 2. At-Risk Limitation 13.44
      • 3. Passive Loss Limitation 13.45
        • a. Real Estate Professionals 13.46
        • b. Publicly Traded Partnerships 13.47
  • V. CURRENT DISTRIBUTIONS TO PARTNER
    • A. Partner's Recognition of Gain and Loss 13.48
      • 1. Distributions of Cash 13.49
      • 2. Distributions of Other Assets 13.50
        • a. Distributions That Alter Partner's Interest in IRC ?751 Property 13.51
        • b. Distributions That Alter Partners' Shares of Partnership Liabilities 13.52
        • c. Distributions Relating to Built-In Gain Property 13.53
        • d. Distributions Treated as Disguised Sales 13.54
        • e. Distributions of Property Subject to Depreciation and Investment Credit Recapture
          • (1) Depreciation Carries Over 13.55
          • (2) Investment Credit Recapture 13.56
    • B. Partner's Basis in Partnership Interest and Distributed Property
      • 1. Basis of Partnership Interest 13.57
      • 2. Basis of Distributed Property 13.58
    • C. Holding Period of Distributed Property 13.59
  • VI. PARTNERSHIP TRANSACTIONS WITH PARTNERS
    • A. Distributions Treated Differently From Other Payments to Partners 13.60
      • 1. Payments to Partner Acting in Nonpartner Capacity 13.61
      • 2. Payments to Partner Acting in Partner Capacity 13.62
    • B. Self-Employment Tax 13.63
    • C. Sale of Assets to Controlled Partnership 13.64

14

Taxation of Transfers and Terminations of Partnership Interests

John R. Bonn

Julie Vandersluis Skeen

  • I. SCOPE OF CHAPTER 14.1
  • II. SALE OR EXCHANGE OF PARTNERSHIP INTEREST
    • A. Treatment of Transferor
      • 1. Distinguishing Sale or Exchange, Liquidation, and Termination 14.2
      • 2. "Disguised" Sale or Exchange 14.3
      • 3. Recognition and Amount of Transferor's Gain or Loss 14.4
      • 4. Sale of Partial Interest 14.5
      • 5. Contribution to Another Partnership 14.6
      • 6. No Like-Kind Exchange of Partnership Interests 14.7
      • 7. Transfer in Exchange for Stock of Corporation 14.8
      • 8. Character of Income, Gain, or Loss Recognized in General 14.9
      • 9. Amounts Attributable to Unrealized Receivables and Inventory Items 14.10
      • 10. Active, Passive, and Portfolio Income, Gain, or Loss 14.11
      • 11. Suspended Losses 14.12
      • 12. Installment Sale 14.13
      • 13. Closing of Partnership Taxable Year 14.14
    • B. Treatment of Transferee
      • 1. Capital Account for Purchased Interest 14.15
      • 2. Purchaser's "Outside" Basis and Holding Period 14.16
      • 3. Effect on Basis and Holding Period of Partnership Assets 14.17
      • 4. Elective Inside Basis Adjustment 14.18
      • 5. Allocation of Basis Adjustment 14.19
      • 6. Effect on Depreciation and Amortization of Partnership Assets 14.20
      • 7. Amortization of Partnership Section 197 Intangibles 14.21
    • C. Allocation of Partnership Tax Items Between Transferor and Transferee for Year of Sale or Exchange 14.22
    • D. Technical Termination of Partnership
      • 1. Termination by Sale or Exchange 14.23
      • 2. Definition of "Sale or Exchange" 14.24
      • 3. Effect of Order of Transactions on Whether Termination Occurs 14.25
      • 4. Consequences of Technical Termination of Partnership 14.26
  • III. LIQUIDATION OF PARTNERSHIP INTEREST
    • A. Distinguishing Between Liquidation and Sale or Exchange of Partnership Interest 14.27
    • B. When Liquidation of an Interest Is Considered to Occur 14.28
    • C. Treatment of Liabilities 14.29
    • D. Distinguishing Between Current and Liquidating Distributions 14.30
    • E. Income Tax Treatment of Payments in Liquidation of Partner's Interest 14.31
      • 1. Substantially Appreciated Inventory Items 14.32
      • 2. Constructive Sale or Exchange of Unrealized Receivable 14.33
      • 3. Liquidating Distributions for Unrealized Receivables 14.34
      • 4. Payments for Partnership Property, Including Good Will 14.35
      • 5. Income Payments 14.36
    • F. Constructive Sale or Exchange of "Hot Assets" 14.37
    • G. Income Payments 14.38
    • H. Payments for Partnership Property 14.39
    • I. Treatment of Payments for Good Will 14.40
    • J. Allocation of Series of Payments 14.41
    • K. Distributions in Kind: Recognition of Gain or Loss 14.42
      • 1. Basis of Distributed Property 14.43
      • 2. Holding Period of Distributed Property 14.44
      • 3. Character of Gain on Sale of Distributed Property 14.45
    • L. Adjustments to Basis of Undistributed Partnership Property 14.46
    • M. Amortization of ?197 Intangibles 14.47
    • N. Allocation of Partnership Tax Items for Year or Years of Liquidation 14.48
  • IV. WITHHOLDING REQUIREMENTS
    • A. Federal Withholding Requirements 14.49
    • B. California Withholding Requirements 14.50
      • 1. Domestic Nonresidents of California 14.51
      • 2. Foreign Nonresident Partners 14.52
  • V. NONINCOME-TAX CONSEQUENCES
    • A. Sales Tax Consequences of Sale of Partnership Interests 14.53
    • B. Change of Ownership for California Real Property Tax Purposes 14.54
      • 1. Acquisition of More Than 50 Percent Control 14.55
      • 2. Transfers by Original Co-Owners 14.56
      • 3. Transfers Between Spouses or Registered Domestic Partners 14.57
    • C. California Documentary Transfer Tax 14.58

