What is a limited partnership?

Asked on 1/22/2009 by Karl Spacler - Bushwood Clubs
Answered by ABC Staff

A Limited Partnership ("LP") is a business organization with one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments. Limited partners also enjoy rights to the partnership's cash flow, but are not liable for company obligations.

Advantages:

• Easier to attract investors since the only liability for limited partners is the capital they invest in the business. 
• Allows general partners to focus their efforts on running the business. 
• Limited partners can leave or be replaced without dissolving the LP.

Disadvantages:

• There are more filings, formalities, and state requirements with limited partnerships.
• General partners assume personal liability.

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