Limited partnership

A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners, there are one or more limited partners. The general partner(s) are each personally liable for the debts of the partnership, and usually hold full managerial control. The limited partner(s) have limited liability, meaning that they are only liable to the extent of their investment, and no management authority.

Related Topics:
Partnership - General partnership - Liable - Debt - Limited liability

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In exchange for this protection from liability, LPs are generally required to file documents with the state government, similar to the filing documents of a corporation. LPs must also explicitly disclose their LP status when dealing with other parties, so that such parties are on notice that the LP carries limited liability.

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Limited partners' status is contingent upon their abstinence from management. If a limited partner takes an active role in managing the LP's affairs, they may legally be considered a general partner, and thus lose their limited liability protection.

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The LP organization is most common in the film industry or in types of businesses that focus on a single or limited-term project. They are also useful in "labor-capital" partnerships, where one or more financial backers prefer to contribute money or resources while the other partner performs the actual work. In such situations, liability is the driving concern behind the choice of LP status. The LP is also attractive to firms wishing to provide shares to many individuals without the additional tax liability of a corporation. Private equity companies almost exclusively use a combination of general and limited partners for their investment funds.

Related Topics:
Film industry - Labor - Capital - Private equity

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Well-known limited partnerships include Carnegie Steel, Bloomberg LP and CNN.

Related Topics:
Carnegie Steel - Bloomberg LP - CNN

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In most states, an LP can elect to become a Limited Liability Partnership (or LLP). In this arrangement, every partner is liable only for the business debts of the company, and not for acts of malpractice or other wrongdoing done by the other partners in the course of the partnership's business.

Related Topics:
Limited Liability Partnership - Malpractice

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