Limited Partnerships

A limited partnership (LP) is a business organization that must have a minimum of two members: at least one general partner and at least one limited partner. General partners control the day-to-day operations of the business and are personally liable for its debts. Limited partners are passive investors who enjoy limited liability and cannot actively participate in business decisions. General partners are often LLCs or corporations to protect their owners from personal liability.

The primary defining feature of a limited partnership is “flow-through tax consequences” for the limited partners. A limited partnership is not federally taxable as a separate entity like a C corporation is. Instead, business profits or losses “flow through” to the personal income tax filings of the partners. Limited partnerships usually also have a termination date written into their certificate of partnership. A certificate of partnership is a document that names all the members of a partnership.

The general partner has the authority to sign legally binding contracts and buy and sell property on behalf of the partnership. He may receive a salary and may charge fees for his activities within the business.

The general partner has unlimited liability related to the LP, which means his personal assets can be at risk if the partnership defaults or files for bankruptcy. The general partner needs approval from the limited partners to inves