Finances and Partnership Interests In Limited Partnerships

TEXAS BUSINESS ORGANIZATIONS

FINANCES

§ 153.201. FORM OF CONTRIBUTION.

The contribution of a partner may consist of a tangible or intangible benefit to the limited partnership or other property of any kind or nature, including:

(1) cash;

(2) a promissory note;

(3) services performed;

(4) a contract for services to be performed; and

(5) another interest in or security of the limited partnership, another domestic or foreign limited partnership, or other entity.

§ 153.202. ENFORCEABILITY OF PROMISE TO MAKE CONTRIBUTION.

(a) A promise by a limited partner to make a contribution to, or pay cash or transfer other property to, a limited partnership is not enforceable unless the promise is in writing and signed by the limited partner.

(b) Except as otherwise provided by the partnership agreement, a partner or the partner's legal representative or successor is obligated to the limited partnership to perform an enforceable promise to make a contribution to or pay cash or transfer other property to a limited partnership, notwithstanding the partner's death, disability, or other change in circumstances.

(c) If a partner or a partner's legal representative or successor does not make a contribution or other payment of cash or transfer of other property required by the enforceable promise, whether as a contribution or with respect to a contribution previously made, that partner or the partner's legal representative or successor is obligated, at the option of the limited partnership, to pay to the partnership an amount of cash equal to the portion of the agreed value, as stated in the partnership agreement or in the partnership records required to be kept under §§ 153.551 and 153.552, of the contribution represented by the amount of cash that has not been paid or the value of the property that has not been transferred.

(d) A partnership agreement may provide that the partnership interest of a partner who fails to make a payment of cash or transfer of other property to the partnership, whether as a contribution or with respect to a contribution previously made, required by an enforceable promise is subject to specified consequences, which may include:

(1) a reduction of the defaulting partner's percentage or other interest in the limited partnership;

(2) subordination of the partner's partnership interest to the interest of nondefaulting partners;

(3) a forced sale of the partner's partnership interest;

(4) forfeiture of the partner's partnership interest;

(5) the lending of money to the defaulting partner by other partners of the amount necessary to meet the defaulting partner's commitment;

(6) a determination of the value of the defaulting partner's partnership interest by appraisal or by formula and redemption or sale of the partnership interest at that value; or

(7) another penalty or consequence.

§ 153.203. RELEASE OF OBLIGATION TO PARTNERSHIP.

Unless otherwise provided by the partnership agreement, the obligation of a partner or the legal representative or successor of a partner to make a contribution, pay cash, transfer other property, or return cash or property paid or distributed to the partner in violation of this chapter or the partnership agreement may be compromised or released only by consent of all of the partners.

§ 153.204. ENFORCEABILITY OF OBLIGATION.

(a) Notwithstanding a compromise or release under § 153.203, a creditor of a limited partnership who extends credit or otherwise acts in reasonable reliance on an obligation described by § 153.203 may enforce the original obligation if:

(1) the obligation is reflected in a document signed by the partner; and

(2) the document is not amended or canceled to reflect the compromise or release.

(b) Notwithstanding the compromise or release, a general partner remains liable to persons other than the partnership and the other partners, as provided by §§ 153.152(a)(2) and (b).

§ 153.205. REQUIREMENTS TO ENFORCE CONDITIONAL OBLIGATION.

(a) An obligation of a limited partner of a limited partnership that is subject to a condition may be enforced by the partnership creditor described by § 153.204 only if the condition is satisfied or waived by or with respect to the limited partner.

(b) A conditional obligation of a limited partner of a limited partnership includes a contribution payable on a discretionary call of the limited partnership before the time the call occurs.

§ 153.206. ALLOCATION OF PROFITS AND LOSSES.

(a) The profits and losses of a limited partnership shall be allocated among the partners in the manner provided by a written partnership agreement.

(b) If a written partnership agreement does not provide for the allocation of profits and losses, the profits and losses shall be allocated:

(1) in accordance with the current percentage or other interest in the partnership stated in partnership records of the kind described by § 153.551(a); or

(2) if the allocation of profits and losses is not provided for in partnership records of the kind described by § 153.551(a), in proportion to capital accounts.

§ 153.207. RIGHT TO DISTRIBUTION.

Subject to § 153.210, when a partner becomes entitled to receive a distribution, the partner has with respect to the distribution the status of and is entitled to all remedies available to a creditor of the limited partnership.

§ 153.208. SHARING OF DISTRIBUTIONS.

(a) A distribution of cash or another asset of a limited partnership shall be made to a partner in the manner provided by a written partnership agreement.

(b) If a written partnership agreement does not provide otherwise, a distribution that is a return of capital shall be made on the basis of the agreed value, as stated in the partnership records required to be maintained under § 153.551(a), of the contribution made by each partner to the extent that the contribution has not been returned. A distribution that is not a return of capital shall be made in proportion to the allocation of profits as determined under § 153.206.

(c) Unless otherwise defined by a written partnership agreement, in this section, "return of capital" means a distribution to a partner to the extent that the partner's capital account, immediately after the distribution, is less than the amount of that partner's contribution to the partnership as reduced by a prior distribution that was a return of capital.

