Chapter 13 - § 13.6 • PARTNERSHIP AGREEMENT PROVISIONS
| Jurisdiction | Colorado |
§ 13.6.1—Name
All entity names are now governed by the Corporations and Associations Act. The name of each domestic entity shall be distinguishable in the records of the Secretary of State from the following: (1) every other entity name; (2) every name that is reserved with the Secretary of State; and (3) until May 30, 2006, every trade name that is registered with the Secretary of State.
In addition, the entity name of a limited partnership that is not a limited liability limited partnership shall contain one of the following terms or abbreviations: "limited partnership," "limited," "company," "l.p.," "lp," "ltd.," or "co."
In addition, the entity name of a limited liability partnership shall contain one of the following terms or abbreviations: "limited liability partnership," "registered limited liability partnership," "limited," "llp," "l.l.p.," "rllp," "r.l.l.p.," or "ltd."
In addition, the entity name of a limited liability limited partnership shall contain one of the following terms or abbreviations: "limited partnership," "limited," "company," "limited liability limited partnership," "registered limited liability limited partnership," "l.p.," "lp," "ltd.," "co.," "l.l.l.p.," "lllp," "r.l.l.l.p.," or "rlllp."66
There is no similar requirement for the name of a limited partnership association.
An entity name may be reserved by any person for successive periods of 120 days.67
§ 13.6.2—Office
Each domestic limited liability partnership and limited liability limited partnership is required to have a registered agent in Colorado.68 An entity that has its usual place of business in Colorado may serve as its own registered agent.
Each domestic limited partnership is required to have a registered agent in Colorado.69 The limited partnership must keep the following records at the office as designated in the partnership agreement, the principal office, or the address of the registered agent: (1) the current list of the names and addresses of each partner in alphabetical order; (2) a copy of the certificate of limited partnership and all amendments and copies of any powers of attorney; (3) copies of the partnership's federal, state, and local income tax returns for the three most recent years; (4) copies of any currently effective written partnership agreements and certain documents regarding contributions and copies of any financial statements for the three most recent years; and (5) unless contained in a written partnership agreement, a statement certified as accurate by the general partners that describes provisions regarding contributions, terminations, and distributions.70
Each limited partnership association is required to have in Colorado a registered office and registered agent.71
§ 13.6.3—Purpose and Scope of Business
The partnership agreement typically details the scope of the business and purposes of the partnership to provide clarity with regard to the effect of the duty of loyalty on a partner's right to conduct other business and with regard to expenditure of partnership capital, borrowings, or revenues on matters within the scope of the partnership business.
§ 13.6.4—Duration
To avoid any issue over whether a general partner may cause a dissolution of the partnership or a limited partnership without a violation of the partnership agreement by withdrawal at will when no definite term or particular undertaking is specified in the partnership agreement pursuant to C.R.S. § 7-64-801, the partnership agreement typically specifies a particular term for the partnership. This issue may also be addressed by providing in the partnership agreement that the withdrawal of a general partner shall not constitute a dissolution.
§ 13.6.5—Contributions
Nature of Contributions to Limited Partnership
A partner's contribution to a limited partnership may be in cash, property, services rendered, a promissory note, or similar obligation to contribute cash or property or to perform services.72 There is no legal requirement that a partner in a general partnership or limited partnership make any contribution for his or her interest in the partnership if the lack of an obligation to contribute is confirmed in writing,73 although the receipt of an interest without payment may be considered a gift or compensation for tax purposes. There is no legal requirement as to the nature of the contribution of a partner to a general partnership.
Obligation to Make Contributions to Limited Partnership
Except as provided in the partnership agreement, a partner is obligated to the limited partnership to perform any enforceable promise to contribute cash or property or to perform services, even if he or she is unable to perform because of death, disability, or other reason.74 In a limited partnership, unless there is a written partnership agreement that states the amount of cash and a description and the agreed value of other property or services contributed by each partner and which each partner has agreed to contribute in the future, and that states the time at which or events on the happening of which any additional contributions are to be made by each partner, a statement setting forth those facts, certified as accurate by the general partners, must be maintained at an office as designated by the limited partnership agent.75 If a partner does not make the required contribution of property or services, he or she is obligated, at the option of the limited partnership, to contribute cash equal to that portion of the value of the stated contribution that has not been made.76 No promise by a limited partner to contribute to the partnership is enforceable unless set out in writing signed by the limited partner.77 Where the written partnership agreement provides for capital contributions to be made upon a vote of less than all of the partners, such a provision is enforceable even if any objecting partner does not vote for the proposal or sign an acknowledgment of the vote, as long as the requisite votes are cast.78
Enforcement of Contribution Obligations to Limited Partnership
Where a partnership agreement establishes an obligation of the partners to make future contributions of money, property, or services to the partnership, the agreement may contain a mechanism for enforcing such obligations. The enforcement mechanism may provide for:
1) Non-defaulting partners may contribute an amount equal to the uncollected assessment as a capital contribution with partnership percentage interests to be adjusted;
2) The non-defaulting partners may have an option of treating contributions made on behalf of the defaulting partner as a loan, with specified interest and terms; or
3) Partners who make loans on behalf of the defaulting partner may have an income preference until a certain amount of money has been received from the limited partnership.
Provisions requiring the withdrawal of a partner for failure to meet obligations or providing for substantial dilution of the defaulting partner's interest, where the partner is paid an amount for his or her interest or dilution that is unrelated to the value of that interest, may be attacked as a penalty or forfeiture unenforceable as a matter of public policy.
Creditors' Rights to Enforce Contribution to Limited Partnership
A creditor of a limited partnership who extends credit or otherwise acts in reliance on the obligation of a partner to make a contribution may enforce that obligation.79
Contributions to General Partnership
No provisions comparable to those above for a limited partnership exist for a general partnership.
Real property owned individually by one who enters into a partnership may become a partnership asset without a written conveyance to the partnership if that is the intent of the partners. In re Estate of Grosboll, 315 P.3d 1284 (Colo. App. 2013).
§ 13.6.6—Allocation of Profits and Losses
The profits and losses of a limited partnership are allocated among the partners, and between general and limited partners, in the manner provided in a written partnership agreement. If there is no written partnership agreement, or if the written partnership agreement is silent, profits and losses are allocated on the basis of the value, as stated in the partnership records, of the contributions made by each partner.80 In a general partnership, unless otherwise provided in the partnership agreement, the profits and losses of the partnership are allocated equally among the partners.81 A person may be a general partner or limited partner without being allocated a share of profits or losses if such is confirmed in writing.82
Partnership agreements may, and sometimes do, allocate profits and losses other than pro rata or in proportion to capital contributions. For example, allocations may be fixed but unequal, or they may be determined annually by a vote of the partners. As discussed in § 3.2.4, these special allocations should be created after careful consideration of the tax consequences.
§ 13.6.7—Distributions
Allocation of Distributions
Distributions of cash or other assets of a limited partnership are allocated among the partners, and between general and limited partners, in the manner provided in a written partnership agreement. In a limited partnership, if the partnership agreement is not in writing or is silent, distribution must be made on the basis of the value, as stated in the partnership records, of the contributions made by each partner.83 A person may be a partner in a general partnership and a general or limited partner in a limited partnership without a right to a share of distributions if such is confirmed in writing.84 Prior to the dissolution and winding up of a limited partnership, a partner has no assurance of receiving any distributions from a limited partnership unless distributions are provided for in the partnership agreement.85 This is true for a general partnership as well because there is no statutory provision requiring distributions...
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