Chapter 178

178.0306(3m)(b)2. 2. Except as provided in subd. 3, a limited liability partnership that became a limited liability partnership on or after January 1, 2018, is deemed to not have elected to have par. (a) apply.

178.0306(3m)(b)3. 3. A limited liability partnership may change its election under this paragraph by filing an amended statement of qualification to that effect. This amendment may be made at any time, but shall be effective prospectively only.

178.0306(4) (4) The failure of a limited liability partnership to observe formalities relating to the exercise of its powers or management of its business is not a ground for imposing liability on a partner for a debt, obligation, or other liability of the partnership.

178.0306(5) (5) The cancellation or administrative revocation of a limited liability partnership’s statement of qualification does not affect the limitation in this section on the liability of a partner for a debt, obligation, or other liability of the partnership incurred while the statement was in effect.

178.0306 History History: 2015 a. 295.

178.0307 178.0307 Actions by and against partnership and partners.

178.0307(1) (1) A partnership may sue and be sued in the name of the partnership.

178.0307(2) (2) To the extent not inconsistent with s. 178.0306, a partner may be joined in an action against the partnership or named in a separate action.

178.0307(3) (3) A judgment against a partnership is not by itself a judgment against a partner. A judgment against a partnership may not be satisfied from a partner’s assets unless there is also a judgment against the partner.

178.0307(4) (4) A judgment creditor of a partner may not levy execution against the assets of the partner to satisfy a judgment based on a claim against the partnership unless the partner is personally liable for the claim under s. 178.0306 and any of the following is true:

178.0307(4)(a) (a) A judgment based on the same claim has been obtained against the partnership and a writ of execution on the judgment has been returned unsatisfied in whole or in part.

178.0307(4)(b) (b) The partnership is a debtor in bankruptcy.

178.0307(4)(c) (c) The partner has agreed that the creditor need not exhaust partnership assets.

178.0307(4)(d) (d) A court grants permission to the judgment creditor to levy execution against the assets of a partner based on a finding that partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court’s equitable powers.

178.0307(4)(e) (e) Liability is imposed on the partner by law or contract independent of the existence of the partnership.

178.0307(5) (5) This section applies to any debt, liability, or other obligation of a partnership which results from a representation by a partner or purported partner under s. 178.0308.

178.0307 History History: 2015 a. 295.

178.0308 178.0308 Liability of purported partner.

178.0308(1) (1) If a person, by words or conduct, purports to be a partner, or consents to being represented by another as a partner, in a partnership or with one or more persons not partners, the purported partner is liable to a person to whom the representation is made, if that person, relying on the representation, enters into a transaction with the actual or purported partnership. If the representation, either by the purported partner or by a person with the purported partner’s consent, is made in a public manner, the purported partner is liable to a person who relies upon the purported partnership even if the purported partner is not aware of being held out as a partner to the claimant. If partnership liability results, the purported partner is liable with respect to that liability as if the purported partner were a partner. If no partnership liability results, the purported partner is liable with respect to that liability jointly and severally with any other person consenting to the representation.

178.0308(2) (2) If a person is thus represented to be a partner in an existing partnership, or with one or more persons not partners, the purported partner is an agent of persons consenting to the representation to bind them to the same extent and in the same manner as if the purported partner were a partner with respect to persons who enter into transactions in reliance upon the representation. If all the partners of the existing partnership consent to the representation, a partnership act or obligation results. If fewer than all the partners of the existing partnership consent to the representation, the person acting and the partners consenting to the representation are jointly and severally liable.

178.0308(3) (3) A person is not liable as a partner merely because the person is named by another as a partner in a statement of partnership authority.

178.0308(4) (4) A person does not continue to be liable as a partner merely because of a failure to file a statement of dissociation or to amend a statement of partnership authority to indicate the person’s dissociation as a partner.

178.0308(5) (5) Except as otherwise provided in subs. (1) and (2) and subch. VII, persons who are not partners as to each other are not liable as partners to other persons.

178.0308 History History: 2015 a. 295.

subch. IV of ch. 178 SUBCHAPTER IV

RELATIONS OF PARTNERS TO EACH
OTHER AND TO PARTNERSHIP

178.0401 178.0401 Partner’s rights and duties.

178.0401(1) (1) Each partner is entitled to an equal share of the partnership distributions and, except in the case of a limited liability partnership, is chargeable with a share of the partnership losses in proportion to the partner’s share of the distributions.

