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Table of Contents

List of Forms by Chapter

Chapter 1 — Formation of General and Limited Partnerships in Illinois and Income Tax Aspects

I. [1.1] Introduction

II. [1.2] Formation of General Partnerships

[1.3] Basic Law

[1.4] Formation of a Partnership

[1.5] Drafting General Partnership Agreement

[1.6] Preamble

[1.7] Name and Business Address of Partnership

[1.8] Term

[1.9] General Purpose

[1.10] Contributions to Capital

[1.11] Profits and Losses

[1.12] Salaries and Draw

[1.13] Management

[1.14] Books of Account

[1.15] Bank Accounts

[1.16] Expulsion of Partner

[1.17] Disability

[1.18] Dissolution and Winding Up of Partnership or Liquidation of Partner’s Interest

[1.19] Arbitration of Disputes

[1.20] New Partners

[1.21] Miscellaneous Provisions

[1.22] Conversion of Partnership into Limited Liability Company or Limited Partnership

[1.23] Merger of Partnership and Limited Liability Company

III. [1.24] Formation of Professional and Personal Service Partnerships

[1.25] Characteristics of Professional or Personal Service Partnerships

Initial Partnership Considerations

[1.26] Initial Conference

[1.27] Discussion of Advantages and Disadvantages

[1.28] Collecting Information and Estimating Costs

[1.29] Delegation of Responsibility

[1.30] Comparison of Corporation and Partnership or Limited Liability Company Tax Benefits

[1.31] Partnership Provisions Commonly Found in Professional Service Partnerships

[1.32] Contributions to Capital

[1.33] Partner’s Share of Profits and Losses

[1.34] Payment to Retiring or Withdrawing Partner

[1.35] New Partners

[1.36] Maintenance of Professional Records

[1.37] Comparison Chart

[1.38] Parity Under Qualified Plan Rules for Corporate and Noncorporate Employers and Remaining Distinctions

Other Employee Benefit and Nontax Distinctions Between Corporate and Noncorporate Entities

Employee Benefit Distinctions

[1.39] Accident and health plans

[1.40] Health insurance premiums

[1.41] Dependent care assistance plans

[1.42] Cafeteria plans

[1.43] Employee business expenses

[1.44] Nontax Benefits of Incorporation

[1.45] Limited liability

[1.46] Malpractice insurance protection

[1.47] Vicarious liability of professional service providers

Reasons To Terminate or Not Elect Corporate Existence

[1.48] Qualified Retirement Plans

[1.49] Additional Corporate Costs and Higher Tax Rates

[1.50] Sale of Personal Service Business

IV. Limited Partnerships

In General

[1.51] Uniform Limited Partnership Act (2001)

[1.52] Formation: Certificate of Limited Partnership

[1.53] Amending the Certificate of Limited Partnership

[1.54] Statement of Termination

[1.55] Execution of Certificates

[1.56] Filing in Office of Secretary of State

[1.57] Approval of Conversion into Another Form of Entity

[1.58] Merger of Limited Partnership and Other Entities

[1.59] Admission of Additional Limited Partners

[1.60] Liability

[1.61] Admission of Additional General Partners

[1.62] Events of Withdrawal of Partner

[1.63] Contributions

[1.64] Sharing of Profits and Losses

[1.65] Distributions

[1.66] Assignment of Partnership Interest

[1.67] Dissolution

[1.68] Foreign Limited Partnerships

[1.69] Direct Actions and Derivative Actions

[1.70] Administrative Matters

Miscellaneous

[1.71] Name

[1.72] Record-Keeping Requirements

[1.73] Service of Process on Limited Partnership

[1.74] Applicability of Uniform Limited Partnership Act (2001)

Sale of Partnership Interests

[1.75] Raising Capital: Securities Aspects

[1.76] Definition of “Security”

