LIMITED PARTNERSHIP (LP)

Partnerships share many similarities with sole proprietorships with the primary difference being that the business has two or more owners.  Unlike a general partnership, a limited partnership is a registered business entity.  In an LP, there are two kinds of partners: those who own, operate and assume liability for the business (general partners), and those who act only as investors (limited partners).   

​

Advantages of a Limited Partnership​

• An LP is a good option for raising money because investors can serve as limited partners without any personal liability

• General partners of the LP get the money they need to operate but maintain authority over business operations

• Limited partners can leave anytime without having to dissolve the business partnership

 

Disadvantages of a Limited Partnership​

• General partners are personally responsible for the debt and liabilities of the business

• More costly to create than a GP and is required to be registered with the state

• A limited partner may also face personal liability for inadvertently taking too much of an active role in the business

​

Although the formation of a limited partnership might be more complicated than that of a general partnership, these entities are great on the basis of raising money from limited partners due to their lack of liability. Most people choose to form partnerships to lower the risk of starting a business since you do not have to go about the process on your own.  Rather, you can have multiple people sharing in the struggles and successes along the way.