In Louisiana, a partnership is an entity created by written or oral contract between two or more legal persons for the purpose of combining their efforts/resources for a common profit or commercial benefit. Because a partnership agreement in Louisiana can be oral, there is no filing requirement with the state. Nonetheless, an agreement between the parties can (and usually should) be written and filed.
In Louisiana, a partner generally owes a fiduciary duty to the partnership and to the other partners. This means that a partner may not appropriate any partnership asset, including a prospective business opportunity, for his own personal profit or in the capacity as a partner, act in a way that is contrary to what he or she perceives to be the best interests of the partnership.
Each partner is secondarily liable for his or her virile share of the partnership’s debts. However, if sued individually, the partner may plead “discussion” wherein the creditor would be required to seize specifically identified partnership assets to satisfy the debt before seizing the partner’s personal assets. For this reason, many individuals choose to form a commendam (a Louisiana legal term meaning “limited”) partnership to better protect the personal assets of a limited partner.
Under a commendam partnership, there are one or more limited partners and one or more general partners. The limited partner is only liable to the extent of his investment in the partnership and will not be personally liable for partnership debts. This protection for the limited partner can cease, however, if the limited partner acts as a general partner by (1) permitting his name to be used in the business dealings of the partnership, (2) participating in the management or administration of the partnership, or (3) conducting business with third parties on behalf of the partnership (but only where the third party reasonably believes that the limited partner is a general partner).
Should you wish to learn more about Louisiana partnerships or other business entity formations, learn about your legal rights from a an experienced New Orleans business attorney by filling out our free, no obligation case review form located on this website.