15

Litigation

Frederick D. Booke

Ovvie Miller

  • I. SCOPE OF CHAPTER 15.1
  • II. ALTERNATIVE DISPUTE RESOLUTION 15.2
    • A. Mediation 15.3
    • B. Arbitration
      • 1. Contractual Arbitration 15.4
      • 2. Factors Affecting Decision to Include Arbitration Provision in Partnership Agreement
        • a. Discovery, Damages, Arbitration Principles, Future Controversies, and Judicial Review 15.5
        • b. Availability of Class Action Arbitration 15.5A
      • 3. Nonsignatory Arbitration 15.6
    • C. Judicial Arbitration 15.7
  • III. CIVIL LITIGATION
    • A. Partnership's Contacts With Other States 15.8
      • 1. Conflict of Laws: General Partnerships and Limited Liability Partnerships (LLPs) 15.9
      • 2. Regulation of Foreign Limited Partnerships 15.10
        • a. In California 15.11
        • b. In Other States 15.12
    • B. California Jurisdiction 15.13
      • 1. Domestic Partnerships 15.14
      • 2. Foreign Partnerships 15.15
        • a. Doing Business Test 15.16
        • b. Agent Designated for Service of Process 15.17
    • C. Federal Jurisdiction 15.18
    • D. Venue 15.19
    • E. Parties
      • 1. Determining Whether Partnership or Partners Are Parties 15.20
      • 2. Statement of Partnership Authority 15.21
      • 3. Limited Liability Partners as Parties 15.22
      • 4. California Joinder
        • a. Actions by Partnership 15.23
        • b. Actions Against Partners or Partnership 15.24
      • 5. Federal Joinder 15.25
    • F. Limitation of Actions 15.26
  • IV. ACTION AGAINST OUTSIDER BY PARTNERSHIP AND/OR PARTNERS
    • A. Identity of Plaintiffs 15.27
    • B. Complaint 15.28
      • 1. Allegations of Partnership Existence 15.29
      • 2. Fictitious Business Name Allegations
        • a. Action by General Partnership 15.30
        • b. Action by Limited Partnership 15.31
        • c. Action by Individual Partners 15.32
      • 3. Body of Complaint 15.33
      • 4. Prayer, Subscription, and Verification 15.34
    • C. Responses by Defendant Outsider
      • 1. Grounds for Demurrer 15.35
        • a. No Allegation of Compliance With Fictitious Business Name Statutes 15.36
        • b. No Certificate of Limited Partnership 15.37
        • c. Partner Not Joined as Plaintiff 15.38
      • 2. Answer 15.39
      • 3. Cross-Complaint 15.40
      • 4. Motions for Joinder of Necessary Parties 15.41
    • D. Trial Problems
      • 1. Discovery; Unwanted Disclosure of Business Information 15.42
      • 2. Admission of Evidence 15.43
      • 3. Special Jury Instructions 15.44
    • E. Binding Nature of Judgment 15.45
  • V. ACTION BY OUTSIDER AGAINST PARTNERSHIP AND/OR PARTNERS
    • A. Types of Outsider Litigation 15.46
    • B. Differences Between Actions Against Outsiders and Actions by Outsiders 15.47
    • C. Separate Actions 15.48
    • D. Pleading
      • 1. Identity of Defendants 15.49
      • 2. Existence of Partnership 15.50
    • E. Statement of Partnership Authority 15.51
    • F. Allegations of Partner's Authority 15.52
    • G. Allegations Regarding Limited Partner Defendants 15.53
    • H. Partnership by Estoppel 15.54
    • I. Service of Process 15.55
    • J. Effect of Service on Judgment 15.56
    • K. Intervention by Limited Partner 15.57
    • L. Responses by Defendant Partnership and/or Partners
      • 1. Demurrer for Misjoinder 15.58
      • 2. Defenses in Answer 15.59
      • 3. Nonjoinder of Partner 15.60
      • 4. Cross-Complaint 15.61
    • M. Trial Problems
      • 1. Evidentiary Issues
        • a. Evidence on Whether Transaction Was With Partnership or Partner 15.62
        • b. Evidence of Partnership Relationship 15.63
      • 2. Death of Partner 15.64
      • 3. Dissolution of Partnership 15.65
    • N. Effect of Judgment
      • 1. Table: Judgments Against Partnerships and General Partners 15.66
      • 2. Res Judicata 15.67
      • 3. Default Judgments 15.68
    • O. Enforcing Judgments 15.69
      • 1. Levying Against Partner's Assets for Judgment Against Partnership 15.70
      • 2. Levying Against Partner's Interest in Partnership for Judgment Against Partner 15.71
      • 3. Payment and Right to Contribution 15.72
      • 4. Charging Order 15.73
  • VI. ACTIONS WITHIN PARTNERSHIP GROUP
    • A. Actions Before Formation
      • 1. When Action Is Appropriate 15.74
      • 2. Measuring Damages 15.75
    • B. Actions During Partnership's Existence
      • 1. Actions by General Partners 15.76
      • 2. Actions by Limited Partners 15.77
      • 3. Proof of Partnership's Existence
        • a. Question of Fact 15.78
        • b. Types of Evidence Admissible to Show Partnership Existence 15.79
        • c. Joint Venture 15.80
        • d. Formation by Written or Oral Agreement Implied by Contract 15.81
    • C. Torts 15.82
    • D. Accounting
      • 1. Accounting Not Required for Ancillary Relief 15.83
      • 2. Pleading When Accounting Is Sought 15.84
      • 3. Cross-Complaint for Dissolution and Accounting 15.85
      • 4. Table: Problems of Proof in Action for Accounting 15.86
      • 5. Judgments and Orders in Accounting Actions 15.87
    • E. Class and Derivative Actions in Limited Partnerships 15.88
    • F. Rescission of Partnership Agreement 15.89
    • G. Conspiracy 15.90
    • H. Contribution 15.91
    • I. Workplace Antidiscrimination Actions 15.92
  • VII. ASSIGNMENT OF PARTNER'S INTEREST
    • A. General Partnerships
      • 1. Transferable Interest and Rights of Transferor 15.93
      • 2. Rights of Transferee 15.94
    • B. Limited Partnerships 15.95