§ 153.209. INTERIM DISTRIBUTIONS.

Except as otherwise provided by this § and § 153.210, a partner is entitled to receive a distribution from a limited partnership to the extent and at the time or on the occurrence of an event specified in the partnership agreement before:

(1) the partner withdraws from the partnership; and

(2) the winding up of the partnership business.

§ 153.210. LIMITATION ON DISTRIBUTION.

(a) Unless the distribution is made in compliance with Chapter 11, a limited partnership may not make a distribution to a partner if, immediately after giving effect to the distribution and despite any compromise of a claim referred to by §§ 153.203 and 153.204, all liabilities of the limited partnership, other than liabilities to partners with respect to their partnership interests and liabilities for which the recourse of creditors is limited to specified property of the limited partnership, exceed the fair value of the partnership assets. The fair value of property that is subject to a liability for which recourse of creditors is limited shall be included in the partnership assets for purposes of this subsection only to the extent that the fair value of that property exceeds that liability.

(b) For purposes of this section, "distribution" does not include an amount constituting reasonable compensation for present or past services or a reasonable payment made in the ordinary course of business under a bona fide retirement plan or other benefits program.

PARTNERSHIP INTEREST

§ 153.251. ASSIGNMENT OF PARTNERSHIP INTEREST.

(a) Except as otherwise provided by the partnership agreement, a partnership interest is assignable wholly or partly.

(b) Except as otherwise provided by the partnership agreement, an assignment of a partnership interest:

(1) does not require the winding up of a limited partnership;

(2) does not entitle the assignee to become, or to exercise rights or powers of, a partner; and

(3) entitles the assignee to be allocated income, gain, loss, deduction, credit, or similar items and to receive distributions to which the assignor was entitled to the extent those items are assigned.

§ 153.252. RIGHTS OF ASSIGNOR.

(a) Except as otherwise provided by the partnership agreement, until the assignee becomes a partner, the assignor partner continues to be a partner in the limited partnership. The assignor partner may exercise any rights or powers of a partner, except to the extent those rights or powers are assigned.

(b) Except as otherwise provided by the partnership agreement, on the assignment by a general partner of all of the general partner's rights as a general partner, the general partner's status as a general partner may be terminated by the affirmative vote of a majority-in-interest of the limited partners.

§ 153.253. RIGHTS OF ASSIGNEE.

(a) An assignee of a partnership interest, including the partnership interest of a general partner, may become a limited partner if and to the extent that:

(1) the partnership agreement provides; or

(2) all partners consent.

(b) An assignee who becomes a limited partner, to the extent of the rights and powers assigned, has the rights and powers and is subject to the restrictions and liabilities of a limited partner under a partnership agreement and this code.

§ 153.254. LIABILITY OF ASSIGNEE.

(a) Until an assignee of the partnership interest in a limited partnership becomes a partner, the assignee does not have liability as a partner solely as a result of the assignment.

(b) Unless otherwise provided by a written partnership agreement, an assignee who becomes a limited partner:

(1) is liable for the obligations of the assignor to make contributions as provided by §§ 153.202-153.204;

(2) is not obligated for liabilities unknown to the assignee at the time the assignee became a limited partner and that could not be ascertained from a written partnership agreement; and

(3) is not liable for the obligations of the assignor under §§ 153. 105, 153.112, and 153.162.

§ 153.255. LIABILITY OF ASSIGNOR.

Regardless of whether an assignee of a partnership interest becomes a limited partner, the assignor is not released from the assignor's liability to the limited partnership under Subchapter E and §§ 153.105, 153.112, and 153.162.

§ 153.256. PARTNER'S PARTNERSHIP INTEREST SUBJECT TO CHARGING ORDER.

(a) On application by a judgment creditor of a partner or of any other owner of a partnership interest, a court having jurisdiction may charge the partnership interest of the judgment debtor to satisfy the judgment.

(b) To the extent that the partnership interest is charged in the manner provided by Subsection (a), the judgment creditor has only the right to receive any distribution to which the judgment debtor would otherwise be entitled in respect of the partnership interest.

(c) A charging order constitutes a lien on the judgment debtor's partnership interest. The charging order lien may not be foreclosed on under this code or any other law.

(d) The entry of a charging order is the exclusive remedy by which a judgment creditor of a partner or of any other owner of a partnership interest may satisfy a judgment out of the judgment debtor's partnership interest.

(e) This § does not deprive a partner or other owner of a partnership interest of a right under exemption laws with respect to the judgment debtor's partnership interest.

(f) A creditor of a partner or of any other owner of a partnership interest does not have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited partnership.

§ 153.257. EXEMPTION LAWS APPLICABLE TO PARTNERSHIP INTEREST NOT AFFECTED.

Section 153.256 does not deprive a partner of the benefit of an exemption law applicable to that partner's partnership interest.

 

Contact Information

Mailing Address

Chowins Law Firm, PLLC
1011 Surrey Lane #200
Flower Mound, TX 75022

Telephone

(469) 630-2550

images linkedinicongreytwittericongrey images facebookicongrey