A Limited Partnership is a form of partnership similar to a General Partnership, except that in addition to one or more general partners. It is a partnership in which only one partner is required to be a general partner.
The General Partners are, in all major respects, in the same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership.
As in a General Partnership, the General Partners have actual authority, as agents of the firm, to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership’s business. As with a general partnership, “an act of a general partner which is not apparently for carrying on in the ordinary course the Limited Partnership’s activities or activities of the kind carried on by the limited partnership binds the Limited Partnership only if the act was actually authorized by all the other partners.”
Limited Partnerships are generally used in real estate investment transactions. They have limited liability for the passive investors but personal liability for the General Partner. The reason they are favored for real estate investments generally is because the passive investors have the peace of mind of knowing that they don’t have personal liability but they also know that the General Partner has some “skin in the game” by having personal liability even though the General Partner doesn’t generally put in any monetary funds.
Do you have a real estate investment and want to decide between a Limited Partnership and a LLC? Schedule an appointment with a LOKK LEGAL professional and we can plan out the best route for you.