Have your cake and eat it too? Partnership conversions under the Florida Uniform Partnership Act.

• Author: Goodbread, Michael E., Jr.

The Florida Legislature adopted the Revised Uniform Partnership Act (RUPA) during the 1995 legislative session.[1] One of the main differences between the prior Uniform Partnership Act of 1914 (UPA) and RUPA is that RUPA treats a partnership as a distinct entity with an existence separate and apart from its partners.[2] Treating the partnership as a distinct entity aids and validates partnership conversions which were not allowed under UPA.

Although RUPA impacts many areas of partnership law, this article focuses on the specific sections of RUPA that allow the conversion of a general partnership to a limited partnership, and vice versa, setting forth the mechanics and effect of such conversions and considering the advantages and disadvantages.

Comparison of FRUPA and RUPA

FRUPA and RUPA are almost identical regarding the mechanics of converting a general partnership to a limited partnership.[3] Both RUPA and FRUPA require that all of the partners (or a number or percentage specified in the partnership agreement) approve the terms and conditions of the conversion.[4] Both acts direct the converting partnership to file a certificate in the jurisdiction in which the conversion occurs, as more thoroughly discussed later.[5] In fact, FRUPA adopted in full the RUPA provisions that dictate the mechanics of converting a general partnership to a limited partnership. However, RUPA and FRUPA differ in the requirements of the statements set forth in the certificate of limited partnership that must be filed for the conversion of a general partnership into a limited partnership. RUPA requires that the statement contain "the number of votes cast for and against the conversion."[6] If the vote is less than unanimous, the certificate must contain the number or percentage required to approve the conversion under the partnership agreement.[7]

FRUPA requires that the certificate of limited partnership contain a more detailed statement setting forth the number of votes cast for and against the conversion by number, class, and percentage.[8] If the vote is less than unanimous, FRUPA requires that the statement set forth the number, class, and percentage required to approve the conversion under the partnership agreement, whereas RUPA only requires the number or percentage required to approve the conversion under the partnership agreement.[9] Additionally, FRUPA requires that the partnership give a prompt notice of conversion along with a copy of F.S. [sections] 620.8902 to each partner.[10]

The main difference between RUPA and FRUPA regarding partnership conversions is the effect of the conversion. Under both RUPA and FRUPA, a partnership that has been converted is "for all purposes the same entity that existed before the conversion."[11] Following the entity theory of partnership, RUPA provides that title to all personal and real property owned by the partnership remains vested in the converted entity.[12] FRUPA also follows the entity theory regarding personal property of a converting partnership and states that title to all personal property owned by the partnership remains vested in the converted entity." However, title to real property owned by the partnership must be transferred by deed to the converted entity.[14]

At first glance, FRUPA contains protections for the rights of creditors of a converting partnership that RUPA does not contain. FRUPA specifically states that neither the rights nor the liens of creditors of a general partnership that converts to a limited partnership are impaired by the conversion.[15] RUPA does not contain this specific language, although all obligations of the converting partnership continue as obligations of the converted entity.[16] Florida's specific protection language does not appear to increase creditors' rights but simply emphasizes that converting a general...