16

Dissociation and Transfer of Partnership Interests

Rachelle H. Cohen

John E. Di Giusto

  • I. SCOPE OF CHAPTER 16.1
  • II. CHANGES IN GENERAL PARTNERSHIP MEMBERSHIP
    • A. Dissociation
      • 1. Effect 16.2
      • 2. Events Causing Dissociation 16.3
      • 3. Wrongful Dissociation 16.4
      • 4. Liabilities Around Dissociation 16.5
    • B. Partnership Continues on Purchase of Partner's Interest 16.6
    • C. Admission of New General Partner [Deleted] 16.7
    • D. Additional Considerations [Deleted] 16.8
  • III. DISSOCIATION IN LIMITED PARTNERSHIPS
    • A. Events Causing Dissociation
      • 1. General Partners 16.9
      • 2. Limited Partners 16.10
    • B. Documenting the Dissociation 16.11
    • C. Form: Certificate of Dissociation (Secretary of State Form LP-101) 16.12
    • D. Effect of Dissociation
      • 1. General Partners 16.13
      • 2. Limited Partners 16.14
    • E. Right to Distribution on Dissociation 16.15
    • F. Wrongful Dissociation
      • 1. General Partners 16.16
      • 2. Limited Partners 16.17
    • G. Liabilities Around Dissociation
      • 1. General Partners 16.18
      • 2. Limited Partners 16.19
  • IV. RETIREMENT OF GENERAL PARTNER
    • A. Methods of Effecting Retirement
      • 1. General Partnerships 16.20
      • 2. Limited Partnerships 16.21
    • B. Partners' Continuing Rights After Retirement
      • 1. General Partnerships 16.22
      • 2. Limited Partnerships 16.23
    • C. Partners' Continuing Liability After Retirement
      • 1. General Partnerships 16.24
      • 2. Limited Partnerships 16.25
  • V. DEATH OF PARTNER
    • A. General Partnerships 16.26
    • B. Limited Partnerships 16.27
  • VI. TRANSFERRING PARTNERSHIP INTERESTS
    • A. General Partnerships 16.28
    • B. Limited Partnerships
      • 1. Interests of Limited Partners 16.29
      • 2. Interests of General Partners 16.30
    • C. Rights and Liabilities of Transferees
      • 1. General Partner Interest
        • a. General Partnerships 16.31
        • b. Limited Partnerships 16.32
      • 2. Limited Partner Interest 16.33
    • D. Tax Consequences of Transferring Partnership Interest 16.34
      • 1. Amount of Gain or Loss Realized 16.35
      • 2. Allocation of Partnership Income and Loss Between Buyer and Seller 16.36
      • 3. Sales of Partnership Interest When Partnership Holds Ordinary Income Property 16.37
      • 4. Notification Compliance 16.38
      • 5. Tax Effect for Partnership of Sale of Partnership Interest 16.39
      • 6. Related Party Transfers 16.40
    • E. Complying With Securities Laws 16.41
    • F. Complying With Buy-Sell Provisions, Rights, and Options 16.42
  • VII. SECURITY IN PARTNERSHIP INTERESTS
    • A. Assignment For Security 16.43
    • B. Perfecting Security Interest or Obtaining a Lien in Partnership Interest
      • 1. General Partnerships 16.44
      • 2. Limited Partnerships 16.45
    • C. Execution on Partnership Interest 16.46
  • VIII. PROCEDURAL MATTERS
    • A. Interests in General Partnerships 16.47
    • B. Interests in Limited Partnerships 16.48

17

Dissolving and Winding Up Partnership

J. Michael Matthews

  • I. SCOPE OF CHAPTER 17.1
  • II. DISTINGUISHING DISSOCIATION, DISSOLUTION, WINDING UP, AND TERMINATION 17.2
  • III. GENERAL PARTNERSHIPS
    • A. Dissolution Events
      • 1. Dissociation Does Not Automatically Cause Dissolution 17.3
      • 2. Partnership at Will 17.4
      • 3. Partnership for Definite Term or Particular Undertaking 17.5
      • 4. Effect of Partnership Agreement 17.6
    • B. Dissolution by Court Decree
      • 1. Grounds for Decree 17.7
      • 2. Decree Sought by Assignee or Judgment Creditor 17.8
    • C. Alternatives to Dissolution
      • 1. Continuation; Waiver of Dissolution 17.9
      • 2. Rescission and Restitution 17.10
      • 3. Accounting Without Dissolution 17.11
    • D. Partner Authority and Liability
      • 1. Post-Dissolution Authority and Liability 17.12
      • 2. Importance of Filing Statement of Dissolution 17.13
    • E. Winding Up Partnership Business
      • 1. Liquidating Partners 17.14
      • 2. Distributions 17.15
      • 3. Closing Out Partners' Accounts 17.16
      • 4. Court-Supervised Winding Up 17.17
  • IV. LIMITED PARTNERSHIPS
    • A. Governing Law 17.18
    • B. Dissolution Events
      • 1. Agreement or Consent 17.19
      • 2. When Dissociation Causes Dissolution
        • a. Dissociation of General Partner 17.20
        • b. Dissociation of Last Limited Partner 17.21
    • C. Judicial Dissolution 17.22
    • D. Alternatives to Dissolution
      • 1. Avoiding Judicial Dissolution 17.23
      • 2. Limited Partnership Rollups 17.24
    • E. Partner Authority and Liability
      • 1. Post-Dissolution Authority and Liability of General Partners 17.25
      • 2. Notice to Known Claimants 17.26
      • 3. Publication of Notice of Dissolution 17.27
      • 4. Filing Certificate of Cancellation 17.28
    • F. Winding Up Partnership Business
      • 1. Permitted Activities; Liquidating Partners 17.29
      • 2. Distributions 17.30
      • 3. Closing Out Partners' Accounts 17.31
      • 4. Court-Supervised Winding Up 17.32
  • V. SPECIAL RULES FOR LIMITED LIABILITY PARTNERSHIPS
    • A. Liability of Partners 17.33
    • B. Notice of Cessation 17.34
    • C. Security on Dissolution or Insolvency 17.35
  • VI. FORMS
    • A. Form: Statement of Dissolution (Secretary of State Form GP–4) 17.36
    • B. Form: Limited Partnership Certificate of Cancellation (Secretary of State Form LP–4/7) 17.37
    • C. Provisions for Dissolution of General Law Partnership
      • 1. Form: Election to Dissolve 17.38
      • 2. Form: Duty of Partner 17.39
      • 3. Form: Disposition of Client Files 17.40
      • 4. Form: Costs of Liquidation 17.41
      • 5. Form: Distributions to Partners 17.42
      • 6. Form: Waiver of Right to Court Decree of Dissolution 17.43
      • 7. Form: Indemnification 17.44

