What defines a limited partnership?

A limited partnership is defined by its structure, which consists of at least one general partner and one or more limited partners. The general partner manages the business and has unlimited liability for the debts and obligations of the partnership, while the limited partners have limited liability, meaning their personal risk is limited to the amount they have invested in the partnership. This structure allows investors to contribute to the business without being personally liable beyond their investment.

This arrangement is beneficial as it offers a way for investors to participate in the business without taking on the same level of risk as the general partner who runs the operation. The limited partners typically do not participate in day-to-day management to maintain their limited liability status.

General partnerships, which consist only of general partners, lack the limitation on liability that characterizes limited partnerships, while partnerships involving family members do not inherently reflect the structure and liability characteristics that define a limited partnership. Lastly, not all partners having limited liability does not accurately describe the relationship in a limited partnership, as this only applies to the limited partners.