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MASSACHUSETTS LIMITED PARTNERSHIPS

Please note that the following should not be construed as legal advice. You should consult an experienced
Massachusetts business attorney if you have a specific legal matter that needs to be addressed. Contact us today at
(800) 719-4889 if you need help with your Massachusetts business matter (you can read about our lawyers and
professionals here). Please review our main business law page if you have additional questions about the process of forming
a business entity in Massachusetts.

Massachusetts Limited Partnership

A limited partnership is a partnership formed by two or more persons having the capacity to act as partners and has as its
members at least one general partner and one limited partner. A general partner has the same liabilities as a partner in a
general partnership. A limited partner is a partner whose liability for partnership obligations is limited to the sum of his or her
capital contribution to the partnership, plus certain distributions made by the partnership to the limited partner. To preserve
limited liability, a limited partner may not participate in the control or management of the partnership's business.

Statutory Requirements for Formation

Massachusetts General Laws chapter 109 governs the formation of Massachusetts limited partnerships. To organize a limited
partnership, all the general partners must execute a certificate of limited partnership containing the information required and
the certificate must be filed with the secretary of state of the Commonwealth of Massachusetts, together with the
appropriate filing fee.

Control and Management

The hallmark of a limited partnership is the limited liability that it affords to investors. To achieve limited liability, however, the
limited partners must relinquish participation in the management and control of the partnership's business. If a limited
partner participates in the conduct of the business, he or she is liable only to persons who transact business with the
partnership in the reasonable belief, based on the conduct of the limited partner, that he or she was a general partner.

Liability

A general partner of a limited partnership has the same liabilities as a partner of a general partnership. Accordingly, he or
she is liable, to the full extent of his or her personal assets, for partnership obligations and may have joint and several or
joint liability with other general partners for tort liabilities. Limited partners, however, are liable for partnership obligations to
a much more limited extent. In general, limited partners are obligated to creditors of the partnership only to the extent of
their contribution to the partnership, unless such partners participate improperly in the management or control of the
business or permit their names to be used in the name of the partnership. A limited partnership is an entity that may be
sued in its own name.

Continuity of Existence

A limited partnership is dissolved and its affairs closed on the first to occur of the following events:

  • the time specified in writing in the partnership agreement;

  • the happening of events specified in writing in the partnership agreement;

  • written consent of all the partners;

  • the withdrawal of a general partner — unless there is at least one other general partner, and a written partnership
    agreement permits the business to be continued and the remaining general partners do so; or

  • entry of a judicial decree.

Unless the certificate of limited partnership provides differently, the withdrawal of a limited partner does not result in the
dissolution of the partnership.

Transferability of Interests

Subject to any restrictions contained in the certificate of limited partnership or the partnership agreement, the partnership
interest of a partner is assignable, in whole or in part. An assignment of a partnership interest does not dissolve the
partnership or entitle the assignee to exercise rights of a partner; it merely entitles him or her to receive the profits, losses
and distributions to which the assignor would otherwise be entitled. An assignee may become a limited partner if and to the
extent that the assignor gives the assignee that right in accordance with authority contained in the partnership agreement
or all of the other partners consent. Once a partner has assigned all of his or her interest in the partnership, he or she
ceases to be a partner unless the partnership agreement provides to the contrary. The assignment of a limited partnership
interest, even in circumstances where the assignee becomes a limited partner, does not release the assignor from liability for
false statements in any filed certificate or for payments of capital contribution, unless there is a specific novation or release.

Federal Taxation

A limited partnership is treated in substantially the same manner as a general partnership for federal income tax purposes.

Because a limited partnership is treated as a partnership for federal income tax purposes, it is not taxed directly on its
income or loss, and each partner is allocated and is taxed on his or her separate share of such income or loss. Each partner's
share of partnership income and loss is generally determined based on whether such partner would receive the benefit of
such income or the detriment of such loss if the partnership were liquidated. Consequently, by varying the economic
relationship of the partners, the allocation of annual profits and losses for tax purposes can be substantially modified and
need not be in proportion to capital contributions.

There are numerous technical differences between the taxation of general and limited partners of both general and limited
partnerships. One important difference is that the income or loss allocated to a limited partner generally is treated as
passive income, while a general partner may be able to establish that his or her income or loss (other than from rental real
estate) is active in nature. I.R.C. § 469.