18

Change of Entity

Cara K. Lowe

Mark D. Lubin

John R. Bonn

  • I. SCOPE OF CHAPTER 18.1
  • II. ADVANTAGES OF AND APPROACHES TO CHANGING FORM
    • A. Advantages of Changing Into and From Partnership Form
      • 1. Changing Corporations Into Partnerships 18.2
      • 2. Changing LLCs Into Partnerships 18.3
      • 3. Changing General Partnerships Into Limited Partnerships 18.4
      • 4. Changing Partnerships Into Corporations and LLCs 18.5
    • B. Approaches to Changing Into and From Partnership
      • 1. By Statutory Merger 18.6
      • 2. By Exchange Transaction 18.7
      • 3. By Statutory Conversion 18.8
      • 4. By Amending Partnership Agreement 18.9
  • III. TAX AND SECURITIES ISSUES
    • A. Federal and California Income Tax
      • 1. Changing Corporations Into Partnerships 18.10
        • a. Changing C Corporations 18.11
        • b. Changing S Corporations 18.12
        • c. Corporations With Minimal Tax Risks 18.13
      • 2. Changing LLCs to Partnerships 18.14
      • 3. Changing General Partnerships to Limited Partnerships 18.15
      • 4. Changing Partnerships Into LLCs and Corporations 18.16
      • 5. Disappearing Partnership and Its Members in Merger 18.17
      • 6. Surviving Partnership and Its Members in Merger 18.18
      • 7. Transitory Merger Entity 18.19
      • 8. Income Tax Termination of Partnership 18.20
      • 9. Special Rule for Merger or Consolidation of Partnerships
        • a. Income Tax Treatment of Resulting Partnership 18.21
        • b. Effect of State Law on Special Rule 18.22
    • B. Sales and Use Taxes 18.23
    • C. Real Property Transfer Tax 18.24
      • 1. Exemptions From Documentary Transfer Tax 18.25
      • 2. Transfer Tax When Change Occurs by Merger or Conversion 18.26
      • 3. Transfer Tax When Change Does Not Occur by Merger or Conversion 18.27
    • D. Real Property Tax Reassessment 18.28
    • E. Securities Issues 18.29
      • 1. "Securities" Defined
        • a. General Partnership Interests 18.30
        • b. Limited Partnership Interests 18.31
        • c. Corporate Shares and LLC Interests 18.32
      • 2. Registering Issuance of Interests
        • a. Under Federal Law 18.33
        • b. Under California Law 18.34
  • IV. STATUTORY MERGERS
    • A. Types of Merger Permitted 18.35
    • B. Law Governing Merger Proceedings 18.36
    • C. Limited Liability Partnerships 18.37
    • D. Steps for Merger 18.38
    • E. Foreign Entity as Participant in Merger 18.39
    • F. Approval and Documentation Requirements for New Entity 18.40
    • G. Effect of Merger 18.41
    • H. Approval of Merger 18.42
      • 1. By General Partnership 18.43
      • 2. By Limited Partnership 18.44
      • 3. By Corporation 18.45
      • 4. By LLC 18.46
    • I. Agreement of Merger
      • 1. Required Contents 18.47
      • 2. Officers' Certificate 18.48
      • 3. Form: Agreement of Merger 18.49
      • 4. Amendment of Agreement of Merger 18.50
    • J. Certificate of Merger
      • 1. Contents of Certificate 18.51
      • 2. Notice to Secretary of State; Agent for Service of Process of Domestic Disappearing Entity 18.52
      • 3. Form: Certificate of Merger (Secretary of State Form OBE MERGER-1) 18.53
      • 4. Execution of Certificate 18.54
    • K. Statement of Merger
      • 1. When to File 18.55
      • 2. Form: Statement/Certificate of Merger (Secretary of State Form GP–6) 18.56
      • 3. Effective Date of Merger
        • a. General Rules for Effective Date of Merger 18.57
        • b. Future Effective Date of Merger 18.58
        • c. Effective Date of Merger Involving Foreign Parties 18.59
    • L. Dissenters' Rights 18.60
      • 1. Limited Partnerships 18.61
        • a. Definition of Limited Partner "Dissenting Interest" 18.62
        • b. Loss of Status as Dissenting Interest 18.63
        • c. Notice of Approval of Merger 18.64
        • d. Demand for Purchase and Payment 18.65
        • e. Submission of Certificate 18.66
        • f. Establishing Purchase Price and Status as Dissenting Interest
          • (1) Establishing Purchase Price 18.67
          • (2) Agreement on Status 18.68
          • (3) Procedure if Parties Fail to Agree on Price or Status 18.69
        • g. Limitation on Rights of Limited Partners to Challenge Reorganization 18.70
      • 2. Corporations 18.71
      • 3. LLCs 18.72
    • M. Dissociation Rights 18.73
      • 1. Procedure 18.74
      • 2. Purchase of Dissociating Partner's Interest 18.75
      • 3. Liability and Authority of Dissociating Partner 18.76
    • N. Abandonment of Merger 18.77
  • V. CHANGING TO AND FROM PARTNERSHIPS OUTSIDE OF STATUTORY PROVISIONS 18.78
    • A. Consent 18.79
      • 1. LLCs 18.80
      • 2. Corporations 18.81
      • 3. Partnerships 18.82
    • B. Tax Issues 18.83
    • C. Method One: Owners Contribute Ownership Interests to Surviving Entity 18.84
      • 1. Diagram: Exchanging Ownership Interests in Old Entity for Ownership Interest in Surviving Entity and Liquidating Old Entity 18.85
      • 2. Documentation 18.86
    • D. Method Two: Owners Contribute Old Entity's Assets to Surviving Entity 18.87
      • 1. Diagram: Liquidating Old Entity and Contributing Its Assets to Surviving Entity 18.88
      • 2. Documentation 18.89
    • E. Method Three: Old Entity Contributes Assets Directly to Surviving Entity 18.90
      • 1. Diagram: Old Entity Contributes Its Assets Directly to Surviving Entity 18.91
      • 2. Documentation 18.92
  • VI. STATUTORY CONVERSIONS
    • A. Statutory Authorization for Conversion 18.93
      • 1. Conversion Entities 18.94
      • 2. Conversion Prerequisites 18.95
    • B. Effect of Conversion 18.96
    • C. Approval and Documentation Requirements for Conversion 18.97
    • D. Approval of Conversion 18.98
      • 1. By General Partnership 18.99
      • 2. By Limited Partnership 18.100
      • 3. By Corporation 18.101
      • 4. By LLC 18.102
      • 5. By Foreign Entity 18.103
    • E. Plan of Conversion
      • 1. Required Contents 18.104
      • 2. Form: Plan of Conversion for Converting Partnership Into LLC 18.105
    • F. Statement or Certificate of Conversion 18.106
      • 1. Conversion Document 18.107
      • 2. Execution of Statement or Certificate of Conversion 18.108
      • 3. Effect of Filing Statement or Certificate of Conversion 18.109
      • 4. Recording Certified Evidence of Conversion When Converted Entity Owns California Real Estate 18.110
      • 5. Form: Certificate of Limited Partnership—Conversion (Secretary of State Form LP-1A) 18.111
      • 6. Form: Limited Liability Company Articles of Organization—Conversion (Secretary of State Form LLC–1A) 18.112
      • 7. Form: General Partnership Statement of Partnership Authority—Conversion (Secretary of State Form GP–1A) 18.113
      • 8. Form: Certificate of Conversion (Secretary of State Form CONV–1A) 18.114
    • G. Effective Date of Conversion 18.115
    • H. Securities Law Compliance 18.116
    • I. Abandonment of Conversion 18.117
  • VII. CHART: SECRETARY OF STATE CONVERSION INFORMATION 18.118

