Chapter 13 - § 13.4 • DISREGARD OF LIMITED LIABILITY

• Jurisdiction: Colorado

§ 13.4 • DISREGARD OF LIMITED LIABILITY

§ 13.4.1—Limited Liability Partnerships

The limited liability afforded to a partner in a limited liability partnership may be disregarded with respect to the improper actions of the partnership in the same circumstances and conditions as applicable to the disregard of the limited liability afforded with respect to corporations. The failure to observe the formalities or requirements relating to the management of the partnership's business and affairs, however, is not in itself a ground for disregard of the limited liability afforded to partners.⁴¹ See Chapter 22, "Piercing the Corporate Veil," for an extended discussion of disregard of the limited liability otherwise afforded by statute. Note particularly the discussion of disregard of limited liability as applied to officers, directors, and agents. Because limited liability is generally a protection desired by clients with the formation of a limited liability partnership, it is prudent for the lawyer to explain the possibilities that limited liability may be disregarded — even to the point of providing the client with a written discussion of those possibilities.

§ 13.4.2—Limited Partnerships and Limited Liability Limited Partnerships

The liability of a limited partner for the obligations of a limited partnership is governed by C.R.S. § 7-62-303. A limited partner of a limited partnership is not liable for the obligations of the partnership incurred while it is not a limited liability limited partnership unless the limited partner is also a general partner or the limited partner participates in the control of the business. If the limited partner participates in the control of the business at the time a liability is incurred, the limited partner is liable only to persons who transact business with the limited partnership reasonably believing (notwithstanding the fact that the limited partner is not designated as a general partner in the certificate of limited partnership), based upon the limited partner's conduct, that the limited partner is a general partner at the time such liability is incurred. A limited partner does not participate in the control of the business solely by doing one or more of the following:

1) Being a contractor for or an agent or employee of the limited partnership or of a general partner;
2) Being an officer, director, or shareholder of a corporate general partner;
3) Consulting with and advising a general partner with respect to the business of

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