how a limited partnership lp works
a limited partnership is required to have at least one general partner and one or more limited partners 1general partners have full management control of the business and unlimited financial liability for their financial obligations limited partners have little or no involvement in management and their liability is limited to the amount of their investment in the lp hedge funds and real estate investment funds are often set up as lps to protect their investors from the financial fallout of a failed venture partnership agreements should be created to outline the specific responsibilities and rights of both general and limited partners types of partnershipsgenerally any partnership is a business owned by two or more individuals there are three forms of partnerships limited partnership general partnership and limited liability partnership in all forms of partnerships each partner contributes resources such as property money skills or labor and in return shares in the profits and losses of the business at least one partner makes decisions regarding the day to day affairs of the business this partner is often known as the general partner most limited partnerships are formed by investors who are pooling their money to invest in assets such as real estate lps differ from other partnerships in that the partners except for general partners have limited liability meaning they are not on the hook for business debts that exceed their initial investment general partners are responsible for the daily management of the limited partnership and are liable for the company s financial obligations including debts and litigation all other contributors are known as limited or silent partners they provide capital but cannot make managerial decisions and are not responsible for any debts beyond their initial investment limited partners can become personally liable if they take a more active role in the lp a general partnership gp is a company structure that requires all of its partners to share in the profits managerial responsibilities and liability for debts of the business the partners share the profits and responsibilities equally unless the legal partnership agreement states otherwise 2a joint venture is a type of general partnership that is formed to complete a specific project and will be dissolved with its completion all partners have an equal right to control the business and share in any profits or losses they also have a fiduciary responsibility to act in the best interests of both other members and the venture 3a limited liability partnership llp is a type of company that gives all partners limited financial liability all partners can also participate in management decisions 4this is unlike a limited partnership in which at least one general partner must have unlimited liability and limited partners cannot be part of management llp partners are not responsible for the misconduct or negligence of other partners 4llps are most often used as business structures for groups of professionals such as lawyers or accountants 