What are Limited Partnerships?

Limited Partnerships are an entity where one or more “general” partners manage the business while "limited" partners contribute capital and share in the profits but take no part in running the business. General partners remain personally liable for partnership debts while limited partners incur no liability with respect to partnership obligations beyond their capital contributions. The purpose of this form of business is to encourage investors to invest without risking more than the capital they have contributed. If a limited partner participates in the management of company affairs he/she can be held personally liable, so it is important to maintain that distance and separation if you form a limited partnership.

The best way to use a limited partnership is to form an LLC or Corporation to be the general partner of your partnership. This limits any exposure to the LLC or Corporation and there is no personal exposure as long as the entities are maintained properly.

REMEMBER: Although the protection afforded through the use of limited partnerships is primarily a result of statutory law, a properly drafted partnership agreement combined with other sophisticated planning techniques can significantly strengthen that protection. Limited Partnerships also generally require a registered agent which InCorp can provide. Contact InCorp if you would like assistance in drafting your partnership agreement.