What Is a Limited Partnership in Business?

limited partnership

Limited partnership

Basically, limited and general partnerships share the same characteristics, with a few distinct differences worth noting.

A limited partnership is defined as an association of at least one general partner and one limited partner. The limited partner is an individual who only invests capital and does not participate in managing the firm. In fact, the limited partnership form of business organization is viewed by many as a capital generating mechanism used quite frequently in real estate, oil and gas development, and mining deals.

Very attractive tax benefits can be passed to investors involved in a limited partnership agreement.

The main thing to remember is that the general partner in a limited partnership has unlimited liability for the debts of the business without question. On the other hand, limited partners are not liable for partnership debts if they do not participate in managing the business.

Their personal assets are not at stake if the limited partnership incurs debts. They can only lose the amount invested and nothing more. Keep in mind that recent court rulings have determined that limited Partners who actively get involved in management fun are not, in fact, limited partners and should be com partners, thereby assuming the unlimited risk for partnership.

Once a limited partnership generates profits, the general partners normally rewarded by receiving between on partners are normally rewarded by one and 20 percent of all income produced after expenses are paid.

The 80 to 99 percent is divided among the limited partners may vary among different propositions.

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