178.0401(2) (2) A partnership shall reimburse a partner for any payment made by the partner in the course of the partner’s activities on behalf of the partnership, if the partner complied with this section and s. 178.0409 in making the payment.

178.0401(3) (3) A partnership shall indemnify and hold harmless a person with respect to any claim or demand against the person and any debt, obligation, or other liability incurred by the person by reason of the person’s former or present capacity as a partner, if the claim, demand, debt, obligation, or other liability does not arise from the person’s breach of this section or s. 178.0406, 178.0407, or 178.0409.

178.0401(4) (4) In the ordinary course of its business, a partnership may advance reasonable expenses, including attorney fees and costs, incurred by a person in connection with a claim or demand against the person by reason of the person’s former or present capacity as a partner, if the person promises to repay the partnership if the person ultimately is determined not to be entitled to be indemnified under sub. (3).

178.0401(5) (5) A partnership may purchase and maintain insurance on behalf of a partner against liability asserted against or incurred by the partner in that capacity or arising from that status even if, under s. 178.0105 (3) (h), the partnership agreement could not eliminate or limit the person’s liability to the partnership for the conduct giving rise to the liability.

178.0401(6) (6) A partnership shall reimburse a partner for an advance to the partnership beyond the amount of capital the partner agreed to contribute.

178.0401(7) (7) A payment or advance made by a partner which gives rise to a partnership obligation under sub. (2) or (6) constitutes a loan to the partnership which accrues interest from the date of the payment or advance.

178.0401(8) (8) Each partner has equal rights in the management and conduct of the partnership’s business.

178.0401(9) (9) A partner may use or possess partnership property only on behalf of the partnership.

178.0401(10) (10) Unless authorized by the partnership agreement or otherwise in accordance with this chapter, a partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership.

178.0401(11) (11) A difference arising as to a matter in the ordinary course of business of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business of a partnership, an amendment to the partnership agreement, or a merger, interest exchange, conversion, or domestication by the partnership under subch. IX may be undertaken only with the affirmative vote or consent of all the partners.

178.0401(11m) (11m) Unless otherwise provided in the partnership agreement, any action that is to be voted on or consented to by some or all of the partners may be taken without a meeting of the partners entitled to vote or consent if all of such partners consent to the action. The consent shall be evidenced by one or more written consents describing the action, signed by each of such partners, and delivered to the partnership for inclusion in the partnership records. Unless otherwise provided in the partnership agreement, if a person, whether or not then a partner, so consenting as a partner directs, whether through instruction to an agent or otherwise, that such consent will be effective at a future time, including a time determined upon the happening of an event, then the person shall be deemed to have consented as a partner at this future time so long as the person is then a partner and did not revoke the consent prior to that time. Any such consent shall be revocable prior to its becoming effective.

178.0401 History History: 2015 a. 295; 2021 a. 258.

178.0402 178.0402 Becoming partner.

178.0402(1) (1) Upon formation of a partnership, a person becomes a partner under s. 178.0202 (1).

178.0402(2) (2) After formation of a partnership, a person becomes a partner in any of the following ways:

178.0402(2)(a) (a) As provided in a partnership agreement.

178.0402(2)(b) (b) As a result of a transaction effective under subch. XI.

178.0402(2)(c) (c) With the affirmative vote or consent of all the partners.

178.0402(3) (3) A person may become a partner without doing any of the following:

178.0402(3)(a) (a) Acquiring a transferable interest.

178.0402(3)(b) (b) Making or being obligated to make a contribution to the partnership.

178.0402 History History: 2015 a. 295; 2021 a. 258.

178.0403 178.0403 Form of contribution. A contribution may consist of money or other property transferred to, services performed for, or another benefit provided to the partnership or an agreement to transfer money or property to, perform services for, or provide another benefit to the partnership.

178.0403 History History: 2015 a. 295.

178.0404 178.0404 Liability for contribution.

178.0404(1) (1) A person’s obligation to make a contribution to a partnership is not excused by the person’s death, disability, termination, or other inability to perform personally.

178.0404(2) (2) If a person does not fulfill an obligation to make a contribution other than money, the person is obligated at the option of the partnership to contribute money equal to the value of the part of the contribution which has not been made.

178.0404(3) (3) The obligation of a person to make a contribution may be compromised only by the affirmative vote or consent of all the partners. If a creditor of a limited liability partnership extends credit or otherwise acts in reliance on an obligation described in sub. (1) without knowledge or notice of a compromise under this subsection, the creditor may enforce the obligation.

178.0404 History History: 2015 a. 295.

178.0405 178.0405 Sharing of and right to distributions before dissolution.

178.0405(1) (1) Any distribution made by a partnership before its dissolution and winding up must be in equal shares among partners, except to the extent necessary to comply with a transfer effective under s. 178.0503 or charging order in effect under s. 178.0504.

178.0405(2) (2) Subject to s. 178.0701, a person has a right to a distribution before the dissolution and winding up of a partnership only if the partnership decides to make an interim distribution.

178.0405(3) (3) A person does not have a right to demand or receive a distribution from a partnership in any form other than money. Except as otherwise provided in s. 178.0806 (6), a partnership may distribute an asset in kind only if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person’s share of distributions.

178.0405(4) (4) If a partner or transferee becomes entitled to receive a distribution, the partner or transferee has the status of, and is entitled to all remedies available to, a creditor of the partnership with respect to the distribution. However, the partnership’s obligation to make a distribution is subject to offset for any amount owed to the partnership by the partner or a person dissociated as partner on whose account the distribution is made.

178.0405 History History: 2015 a. 295; 2021 a. 258.

178.0406 178.0406 Limitations on distributions by limited liability partnership.

178.0406(1) (1) A limited liability partnership may not make a distribution, including a distribution under s. 178.0806, if after the distribution any of the following applies:

178.0406(1)(a) (a) The partnership would not be able to pay its debts as they become due in the ordinary course of the partnership’s business.

178.0406(1)(b) (b) The partnership’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the partnership were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of partners and transferees whose preferential rights are superior to the rights of persons receiving the distribution.

178.0406(2) (2) A limited liability partnership may base a determination that a distribution is not prohibited under sub. (1) on any of the following:

178.0406(2)(a) (a) Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances.

178.0406(2)(b) (b) A fair valuation or other method that is reasonable under the circumstances.

178.0406(3) (3) Except as otherwise provided in sub. (5), the effect of a distribution under sub. (1) is measured as follows:

178.0406(3)(a) (a) In the case of a distribution described in s. 178.0102 (4) (a) 1. and 2., as of the earlier of the following:

178.0406(3)(a)1. 1. The date money or other property is transferred or debt is incurred by the limited liability partnership.

178.0406(3)(a)2. 2. The date the person entitled to the distribution ceases to own the interest or rights being acquired by the partnership in return for the distribution.

178.0406(3)(b) (b) In the case of any distribution of indebtedness other than one under par. (a), as of the date the indebtedness is distributed.

178.0406(3)(c) (c) In all cases other than those under par. (a) or (b), as of the following:

178.0406(3)(c)1. 1. The date the distribution is authorized, if the payment occurs not later than 120 days after that date.

178.0406(3)(c)2. 2. The date the payment is made, if the payment occurs more than 120 days after the distribution is authorized.

178.0406(4) (4) A limited liability partnership’s indebtedness to a partner or transferee incurred by reason of a distribution made in accordance with this section is at parity with the partnership’s indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.

178.0406(5) (5) A limited liability partnership’s indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of sub. (1) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.

178.0406(6) (6) In measuring the effect of a distribution under s. 178.0806, the liabilities of a dissolved limited liability partnership do not include any claim that has been disposed of under s. 178.0807, 178.0808, or 178.0809.

178.0406 History History: 2015 a. 295.

178.0407 178.0407 Liability for improper distributions by limited liability partnership.

178.0407(1) (1) Except as otherwise provided in sub. (2), if a partner of a limited liability partnership consents to a distribution made in violation of s. 178.0406 and in consenting to the distribution fails to comply with s. 178.0409, the partner is personally liable to the partnership for the amount of the distribution which exceeds the amount that could have been distributed without the violation of s. 178.0406.

178.0407(2) (2) To the extent the partnership agreement of a limited liability partnership expressly relieves a partner of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other partners, the liability stated in sub. (1) applies to the other partners and not to the partner that the partnership agreement relieves of the authority and responsibility.

178.0407(3) (3) A person that receives a distribution knowing that the distribution violated s. 178.0406 is personally liable to the limited liability partnership but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under s. 178.0406.

178.0407(4) (4) A person against which an action is commenced because the person is liable under sub. (1) may do any of the following:

178.0407(4)(a) (a) Implead any other person that is liable under sub. (1) and seek to enforce a right of contribution from the person.

178.0407(4)(b) (b) Implead any person that received a distribution in violation of sub. (3) and seek to enforce a right of contribution from the person in the amount the person received in violation of sub. (3).