What is a Limited Partnership?

A limited partnership is a legal business entity made up of at least one limited partner and at least one general partner. Business people trying to decide which type of business entity to establish might choose a limited partnership because it offers the beneficial flexibility and tax treatment of a partnership, while allowing different levels of ownership and involvement among the partners.

Limited partners are investors

Limited partners may invest in a company and hold partial ownership, but may not exercise management authority. The upside is that limited partners are protected from partnership liability beyond their capital contributions, or as otherwise agreed in the partnership agreement. Limited partners are usually passive investors.

General partners, on the other hand, manage and control the limited partnership. They have authority to enter into contracts on behalf of the partnership and otherwise bind the partnership. Because of their exclusive management role, general partners owe certain fiduciary duties to the limited partners and other general partners.

In our next article, we'll discuss the fiduciary duties of general partners in a limited partnership.

Call Peterson Law Group today for more information

If you have questions about which type of business entity is right for your project, contact one of our experienced Brazos County, Texas commercial law attorneys. Call the Peterson Law Group to make an appointment at 979-703-7014, and sign up to receive our free online newsletter to receive regular updates about all kinds of business law topics.