Sep '01 Issue
MSBA Home Page
RUPA is Coming:
UPA-- LLPs Beware
by Daniel S. Kleinberger
. . . warrants attention by all lawyers who have clients in general
partnerships or who themselves practice within a general partnership"
On January 1, 2002, the Revised
Uniform Partnership Act ("RUPA") becomes the only general
partnership statute still "on the books" in Minnesota.1 On that day, the original Uniform Partnership
Act ("UPA") is repealed2 and
all existing UPA general partnerships become subject to the newer
statute by operation of law.3
Once upon a time, when the law of business organizations was
considerably simpler, it was axiomatic that each partner in a
general partnership was personally liable for the obligations
of the partnership. This "owner liability" was automatic,
existed without regard to a partner's fault or participation
in the partnership's business, and was a major reason to avoid
using a general partnership.
In 1997, the Minnesota Legislature adopted RUPA, which, like
the Minnesota UPA, allowed a general partnership to become an
LLP by filing a simple document with the secretary of state.
RUPA labeled the document a "statement of qualification"
and dispensed with any annual renewal requirement.10
An registration is necessary, however, to keep current basic
information in the public record. Failure to file the report
can imperil the LLP shield.11
1. January 1, 1999 -- RUPA takes effect and governs
all Minnesota general partnerships newly formed on or after that
date.13 The UPA remains temporarily "on
the books" and continues to govern each Minnesota general
partnership that came into existence before January 1, 1999,
unless that preexisting general partnership elects to be governed
The transition into RUPA is problematic for preexisting Minnesota
LLPs because a partnership's UPA--LLP shield inevitably disappears
when the partnership becomes subject to RUPA. Fortunately, a
fully functioning RUPA--LLP shield is immediately available,
and a little preventative action can make the transition seamless.17 What particular action is necessary depends
on whether the UPA general partnership elects before January
1, 2002, to be governed by RUPA or waits instead for the transition
to occur by operation of law.
DANIEL KLEINBERGER is professor of law at William Mitchell College of Law. A coauthor of Limited Liability Companies: Tax and Business Law (Warren, Gorham & Lamont); he is also the Reporter for NCCUSL's new uniform limited partnership act.
Although this provision was not drafted with the LLP shield
protections in mind,20 the words of the
provision plainly apply to those protections. As a result, the
RUPA--LLP shield of an "electing in" partnership is
perforated in favor of customers, vendors and other third parties
who did business with the partnership in the year proceeding
Fortunately, the 2001 Legislature fixed this problem completely, allowing UPA partnerships to prefile RUPA statements of qualification while remaining governed by the UPA. The prefiling:
RUPA takes over completely on January 1, 2002, and at the same moment every LLP shield based on Minnesota's Uniform Partnership Act will vanish. To prevent a gap in its shield, each Minnesota UPA--LLP should either:
"Merely electing to be governed
by RUPA does not establish a
1. RUPA is a product of the National Conference of Commissioners
on Uniform State Laws ("NCCUSL"). The Minnesota version
appears in Minn. Stat. ch. 323A. NCCUSL formally eschewed the
label "Revised Uniform Partnership Act," and Minn.
Stat. ¤ 323A.12-01 states that "Chapter 323A may
be cited as the Uniform Partnership Act (1994)." However,
throughout the country practitioners and academics experienced
with the statute refer to it as the "Revised Uniform Partnership
Act" and "RUPA."