What distinguishes a limited partnership from a general partnership?

In a limited partnership, the key distinction is that only general partners have the authority to manage the business. This means that while general partners actively participate in the day-to-day operations and decision-making processes, limited partners contribute capital to the business but do not have a say in its management. This framework allows limited partners to have liability protection, which is not available to general partners who manage the business and are fully liable for business debts.

This distinction is essential because it outlines the different roles and levels of liability within the partnership structure. General partners face unlimited personal liability, meaning their personal assets could be at risk if the business incurs debts, whereas limited partners’ liability is typically limited to their investment in the partnership.

Understanding this dynamic is crucial for potential partners deciding on their involvement in a business venture, as it affects both their management responsibilities and financial exposure.