ADVISING CALIFORNIA PARTNERSHIPS

(3d Edition)

February 2017

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH01

Chapter 1

Attorney’s Role

01-026

§1.26

Checklist: Elements to Consider for Inclusion in Engagement Letter

01-028

§1.28

Nonengagement Letter

01-029

§§1.29-1.51

Salutation

 

§1.30

Introduction

 

§1.31

Scope of and Limitations on Duties

 

§1.32

Required Securities Disclosures

 

§1.33

Association of Specialists

 

§1.34

Who Will Work on Matter

 

§1.35

Fees

 

§1.36

Expenses

 

§1.37

Nonrefundable Fees

 

§1.38

Billings

 

§1.39

No Apportionment Among Multiple Clients

 

§1.40

Warranties as to Fees and Costs

 

§1.41

Arbitration Clause

 

§1.42

Judicial Reference of Disputes

 

§1.43

Termination

 

§1.44

Document Retention

 

§1.45

No Tax Advice

 

§1.46

Conflicts of Interest

 

§1.47

Disclosure of Conflicts From Prior Representation

 

§1.48

Waiver of Conflicts

 

§1.49

Entire Agreement

 

§1.50

Closing

 

§1.51

Acceptance

01-052

§1.52

Disengagement Letter on Completion of Services

01-053

§1.53

Notice Letter to Former Client Regarding Potential Conflict with New Client

01-054

§1.54

Disengagement Letter on Termination of Representation Before Services Completed

CH02

Chapter 2

Choice of Entity and Collecting Client Information

02-090

§2.90

Checklist: Information About Participants, Their Roles, and Interests in Business

02-091

§2.91

Checklist: Information About Business

02-092

§2.92

Checklist: Information Necessary to Organize Partnership

CH04

Chapter 4

Partnership Name

04-031

§4.31

Fictitious Business Name Statement

CH05

Chapter 5

Planning General Partnerships

05-034

§5.34

Checklist: Planning for Initial Contributions and Capital Structure

CH06

Chapter 6

General Partnership Agreements

06-002

§§6.2-6.23

Parties, Date, and Recitals

 

§6.3

Name

 

§6.4

Place of Business

 

§6.5

Term of Partnership

 

§6.6

Business of Partnership

 

§6.7

Powers

 

§6.8

Statutory Filings

 

§6.9

Capital

 

§6.10

Division of Profits and Losses

 

§6.11

Distributions to Partners in Proportion to Initial Capital Contributions

 

§6.12

Accounting

 

§6.13

Records and Reports

 

§6.14

Management

 

§6.15

Partners’ Fiduciary Duty and Duty of Care

 

§6.16

Changes in Membership

 

§6.17

Consent of Spouses

 

§6.18

Transfer of Partnership Interests

 

§6.19

Valuation of Interest

 

§6.20

Payment of Purchase Price

 

§6.21

Miscellaneous Clauses

 

§6.22

Execution

 

§6.23

Consent of Spouses

06-024

§§6.24-6.84

Parties, Date, and Recitals

 

§6.25

Basic Operative Clause

 

§6.26

Firm Name

 

§6.27

Chief Executive Office

 

§6.28

Term of Partnership

 

§6.29

Purposes Clause

 

§6.30

Powers

 

§6.31

Statutory Filings

 

§6.32

Contributions in Money or Property

 

§6.33

Contributions of Services

 

§6.34

Contributed Property; Special Tax Allocations Because of Carryover Basis

 

§6.35

Failure to Make Initial Contribution

 

§6.36

Deferred Contributions

 

§6.37

Additional Capital

 

§6.38

Withdrawals of Capital

 

§6.39

No Interest on Capital Contributions

 

§6.40

Loans to Partnership

 

§6.41

Division of Profits and Losses

 

§6.42

Distribution of Profits

 

§6.43

Distributions of Proceeds From Sale of Capital Assets

 

§6.44

Limit on Distributions

 

§6.45

Fiscal Year of Partnership

 

§6.46

Accounting Method

 

§6.47

Capital Accounts—Initial Contributions

 

§6.48

Adjustment of Capital Accounts

 

§6.49

Determination of Profit and Loss

 

§6.50

Partnership Books

 

§6.51

Annual Report to Partners

 

§6.52

Control of Business

 

§6.53

Acts Requiring Majority Consent

 

§6.54

Handling Funds

 

§6.55

Remuneration to Partner

 

§6.56

Effect of Assignment of Interest

 

§6.57

Duty of Loyalty

 

§6.58

Duty of Care

 

§6.59

Duty of Good Faith and Fair Dealing

 

§6.60

Furtherance of Partner’s Own Interests

 

§6.61

New Partners

 

§6.62

Partner’s Dissociation

 

§6.63

Partner’s Expulsion by Partner Vote

 

§6.64

Expulsion by Judicial Determination

 

§6.65

Retirement From Partnership Management

 

§6.66

Retirement From Partnership

 

§6.67

Noncompetition Covenant

 

§6.68

Payment When Business Not Wound Up

 

§6.69

Payment of Purchase Price by Mutual Agreement When Business Not Wound Up

 

§6.70

Definition of Transferable Interest

 

§6.71

Transferability of Interest

 

§6.72

Transfers Under Dissolution of Marriage

 

§6.73

Right of First Refusal

 

§6.74

Valuation of Interest

 

§6.75

Payment of Purchase Price

 

§6.76

Assumption of Outstanding Partnership Liabilities

 

§6.77

Dissolution

 

§6.78

Termination of Partnership After Dissolution; Waiver of Termination

 

§6.79

Persons Eligible to Wind Up Partnership

 

§6.80

Distribution of Assets

 

§6.81

Indemnification

 

§6.82

Miscellaneous Clauses

 

§6.83

Execution

 

§6.84

Consent of Spouses

CH07

Chapter 7

Planning Limited Partnerships

07-080

§7.80

Checklist: Preformation

07-081

§7.81

Checklist: Formation

CH08

Chapter 8

Limited Partnership Agreements

08-002

§8.2

FORM: SHORT FORM AGREEMENT FOR A SMALL CALIFORNIA LIMITED PARTNERSHIP

08-003

§§8.3-8.80

Title of Agreement, Date, and Parties

 

