Limited Partnership

Limited Partnership Definition

A limited partnership is a private or public business owned by two or more partners, including both general partners and limited partners.

In this type of partnership, the partners share the profits and losses of the business as stipulated in a predetermined agreement. The general partners share the management and control of the business. In comparison, limited partners do not participate in management or control of the business.

In a limited partnership, only the general partners have unlimited liability for the obligations of the business. This is because the limited partners are only liable up to the amount of their original investment. This means if the partnership defaults on loan payments, then the personal assets of the general partners can be liquidated to repay the debt, but the limited partners only risk losing their original invested capital.

Consider a limited partnership private if it has less than 35 limited partners. Furthermore, private limited partnerships do not have to register with the SEC. But consider it public if it has more than 35 limited partners. As a result, public limited partnerships must register with the SEC. One can trade the ownership through brokers and dealers, but they cannot trade on public securities exchanges.

General Partner Definition

In any type of partnership – a general partnership, a private limited partnership, or a public limited partnership – a general partner is an individual who is responsible for the operations of the partnership and has unlimited liability for the obligations of the business.

Limited Partner Definition

In comparison, a limited partner is an investor whose liability is limited by the amount of capital they invested. If the partnership defaults on loans, then a limited partner cannot lose more than what he originally invested. Limited partners typically are not involved in the daily operations of the business.

General Partnership vs. Limited Partnership

In a general partnership, all of the co-owners are general partners with unlimited liability for the obligations of the business. In a limited partnership, there is at least one limited partner. That limited partner is an investor whose liability is limited by the amount of capital invested by that individual. In comparison, general partnerships are always privately owned. These partnerships can be privately or publicly owned.

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Limited Partnership

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Limited Partnership

See Also:
Organizational Structure
Sole Proprietorship
S Corporation
Make-or-Buy Business Decision
Company Life Cycle

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