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A Limited Partnership is a business entity that consists of one or more General Partners, whose responsibilities include daily management of the company, and one or more Limited Partners, who do not participate in management. A General Partner may be an individual or an entity, such as a corporation.
In order to form a limited partnership, you must file a Certificate of Limited Partnership with the Delaware Division of Corporations. This is a very simple form that states the name of the General Partner.
Typically, the General Partners are liable for any and all of the company's financial obligations, while the Limited Partners possess no liability for the company's debts, obligations or actions.
General Partners usually possess all the rights and responsibilities of managing the business entity, including all of its activities and financial matters. They also hold general liability for the debts, obligations and activities of the Limited Partnership.
Typically, the Limited Partners do not participate in the management of the business entity and/or its properties in any way. It is of utmost importance that the Limited Partners refrain from any participation in the management of the company, on any level.
Engaging in management activity will nullify the limitation against personal liability that a Limited Partner enjoys.
Like the LLC, the limited partnership is a creature of contract, meaning that it is flexible and subject to few requirements or terms fixed by Delaware law. However, it is used less frequently since the adoption of the Delaware Limited Liability Company Act.
Limited Partnerships are typically utilized for two main purposes:
In both cases, if the Limited Partners comply with all laws and IRS Regulations concerning Limited Partnerships, the most they can each lose is the amount he/she invests in the partnership or the amount he/she is given in the Limited Partnership.
No court can reach into the assets of a Limited Partner in order to satisfy debts or obligations of the Limited Partnership as a business entity.
If a Limited Partner begins to participate in the management of the company, he/she risks personal liability, thereby reaching the same legal exposure as the General Partner(s).
Limited Partnerships are typically formed by individuals or corporations who want to maintain 100% of the control of an asset or project while including investors or heirs on the income from the Limited Partnership.
Limited Partnerships do not have stock or stockholders. Each Limited Partner has a specifically stated percentage of interest in the income from the entity.
Limited Partners do not receive dividends but are entitled to their share of the income.
Delaware Limited Partnerships may have any number of limited partners.
For detailed information on forming a Limited Partnership, see our limited partnership formation packages, then form an LP with our easy-to-use order form. You can also click on the button below to get started.Form a Limited Partnership Now
Harvard can provide assistance throughout the life of your company. These custom services are the most popular with our clients: