Legal Forms of Ownership for Small Businesses

As part of our legal forms of ownership for small businesses discussion, we recently discussed an overview of general partnerships. Today, we are continuing this discussion with an overview of limited partnerships.

A specialized form of partnership, a limited partnership is created to let individuals organize their entity that is flexible as a general partnership and also allows for additional duties, protections, and rights for limited partners.

To create a limited partnerships, limited partnerships are required to: file an application with a state government including the names and contact information for the general and limited partners of the limited partnership; and create a written agreement amongst the partners that identifies the status of any limited partners to the limited partnership.

Unlike general partnerships, the limited partners to a limited partnership are not allowed to engage in any of the operations of the entity. In other words, limited partners are generally consigned to being passive investors in the entity's business activity.

In addition, a limited partner's liability is limited to only being personally liable to the extent of his or her investment in the entity.

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*This blog post should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only.