Limited Partnership


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  • A limited partnership (LP) is a partnership in which the duties and obligations of the partners are divided between one or more "general partners" and one or more "limited partners."
  • As in a general partnership, the limited and general partners may be individuals, corporations, limited liability companies, or other partnerships.
  • As in a general partnership, a general partner in an LP has unlimited personal liability for debts and obligations of the LP.
  • A limited partner is at risk to lose the amount invested in the LP, but otherwise is not personally liable for the debts and obligations of the LP.
  • The business of the LP must be run by the general partners. The limited partners are restricted by state laws from participating in the management of the business other than to vote on certain major decisions.
  • If a limited partner crosses over the line and participates in the operation of the business, the limited liability protection may be lost.
  • An LP generally cannot exist unless a certificate of limited partnership has been duly filed and recorded as required by state statutes. The statutes must be substantially complied with or the partnership may be treated as a general partnership, and limited partners thus may have unlimited liability for partnership obligations.
  • A written agreement is used to identify the capacity of the partners as general or limited and cover matters such as the division of profits and losses, the duties and responsibilities of the general partner and any management fees or other compensation to which the general partner is entitled.
  • An LP is generally not subject to federal or state income taxes but typically is subject to any state franchise taxes for the privilege of operating as a limited liability entity.
  • It is a pass-through tax entity in which the profits and losses of the partnership are passed through to the limited partners according to their partnership interests and reported on the limited partner’s individual tax returns.

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