Limited partnerships in the US consist of at least one
general partner and one or more limited partners. Limited partners, unlike general partners, do not have the
right to participate in
management decisions, and have only limited liabilities for the firm's
obligations. The formation of the limited partnership is similar to that of the
general partnership. Differing from the general partnership, though, is the fact that the law recognizes a limited partnership as
separate legal entity from the partners themselves.
The advantages:
- The major benefit of this type of structure is the limited liabilities of limited partners. In exchange for giving up management rights, limited partners can lose no more than the amount they invested into the firm.
The disadvantages:
- The process to form a limited partnership is more complex than that of a general partnership. The procedures are similar to the formation of a corporation.
- An organization fee is required for this type of partnership.
- Furthermore, limited liability cannot be extended to all partners. General partners still have unlimited liability.
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