PARTNERSHIPS-LIMITED-FAILURE TO COMPLY WITH STATUTES AS BASIS FOR UNLIMITED LIABILITY

The recent decision of the Eighth Circuit Court of Appeals in Kistler v. Gingles, that a limited partner under the Arkansas Limited Partnership Act fails to avoid unlimited liability if the terms of the statute are not complied with, illustrates the inherent danger of the limited partnership. This statute, which is typical of the limited partnership statutes antedating the Uniform Limited Partnership Act, provides, in part, for an affidavit by one of the general partners stating that the sums which each limited partner proposes to contribute to the enterprise have actually and in good faith been paid into the business in cash by the date of its registration; and that if any false statement be made in the affidavit, all the persons interested in such partnership shall be liable for all the engagements of the firm as general partners. The uncontested facts in the above case show that while the would-be limited partners had not actually paid over in cash their full contributions as had been stated in the affidavit, they were at all times ready, willing, and able to so do. Instead of losing only their initial investment in the enterprise, the investors were held liable for the concern\u27 s entire indebtedness as a result of their failure to follow the precise terms of the statute. Herein lies the danger of the limited partnership and the reason this type of business association has been largely neglected in those states not adopting the Uniform Limited Partnership Act