Frequently Asked Questions

How does a limited partnership differ from a general partnership?

Understanding the difference between a limited partnership and a general partnership is crucial when deciding on the structure of your business. In a general partnership, all partners share equal responsibility and liability for the business. This means that each partner is accountable for the obligations and debts of the business, including the actions of the other partners. This type of partnership is typically formed by two or more individuals who have decided to establish a for-profit business together. On the other hand, a limited partnership consists of at least one general partner and one limited partner. The general partner has unlimited liability in the company, meaning they are fully responsible for the company's debts and obligations. The limited partner, however, is only liable for their portion of ownership in the company. This means that their personal assets are protected from the company's debts and liabilities. The key difference between these two types of partnerships lies in the level of liability and involvement of the partners. In a general partnership, all partners are equally involved in the management of the business and share the same level of liability. In a limited partnership, the general partner manages the business and assumes full liability, while the limited partner typically provides capital investment and has limited liability.