Your LP Has One Partner With Unlimited Personal Liability—Is It You?

In every California limited partnership, the general partner stands fully exposed to every debt and lawsuit the fund or project can generate—a rule with consequences that a recent $23 million California trial judgment made impossible to ignore.

In a 2024 Silicon Valley commercial real estate LP dispute, a general partner was found to have repeatedly breached fiduciary duties of loyalty and care to elderly limited partner investors—directing partnership funds to self-dealing construction contracts, withholding financial disclosures, and prioritizing personal fee income over partnership obligations. The trial court issued a $23 million judgment against the GP personally. Under California’s Uniform Limited Partnership Act of 2008, that result was entirely predictable: the general partner is the one role in a limited partnership that carries unlimited personal liability for every obligation the entity incurs, regardless of fault.

California’s CULPA 2008 (Corp. Code §15904.01 et seq.) gives the general partner full authority to manage and bind the limited partnership—and full personal exposure for every obligation that authority creates. The LP agreement can restrict what the GP is authorized to do internally, but it cannot eliminate the GP’s apparent authority to bind the LP to third parties, nor can it reduce the GP’s fiduciary duties of loyalty and care to the partnership and its investors. The most common—and most costly—mistakes are serving as GP in your personal name rather than through an LLC or corporation, engaging in undisclosed self-dealing, and acting outside the LP agreement without proper authorization.

Read the full brief with checklist and recent cases: https://claude.ai/artifact/UgT7nr7EaJs1psUMUgzohq