§8.5

Definitions

 

§8.6

Formation and Name

 

§8.7

Designated Office

 

§8.8

Certificate of Limited Partnership

 

§8.9

Term

 

§8.10

Business of Partnership

 

§8.11

Financing and Partner Guaranties of Repayment

 

§8.12

Initial Capital Contributions

 

§8.13

General Partners’ Additional Capital Contributions

 

§8.14

Limited Partners—No Obligation to Contribute Additional Capital

 

§8.15

Capital Accounts

 

§8.16

No Interest

 

§8.17

No Withdrawal of Capital

 

§8.18

Distributions

 

§8.19

Determination and Allocation of Profits and Losses

 

§8.20

Special Allocations of Profits and Losses

 

§8.21

Qualified Income Offset

 

§8.22

IRC §704(c) Allocations

 

§8.23

Participation; Rights and Powers

 

§8.24

Delegation of Authority

 

§8.25

Compensation

 

§8.26

Liability of General Partners

 

§8.27

Reimbursement of Expenses and Indemnification

 

§8.28

Devotion of Time

 

§8.29

Employment or Retention of Affiliates

 

§8.30

Other Business Activities

 

§8.31

Generally No Right to Participate

 

§8.32

Power of Attorney

 

§8.33

Consent Required

 

§8.34

Liability of Limited Partners

 

§8.35

Dissociation Rights

 

§8.36

Transactions With Limited Partners

 

§8.37

Books and Records

 

§8.38

Reports and Copies

 

§8.39

Tax Returns

 

§8.40

Tax Matters Partner/Partnership Representative

 

§8.41

Taxable Year

 

§8.42

Accounting Method

 

§8.43

Bank Accounts

 

§8.44

Partnership Meetings

 

§8.45

Insurance

 

§8.46

General Prohibition

 

§8.47

Conditions of Transfer

 

§8.48

Permitted Transfers

 

§8.49

Right of First Refusal

 

§8.50

Transferor’s Rights in Partnership

 

§8.51

Admission of Additional Partners

 

§8.52

Events of Default of General Partner

 

§8.53

Notice of Default and Time to Cure

 

§8.54

Election of Remedies After Default of General Partner

 

§8.55

Determination of Fair Market Value

 

§8.56

Events of Dissolution

 

§8.57

Winding Up

 

§8.58

Distribution of Liquidation Proceeds

 

§8.59

Deficit Restoration Requirement

 

§8.61

Amendment

 

§8.62

Arbitration

 

§8.63

Binding Effect

 

§8.64

Captions and Headings

 

§8.65

Counterparts and Facsimiles

 

§8.66

Counting of Days

 

§8.67

Cumulative Remedies

 

§8.68

Entire Agreement

 

§8.69

Exhibits

 

§8.70

Further Documents

 

§8.71

Governing Law

 

§8.72

Jurisdiction

 

§8.73

Notice

 

§8.74

Prevailing Party’s Fees

 

§8.75

Pronouns and Gender

 

§8.76

Severability

 

§8.77

Time of Essence

 

§8.78

Waiver

 

§8.79

Signatures

 

§8.80

Separate Property Waiver and Acknowledgment

CH09

Chapter 9

Planning Limited Liability Partnerships

09-031

§9.31

Checklist: Organizing New California LLP

09-032

§9.32

Checklist: Registering Foreign LLP in California

09-033

§9.33

Checklist: Converting Domestic Partnership to Registered LLP

CH10

Chapter 10

Limited Liability Partnership Agreements

10-002

§§10.2-10.36

Title, Introduction, Name

 

§10.3

Purpose and Term

 

§10.4

Place of Business

 

§10.5

Security Requirements

 

§10.6

Definitions

 

§10.7

Capital Contributions

 

§10.8

Capital Accounts; Allocations of Profit and Loss

 

§10.9

Qualified Income Offset

 

§10.10

Distributions

 

§10.11

Restrictions on Distributions

 

§10.12

Management

 

§10.13

Rights and Duties of Partners

 

§10.14

Fiscal Year, Accounting Method, Records and Reports, Tax Returns, and Banking

 

§10.15

Additional Partners

 

§10.16

Withdrawal, Expulsion, or Disability of Partner

 

§10.17

Payments to Terminated Partner

 

§10.18

Continuation of Partnership

 

§10.19

Liquidating Events

 

§10.20

Winding Up

 

§10.21

Deficit Capital Accounts

 

§10.22

Indemnification

 

§10.23

Amendments

 

§10.24

Notices

 

§10.25

Counterparts

 

§10.26

Governing Law

 

§10.27

Successors

 

§10.28

Severability

 

§10.29

Headings

 

§10.30

Further Documents

 

§10.31

Construction

 

§10.32

Gender

 

§10.33

Incorporation by Reference

 

§10.34

Attorney Fees

 

§10.35

Arbitration

 

§10.36

Entire Agreement

CH11

Chapter 11

Issuing Partnership Interests

11-027

§11.27

Legend for Certificate and Partnership Agreement

11-053

§11.53

Subscription Agreement

CH17

Chapter 17

Dissolving and Winding Up Partnership

17-038

§§17.38-17.44

Election to Dissolve

 

§17.39

Duty of Partner

 

§17.40

Disposition of Client Files

 

§17.41

Costs of Liquidation

 

§17.42

Distributions to Partners

 

§17.43

Waiver of Right to Court Decree of Dissolution

 

§17.44

Indemnification

CH18

Chapter 18

Change of Entity

18-049

§18.49

Agreement of Merger

18-105

§18.105

Plan of Conversion for Converting Partnership Into LLC

 

Selected Developments

February 2017 Update

The California Legislature has amended the dates by when a partnership is required to file an informational tax return. The deadline is now the 15th day of the third month following the close of the partnership's taxable year. The legislature made this change to conform with federal law for tax years beginning after January 1, 2016. Rev & T C §18633. See §§2.51, 13.7.

In 2016, the legislature amended existing law that provides a limited liability company (LLC) is dissolved when a majority of the members of the LLC vote to dissolve. The amendment requires a vote of 50 percent or more of the voting interests of the members to dissolve the LLC. Corp C §17707.01, amended in Stats 2016, ch 66. See §§2.84, 18.80.

The IRS has issued final regulations to clarify the rules related to disguised sales of property. TD 9787, 81 Fed Reg 69291 (Oct. 5, 2016). See §3.31.

