3.8.1.2 Real Estate Limited Partnership (RELP)
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. When the limited partnership manages real estate it is often referred to as a real estate limited partnership (RELP). It can also be called a direct participation program (DPP). General partners control the day-to-day operations of the business and are personally liable for the debts of the business. Limited partners are passive investors, who enjoy limited liability but cannot actively participate in business decisions. For limited partners, the integrity and reliability of the general partner should be an important consideration. 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 owners. A limited partnership is not federally taxable as a separate entity as is the case for a C corporation. Instead, business profits or losses “flow through” to the income tax filings of the partners. Limited partnerships usually also have a termination date written into their certificate of partnership.
A limited partnership has one or more general partners and one or more limited partners. The general partner(s) manages the business on a day-to-day basis, for the most part without consulting or seeking approval from the limited partn