Section 503. Sharing of Distributions

A distribution by a limited partnership must be shared among the partners on the basis of the value, as stated in the required records when the limited partnership decides to make the distribution, of the contributions the limited partnership has received from each partner.

Comment

This Act has no provision allocating profits and losses among the partners. Instead, the Act directly apportions the right to receive distributions.

Nearly all limited partnerships will choose to allocate profits and losses in order to comply with applicable tax, accounting and other regulatory requirements. Those requirements, rather than this Act, are the proper source of guidance for that profit and loss allocation.

Unlike predecessor law, this section apportions distributions in relation to the value of contributions received from each partner without regard to whether the limited partnership has returned any of those contributions. Compare RULPA Sections 503 and 504. This Act’s approach produces the same result as predecessor law, so long as the limited partnership does not vary this section’s approach to apportioning distributions.

This section’s rule for sharing distributions is subject to change under Section 110. A limited partnership that does vary the rule should be careful to consider not only the tax and accounting consequences but also the “ripple” effect on other provisions of this Act. See, e.g., Sections 801 and 803(c) (apportioning consent power in relation to the right to receive distributions).