Limited partnership

A limited partnership is formed when some of the partners in a venture want to invest but not be responsible for the day-to-day operation. In this situation, they become the limited partners. As long as they remain disconnected from the direct decision-making of the limited partnership, they have no exposure beyond their original or subsequent financial investment.

Those partners who are willing to assume operating responsibility and therefore, additional exposure, elect to become general partners.

A limited partnership must have a partnership agreement that complies with requirements established in state law. It also must identify the general partner(s) and limited partner(s) and their shares of ownership.