Limited Partnership LP

A **Limited Partnership (LP)** is a partnership formed under state Uniform Limited Partnership Act provisions, with two distinct classes of partner. The general partner runs the day-to-day operations and accepts unlimited personal liability for partnership debts. Limited partners contribute capital and share in profits but lose protection if they participate in management beyond statutory safe-harbor activities.\n\nLPs are formed by filing a certificate of limited partnership with the state and adopting a limited partnership agreement. There is no minimum capital. The agreement allocates profits, losses, distributions, capital accounts, and waterfalls. For tax purposes the LP is a pass-through, with each partner receiving a Schedule K-1.\n\nThe LP is the dominant vehicle for private equity, venture capital, hedge funds, and real estate syndications. The fund itself is the LP, the management company is the GP (often itself an LLC for liability protection), and investors are limited partners. LPs are also used for family wealth structures and for holding entities where some owners want to be passive.

You will meet limited partnerships when investing in a venture or private equity fund, joining a real estate syndication, or planning estate transfers through a family limited partnership. Founders rarely operate an active business through an LP because of the unlimited GP liability problem; instead they wrap the GP role in an LLC. If you receive a K-1 from a fund or syndication, the issuing entity is almost certainly an LP.