Limited Partnerships

Limited Partnerships

A limited partnership (LP) is where two or more people own a business, but there are two classes of partners: general partners (who own and operate the business), and limited partners (who invest their money or property in the business, do not have the right to make decisions regarding the operation of the business, and do not have personal liability for business debts). The limited partnership was designed to allow limited partners to invest in the business, but not have the drawback of personal liability. However, personal liability still remains for the general partners.

Advantages of a Limited Partnership

Compared to a general partnership or sole proprietorship. The main advantage a limited partnership over a general partnership or sole proprietorship is the addition of limited partners. In a limited partnership, the general partners are still personally liable for the debts of the business, but the limited partners are not. Limited partners are also not given any say in how the company is run, which could make decisions easier to make.

Compared to a corporation or LLC. Compared to a corporation or an LLC, a limited partnership may be cheaper and easier to set up. Limited partnerships also have fewer formalities than an LLC or corporation.

Disadvantages of a Limited Partnership

Compared to a corporation or LLC. A corporation or an LLC is usually more advantageous than an LP, since they both provide personal liability protection for all owners, not just some of the owners.

It may also be easier to transfer an interest in a corporation or an LLC than an interest in an LP. 

  • Overview of Businesses and Partnerships
    This section will explain various types of business organizations and help you decide if a partnership is the right form for your business. Types of Business Organizations A partnership is only one type of business organization. There are basically five types of business organizations:
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  • Personal Liability
    To fully understand partnerships, as well as all other types of business entities, it is important to understand the legal concept of personal liability for business obligations. There are always financial risks associated with starting a business. One risk is that the business will fail to make...
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  • General Partnerships
    General partnerships are the most basic type of partnership, and are little more than an agreement between two or more people to run a business. General partnerships have fallen out of favor, being replaced by other types of business structures because they don’t offer liability protection for...
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  • Limited Partnerships
    A limited partnership (LP) is where two or more people own a business, but there are two classes of partners: general partners (who own and operate the business), and limited partners (who invest their money or property in the business, do not have the right to make decisions regarding the...
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  • Limited Liability Partnerships
    A limited liability partnership (LLP) is basically a general partnership, but with the addition of giving the partners at least some limited personal liability. There is only one class of partner (general partners).
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  • Limited Liability Limited Partnerships
    A limited liability limited partnership (LLLP) is a type of partnership that is very similar to a limited liability partnership (LP) in that it has two types of partners, general partners and limited partners. Unlike an LP, however, the general partners in an LLLP have some liability protection....
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