JJ Childers here. Today’s topic is the Limited Partnership. Just what is a Limited Partnership? Well, in basic terms, a limited partnership is a legal entity in which two or more persons, or entities have entered. At least one of these partners is called the General Partner. The general partner has all control over the operations of the Limited Partnership. They make all the decisions. But since they have all the control, they are also responsible for all obligations and debts. They are fully liable for any debts or claims filed against the partnership.
The other partners are called limited partners. A limited partner has the advantage of being liable for only the amount of his or her investment in the business. That means a limited partner’s personal assets are not available or at risk to settle any claims.
In order to receive this limited liability, however, a limited partner can’t participate in managing or control of the partnership.
Even without knowing all the ins and outs of this particular legal entity, you can probably already see why this would be appealing to both the general partner and the limited partner.
The general partner can get capital from limited partners who won’t tell him or her what to do. And the limited partner has the potential of gain when the venture is making money and only their investment in the partnership is at risk. And there are strategies that can be implemented to overcome the full liability of the general partner to sweeten the pot even more. We will discuss these strategies in a future visit.