In 2015, Congress enacted the Bipartisan Budget Act of 2015 (BBA) (114 Pub L 74, 129 Stat 584), which changed the way the Internal Revenue Service will conduct audits of partnerships and LLC tax returns. It is effective for tax years beginning on or after January 1, 2018, although a partnership may elect for the rules to apply to a partnership return filed for taxable years beginning after November 2, 2015, and before January 1, 2018. The BBA also eliminates the term "tax matters partner" and replaces it with "partnership representative." See §§3.79, 8.40, 13.3, 13.6, 13.8.

When a husband owned a partnership interest as his separate property and the partnership agreement was modified adding his wife as a partner, no transmutation existed of the husband's separate property interest in the partnership when the modified partnership agreement did not contain any express declaration that the characterization or ownership of the husband's property was being changed. Marriage of Lafkas (2015) 237 CA4th 921. See §6.17.

California law now provides that the term "spouse" includes registered domestic partners. Care should be taken when addressing spousal rights to include the equal rights given to registered domestic partners. CC §14.2, added by Stats 2016, ch 50. See §§6.17, 6.23, 6.61, 6.72, 6.84.

The SEC has amended Rule 504 (17 CFR §230.504) to increase the aggregate amount of securities that may be offered under the exemption provided by that section to $5 million. At the same time, the SEC has repealed Rule 505 (17 CFR §230.505). 81 Fed Reg 83404 (Nov. 21, 2016). See §§11.16, 11.20–11.23, 11.22, 11.28, 11.36.

The SEC has established a new intrastate offering exemption, designated Rule 147A, to accommodate modern business practices and provide an alternative means for smaller companies to raise capital locally. 17 CFR §230.147A (81 Fed Reg 83494 (Nov. 21, 2016)). See §11.25A.

Chapter 11, "Issuing Partnership Interests," has been considerably revised and expanded. Among other things, several new sections have been added on liability for violations under California securities laws. See §§11.68–11.74.

The SEC issued its long-awaited rules for crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934, to implement the requirements of Title III of the Jumpstart Our Business Startups Act (JOBS Act) (Pub L 112–106, 126 Stat 306). The new rules are effective as of May 16, 2016. Consistent with the JOBS Act, the rules limit the amount of money a company can raise, require companies to disclose certain information about their offerings, and create a regulatory framework for the online intermediaries who will facilitate crowdfunding transactions. The rules are available at 17 CFR pts 200, 227, 232, 239, 240, 249, 269, and 274. See §11.28B.

The IRS has released temporary and proposed regulations to clarify recourse liability partnership rules. TD 9788, 81 Fed Reg 69282 (Oct. 5, 2016). See §§13.19, 13.20.

The United States District Court for the Northern District of California held that a partner may not withdraw from a partnership in order "to appropriate a partnership business opportunity." Second Measure, Inc. v Kim (ND Cal 2015) 143 F Supp 3d 961. See §§16.6, 16.22.

About the Authors

JOHN R. BONN received his A.B. from Princeton University, Woodrow Wilson School of Public and International Affairs, in 1972 and his J.D. from the University of California, Berkeley, School of Law in 1976. Mr. Bonn has been a partner of Sheppard, Mullin, Richter & Hampton, LLP in Los Angeles since 1986, and before that time was a partner of Luce, Forward, Hamilton & Scripps. He is the author of a two-volume treatise, Partnership Taxation, published in 1987 by Clark, Boardman, Callaghan & Co. In addition, Mr. Bonn is the author of two papers presented to the University of Southern California Tax Institute, "Choice of Entity for the U.S. Private Enterprise and Use of Disregarded Entities" (1999) and "Acquiring or Disposing of an S Corporation" (1997). Mr. Bonn has been named in the 1997–1998, 1995–1996, 1993, 1989, and 1987 editions of The Best Lawyers in America.

FREDERICK D. BOOKE received his A.B. degree in 1961 from the University of California, Berkeley, and his J.D. in 1965 from the University of California, Los Angeles, School of Law. Mr. Booke is of counsel to the firm Cohan & Flame in Los Angeles. He specializes in civil and health care litigation.

COLBY A. CAMPBELL received her A.B. degree in 1980 from the University of California, Berkeley, her J.D. in 1985 from the University of Santa Clara, and her LL.M. in Taxation in 1992 from Golden Gate University. Ms. Campbell is an associate of the firm of Trainor Robertson in Sacramento. Her practice involves tax, business, and estate planning.

CHRISTOPHER CHEDIAK received his B.S. in 1980 from the University of California, Davis, and his J.D. in 1983 from the University of Southern California. Mr. Chediak is a shareholder and Section Head of the Business Law Department at Weintraub Tobin Chediak Coleman Grodin Law Corporation, in Sacramento. He is a former member of the Partnerships and Partnerships and Limited Liability Companies Committee of the State Bar Business Law Section and former president of the Sacramento County Bar Business Law Section.

RACHELLE H. COHEN received her B.S. degree in 1997 from Cornell University and her J.D. in 2001 from the University of California, Los Angeles, School of Law. She specializes in business and real estate transactions at Kehr, Schiff & Crane, LLP, Los Angeles. Ms. Cohen is a member of the Los Angeles County Bar Association and the Business Law Section of the State Bar of California, where she is the Vice Chair of the Partnerships and Limited Liability Companies Committee.

PAUL J. DERENTHAL received his B.A. in 1976 from the University of San Francisco and his J.D. in 1980 from the University of California, Hastings College of the Law. Mr. Derenthal is a partner in the law firm of Derenthal & Dannhauser in San Francisco. His practice focuses on organizing and counseling businesses, including corporations and partnerships, and on securities law. He also serves as an arbitrator for the National Association of Securities Dealers.

JOHN E. DI GIUSTO received his B.S. in 1975 from California State University, Sacramento, his J.D. in 1981 from the University of California, Davis, School of Law, his LL.M. in Business and Taxation in 1984 from the University of the Pacific, McGeorge School of Law, and is a retired CPA. He is a shareholder in the firm of Boutin Gibson Di Giusto Hodell Inc., specializing in business litigation, real estate transactions, corporate and business transactions, and taxation. Mr. Di Giusto wishes to acknowledge the assistance of these associates in his law firm: Kimberly L. Jackson and James R. Moore on chapter 12 and Kimberly L. Jackson and Mark W. Owens on chapter 14.

