Limited Partnership
A limited partnership is an entity which is structured very similar to a general partnership, except that one or more of the partners has limited liability for the acts of the partnership. In a limited partnership there must be at least one or more general partners and one or more limited partners. The general partner(s) shall have management control, the right to use partnership property, share in the profits of the partnership, and have joint and several personal liability for all the debts of the partnership. The general partners shall have the authority to act as agents and bind the partnership in the ordinary course of business.
The limited partners have limited liability, meaning they are only liable for debts incurred by the partnership to the extent of their investments in the company, there is no personal liability to third parties. In order to keep this protection, the limited partners must have no management authority or decision making related to the day to day operations of the partnership. If a limited partner takes control of the business of the company, the limited partner shall become personally liable to any third party who reasonable believes that the limited partners are actually a general partner.
A limited partner does not lose its limited liability protection merely by becoming an employee, independent contractor, officer, director or stockholder of the partnership or of one of the general partners. A limited partner may also consult with and advise the general partner regarding the business of the partnership, so long as the limited partner did not exercise an ‘equal voice’ in making a decision related to the business of the partnership. A limited partner may vote on: amendments to the partnership agreement , the dissolution of the partnership, the sale, exchange, lease or mortgage of assets, the incurrence of debt to the partnership that is not in the ordinary course of business, a change in the nature of the business, the removal or admission of a general partner, the merger of the partnership with another entity, or any other business which the partnership agreement indicates must be approved by a vote of the limited partners, without being considered control which would cause a loss of the limited liability protection.
Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.
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