Limited Partnership

Definition

A partnership in which the management, authority, and liability of some of the partners is limited.

Purpose

Limited partnerships allow investors to contribute capital without being involved in daily management or bearing unlimited liability. This structure provides a balance between capital investment and risk management.

Examples of Use

• Real estate investments: Limited partnerships are common in real estate developments where investors provide funding but do not manage the project.
• Venture capital: Used to pool funds from investors for startups and business ventures while limiting their liability.
• Family businesses: Facilitating the transfer of wealth and management responsibilities within family-owned enterprises.

Related Terms

• General Partner: A partner with management authority and unlimited liability in a partnership.
• Limited Liability Company (LLC): A business structure that provides limited liability to its owners.
• Partnership Agreement: A contract outlining the terms and conditions of a partnership.

Notes

• Limited partnerships must comply with specific legal requirements and file appropriate documentation with state authorities.
• The roles and responsibilities of general and limited partners should be clearly defined in the partnership agreement.
• Limited partners' liability is restricted to their investment in the partnership, protecting personal assets.