The Uniform Partnership Act (UPA) was approved by the Uniform Law Commissioners in 1994. It is a complete revision of the Uniform Partnership Act of 1914, which was adopted in every state except Louisiana. UPA updates partnership law to meet the needs of modern business, clearly establishing that a partnership is an entity rather than an aggregate of partners.

The 1997 Amendments to UPA add a significant option to partnership law: limited liability for all partners in a partnership when the entity chooses the registered limited liability partnership form. A partner in a limited liability partnership has nearly the same level of limited liability as a shareholder in a business corporation.

One of the historic principles of general partnership law is that each individual partner is personally liable for all partnership obligations. This means that partners may be required to discharge partnership obligations from their own personal assets once partnership assets are exhausted.

However, limited liability for participants in a business organization can have an important economic impact. Whether an individual or entity invests in or participates in a business may very well depend upon the quality of limited liability -- for obvious reasons. Much of the current development in unincorporated organization law has been devoted to combining the flexibility of a partnership with limited liability for the participants in the business. The limited liability company and certain kinds of business trusts are examples.

But the search for an even simpler form has continued. Texas pioneered the concept of a limited liability partnership in 1991. The notion of a partnership that obtains limited liability for partners by a simple registration on the public record provides an even simpler form than a limited liability company, for example. The Texas experiment lead directly to the Amendments to UPA.

The 1997 Amendments to UPA provide for a limited liability partnership with complete limitation of liability. Some of the pioneer legislation posed limitation of liability only for professional malpractice. The UPA Amendments provide for immunity from personal liability for any partnership obligation. A partner who personally incurs an obligation in the conduct of partnership business is fully liable. Immunity is granted only for liability that is imputed simply because a partner is a partner, not for liability directly incurred.

Limited liability is an election that requires partners to register to become a limited liability partnership. Corporations, limited partnerships, and limited liability companies, which provide members or participants with some level of limitation of liability, all are registered entities. A limited liability partnership must also identify itself as an L.L.P. to those with whom it does business. The registration and identification requirements are to provide clear notice of its limited liability status to those who do business with a partnership. Creditors may and will adjust their assessments of credit-worthiness, accordingly.

The Amendments provide an option. The traditional partnership remains intact as the "residual" business organization for those who join to do business together. The continuity of partnership law that comes from the 1914 Uniform Partnership Act remains unsullied. A limited liability partnership is a partnership, and the rules that govern such matters as partners' obligations to each other, distributions, dissociation from the partnership, dissolution of the partnership, and the like, remain the same for limited liability partnerships as they do for traditional partnerships.

The objective of the 1997 Amendments to UPA is to increase choices for those who join to do business together. This should have a positive impact on the formation of new businesses. Tax consequences have always been a major factor in decisions about which form of business organization to choose. This impact upon choice appears likely to become less important in the future with the promulgation of new regulations by the Internal Revenue Service. Therefore, the appearance of the Amendments to UPA could not come at a more propitious time.