Limited Partnerships (LP) combine the limited liability benefits of incorporating with the pass-through taxation of partnerships. Limited Partnerships may be the best vehicle for business formation if liability can be vested in one person, the General Partner.

At least two persons are required to form a Limited Partnership - one General Partner and one Limited Partner. Each Limited Partner is limited in liability to the amount of capital contributed to the partnership, and items of profit and loss passed through to the individual. Limited Partnerships are formed and managed by one or more General Partners.

Limited Partners must not participate in the operation of the partnership. A limited partner who engages in management activities of the partnership may lose the benefits of limited liability and be reclassified as a general partner.

Because partners’ interests may not be freely traded, Limited Partnerships should not be formed if liquidity of investments is desired. The contribution and distribution of capital is generally allocated in the partnership agreement. Changes in the allocation may be made by unanimous consent or as stipulated in the partnership agreement. Subsequent persons may be admitted as General Partners or Limited Partners, pursuant to established partnership agreements or to unanimous consent.

Limited Partnerships have a limited life and cannot operate in perpetuity; a dissolution date must be submitted at the time of limited partnership organization. Often an investor has technical or management skills that would be of value to the partnership but does not the unlimited liability associated with being a general partner. In this situation a Limited Liability Company may better fulfill your needs

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