Limited partnership (LP)

Definition

A Limited Partnership (LP) is a business structure where at least one partner has unlimited liability (general partner) and others have limited liability up to their investment (limited partners). General partners manage the business, while limited partners typically do not participate in day-to-day operations.

5 Must Know Facts For Your Next Test

1. Limited partners in an LP are only liable for debts up to the amount they invested.
2. General partners have unlimited liability and are responsible for managing the partnership.
3. Profits and losses are shared according to the partnership agreement.
4. Limited partnerships must be registered with state authorities to be recognized legally.
5. Limited partners risk losing their limited liability status if they participate in management decisions.

Related terms

General Partnership: A business arrangement where all partners share equal responsibility and liability.

Limited Liability Partnership (LLP):

A partnership where all partners have some degree of limited liability, protecting them from personal responsibility for certain debts.

Sole Proprietorship: A business owned and operated by one individual with no distinction between owner and business entity.