ALLAN B. DUBOFF received his B.A. (magna cum laude) in 1980 from the University of California, Los Angeles, his M.B.A. from Wharton Graduate School of Business, and his J.D. (cum laude) from the University of Pennsylvania Law School in 1984. Mr. Duboff is a shareholder in the firm of Richman, Lawrence, Mann, Chizever & Phillips in Beverly Hills, specializing in partnership, limited liability company, and general corporate matters.

JAMES T. FREEMAN received his A.B. in 1969 from the University of California, Davis), and his J.D. in 1972 from the University of California, Davis, School of Law. Mr. Freeman practices law with Goldsberry, Freeman & Guzman, LLP, in Sacramento, specializing in business law, real estate, and finance.

GEORGE GRELLAS received his B.A. in 1974 from the University of California, Santa Cruz, with highest honors, and his J.D. in 1978 from the University of Santa Clara Law School, magna cum laude. He heads the firm George Grellas & Associates, in Cupertino, where he specializes in start-ups in technology, business, corporate, and commercial law and represents leading companies in the high tech field and traditional business owners in a broad array of industries. Details of his Silicon Valley practice may be found at http://www.grellas.com.

CARA K. LOWE received her B.A. in 1990 from the University of California, Berkeley, and her J.D. in 1994 from the University of California, Hastings College of the Law. She is the principal of the firm Pivot Law PC, specializing in corporate law and mergers and acquisitions.

MARK D. LUBIN received his B.A. in 1973 from Columbia University and his J.D. in 1977 from the University of California, Berkeley, School of Law. Mr. Lubin is a partner in the firm of Stein & Lubin LLP, in San Francisco, specializing in real estate and general business law. He was co-chair (1995–1996) and member (1992–1996) of the Partnerships and Limited Liability Companies Committee of the State Bar Business Law Section and has participated on a national panel for the drafting of a Uniform Limited Liability Partnership Act.

J. MICHAEL MATTHEWS received his B.A. in 1973 from Yale University and his J.D. in 1976 from Georgetown University. Mr. Matthews is a member in the firm of Rogers, Joseph, O'Donnell & Quinn, specializing in construction, legal ethics, professional liability, and business litigation.

OVVIE MILLER received his B.A. (highest honors) in 1956 from the University of California, Los Angeles, and his J.D. in 1961 from Harvard Law School. Mr. Miller is of counsel to Rosenfeld Meyer & Susman, LLP, in Beverly Hills, specializing in family law and civil litigation. He is a member of the Beverly Hills, Los Angeles County, and American Bar Associations and the State Bar Committee on Administration of Justice. He is a Fellow of the American Academy of Matrimonial Lawyers.

JEROME SAPIRO, JR., received his B.A. in 1963 from the University of California, Berkeley, and his LL.B. in 1966 from the University of California, Hastings College of the Law. He is proprietor of The Sapiro Law Firm in San Francisco. Mr. Sapiro is former chair of the Bar Association of San Francisco Legal Ethics Committee; former member of the State Bar Committee on Professional Responsibility and Conduct; past president of the Lawyers' Club of San Francisco; past president of the St. Thomas More Society of San Francisco; former member of the State Bar Commission for the Revision of the Rules of Professional Conduct, which drafted the Rules of Professional Conduct that became effective in 1989 and 1992; and a former member of the California State Bar Standing Committee on the Administration of Justice. He is a member of the Board of Governors of the Lawyers' Club of San Francisco and is secretary of the Executive Committee of the Litigation Section of the California State Bar. Mr. Sapiro's practice includes business litigation, litigation involving lawyers, estate planning and probate and related litigation, consultation with lawyers on their ethical studies, and transactional work. He often testifies as an expert witness in matters involving lawyers' professional responsibilities.

JULIE VANDERSLUIS SKEEN received her B.A. in 1991 from Cornell University and her J.D. in 1999 from the University of California, Hastings College of the Law, where she completed the tax concentration. She has practiced tax law in both the private sector and with the Office of Chief Counsel, Internal Revenue Service, as a senior attorney in the Office of Associate Chief Counsel, Passthroughs and Special Industries. Ms. Skeen currently assists clients with tax controversy, tax planning, and probate matters.

JOHN C. SUTTLE received his B.A. in 1969 from Stanford University, his M.B.A. in 1973 from the University of California, Berkeley, his J.D. in 1980 from the University of California, Hastings College of the Law, and his LL.M. (in Taxation) in 1983 from Golden Gate University. Mr. Suttle is a member in the firm of SuttleLaw, PC, in San Francisco, specializing in taxation, estate planning, probate, and business law. Mr. Suttle is certified as a specialist in Taxation Law by the State Bar of California Board of Legal Specialization.

CHARLES E. TOOMBS received his B.A. in 1974 from the University of California, Berkeley, his J.D. in 1984 from the University of San Francisco, and his LL.M. (Taxation) in 1987 from New York University. Mr. Toombs practices law with McInerney & Dillon, PC, Oakland, specializing in tax, business, corporate, partnership, nonprofit, and real estate matters. Mr. Toombs gratefully acknowledges the work of Paul Derenthal of Derenthal & Dannhauser, San Francisco, and Herbert Kraus of Gibson, Dunn & Crutcher, Los Angeles, authors of Advising California Partnerships, chapters 1 and 4 (2d ed Cal CEB), from which portions of chapter 6 are derived. Mr. Toombs also gratefully acknowledges the work of David Greenberg, whose article California Adopts the Revised Uniform Partnership Act to Govern General Partnerships, 18 CEB Cal Bus L Rep, provided clear and concise guidance for many portions of chapters 5 and 6.

MARK M. TUCKER received his B.A. in 1970 from Stanford University, his J.D. (magna cum laude) in 1974 from Willamette University, his LL.M. (in Taxation) in 1975 from New York University, and his M.B.A. in 1985 from Pepperdine University. Mr. Tucker, a member of the firm of SuttleLaw, PC, in San Francisco, emphasizes estate planning and taxation. He is a member of the Washington State Bar Association, the Oregon State Bar, and the State Bar of California.

About the 2017 Update Authors

CHRISTOPHER CHEDIAK is the update author of chapter 11, "Issuing Partnership Interests." Please see his biography in the "About the Authors" section.

RACHELLE H. COHEN is the update author of chapter 16, "Dissociation and Transfer of Partnership Interests." Please see her biography in the "About the Authors" section.

CARA K. LOWE is the update author of chapter 18, "Change of Entity." Please see her biography in the "About the Authors" section.

CHARLES E. TOOMBS is the update author of chapter 5, "Planning General Partnerships," chapter 6, "General Partnership Agreements," and chapter 13, "Taxation of Partnership Income." Please see his biography in the "About the Authors" section.

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