Section 10-9B-304

Person erroneously believing himself or herself a limited partner.

(a) Except as provided in subsection (c), a person who makes a contribution to a business enterprise and erroneously but in good faith believes that he or she has become a limited partner in the enterprise is not a general partner in the enterprise and is not bound by its obligations by reason of making the contribution, receiving distributions from the enterprise, or exercising any rights of a limited partner, if, on ascertaining the mistake, he or she:

(1) Causes an appropriate certificate of limited partnership or a certificate of amendment to be executed and filed; or

(2) Withdraws from future equity participation in the enterprise by executing and filing a certificate of withdrawal evidencing such withdrawal from future equity participation.

(b) A certificate of withdrawal evidencing withdrawal from future equity participation shall be signed by the person erroneously believing himself or herself a limited partner and shall be filed in the office of the judge of probate where the certificate of limited partnership of the enterprise has been filed, or if none has been filed, such certificate of withdrawal shall be filed in the office of the judge of probate of the county where the principal place of business of the enterprise is located, or if there is no known principal place of business, then in the office of the judge of probate of the county of domicile of such person. By withdrawing from future equity participation a person shall be deemed to withdraw from all participation in the future profits of the enterprise and from any future appreciation in the value of its assets, but shall not be deemed to withdraw from any previously accrued profits, whether distributed or undistributed, or from any appreciation in the assets of the enterprise (whether realized or unrealized) up to the date of such withdrawal, except as may be otherwise provided by agreement among the person withdrawing and other parties to the enterprise and except as may be otherwise stated in the certificate of withdrawal. For purposes of Section 10-9B-604, a person withdrawing from future equity participation shall be deemed a withdrawing partner.

(c) A person who makes a contribution of the kind described in subsection (a) is liable as a general partner to any third party who transacts business with the enterprise (i) before the person withdraws and an appropriate certificate is filed to show withdrawal, or (ii) before an appropriate certificate is filed to show that he or she is not a general partner, but in either case only if the third party actually believed in good faith that the person was a general partner at the time of the transaction, and extended credit to the business enterprise in reasonable reliance on the credit of such person.

(Act 97-921, 1st Ex. Sess., p. 335, § 1.)