[1.77] Intrastate Offerings

[1.78] Private Placement Offerings

[1.79] Manner of Offering

[1.80] Information Requirements

[1.81] Limitations on Resale

[1.82] Integration

[1.83] Classification of Investors

[1.84] Notification Requirements for Private Placement

[1.85] Insignificant Deviations

[1.86] State Securities Law Compliance

Drafting Limited Partnership Agreement

[1.87] Issues To Be Addressed

[1.88] Provisions Commonly Used in Limited Partnership Agreements

[1.89] Name of Partnership

[1.90] Loans

[1.91] Outside Activities

[1.92] Liability of General Partner to Limited Partner: Indemnity

[1.93] Capital Contributions

[1.94] Management of Partnership Business

[1.95] Transferability

[1.96] Books of Account

[1.97] Agent for Service of Process

[1.98] Family Limited Partnerships

[1.99] Formation

[1.100] Creditor Protection

[1.101] Income Tax Considerations

Transfer Tax Considerations

[1.102] Valuation Discounts

[1.103] Restrictions on Valuation Discounts

[1.104] Annual Exclusion Gifts

[1.105] Economic Substance of Transaction

[1.106] Appraisal of Assets

V. [1.107] Income Tax Aspects of General and Limited Partnerships

Basic Rules of Partnership Taxation

[1.108] Definition of “Partnership” for Tax Purposes

[1.109] Income Tax Returns

[1.110] Partnership Accounting

[1.111] Partnership Income and Partner’s Income

[1.112] Partner’s Distributive Share

[1.113] Partnership Assets

[1.114] Basis of Partnership Assets

[1.115] Basis of Partner’s Interest in Partnership

Tax Considerations of Partnership Transactions

[1.116] Contribution of Property to Partnership

[1.117] Partnership Distributions

[1.118] Recapture of Depreciation

[1.119] Recapture of Investment Credit

[1.120] Partnership Interest for Services

[1.121] Contributions of Property Subject to Liabilities

[1.122] Contributions of Installment Obligations

[1.123] Guaranteed Payments

Other Matters

[1.124] Code §179 Election To Expense Certain Depreciable Assets

[1.125] Syndication Expenses and Organization Fees

[1.126] At-Risk Provisions

[1.127] Prepaid Expenses

[1.128] Exchange of Partnership Interests

[1.129] Character of Gain or Loss

[1.130] Disclosure of Reportable Transactions

[1.131] Partnership of Corporations

[1.132] Incorporating a Partnership

Tax Considerations in Drafting Partnership Agreements

[1.133] Profits Interest of Each Partner

[1.134] Capital Interest of Each Partner

[1.135] Tax Basis for Each Partner’s Interest in Partnership

[1.136] Property To Be Contributed by Each Partner to Partnership

[1.137] Controlled Partnerships

[1.138] Purchase of Deceased or Retired Partner’s Interest in Partnership

VI. Appendix

Sample Forms

[1.139] General Partnership Agreement

[1.140] Partnership Formation Information Sheet

[1.141] Bibliography

Chapter 2 — Partnership Agreements

Chapter 3 — Statutory Dissociation and Winding Up

Chapter 4 — Limited Liability Partnerships

Chapter 5 — Family Limited Partnerships

Authors

James W. Dodge
James W. Dodge
James W. Dodge is a Professor at Purdue Global Law School, where he serves as the subject-matter expert for contracts. His courses cover estates, wills, and trusts; real property; and corporations and business organizations. He is a member of the Academy of Legal Studies in Business and a former member of the Uniform Laws Commission (2011 – 2022). Dodge received his B.S. from the University of Illinois and his J.D. from Southern Illinois University School of Law.
Kirk A. Hoopingarner
Kirk A. Hoopingarner
Kirk A. Hoopingarner is a Partner at Quarles & Brady LLP, in Chicago, where he focuses his practice on trusts and estates and tax-exempt organizations. Hoopingarner is a Fellow of the American College of Trust and Estate Counsel, a member of the Chicago Estate Planning Council, and a member of the editorial board of Planned Giving Today. Hoopingarner received his B.A. from Hope College and his J.D. cum laude from the University of Michigan Law School.
John B. Waters
John B. Waters
John B. Waters is Of Counsel to Roetzel & Andress, LPA, in Chicago, where he practices in the areas of corporate and tax law. He is a member of the American Bar Association Section of Taxation and the Illinois State Bar Association Federal Taxation Section. He received his B.S. from Iowa State University, his M.N.E. from North Carolina State University, his J.D. from the University of Idaho College of Law, where he was Symposium Editor of the Law Review, and his LL.M. in taxation from DePaul University.

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Business Partnerships (ARCHIVED 2018 EDITION)

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