Are there other ways to maximize one's limited partnership protection?
Posted on Jan 5, 2015 7:29am PST
You can use a number of different strategies to bolster your limited partnership
protection. For example, your limited partnership agreement might: 1)
give the general partners full discretion to withhold profit distributions;
2) the partnership agreement can specifically restrict the transfer of
a limited partnership interest without the consent of the general partner,
and/or all or a majority of the limited partners; 3) the agreement may
further prevent a limited partner from withdrawing capital contributions
without unanimous partner consent; 4) the agreement may also specify that
a creditor of a limited partner becomes only an assignee of the limited
partner's interest and acquires absolutely no partnership rights other
than rights to distributions; 5) the limited partnership agreement can
further allow the general partner to 'assess' the limited partners
for further contributions. This obligation should expressly extend to
charging order creditors; 6) 'high-risk' family members might
own a smaller partnership interest or be entitled to a proportionately
smaller share of the income; 7) spouses may title their limited partnership
interests as tenants-by-the-entirety – if their state creditor protects
this tenancy type. This protects the partnership interest from creditor
claims against one spouse; 8) finally, if you do invest in a non-controlled
limited partnership or limited liability company, you may title your ownership
interest to a family limited partnership that you
do control. A well-drafted limited partnership agreement can create a formidable
creditor barrier. An asset protection attorney would know how to optimize
the protection available from a limited partnership. As a final protective
measure, you can encumber or lien your partnership interest or its underlying
assets so the secured creditor has first claim to profit distributions
before the charging order creditor.