Limited Partnership

A limited partnership (“LP”) is a form of partnership similar to a general partnership, except that, in addition to one or more general partners (“GPs”), there are one or more limited partners as well. The general partners may have unlimited liability, but they have power to manage the limited partnership; the limited partners have limited liability, but with little, if any, powers to manage the limited partnership. Limited partnerships are most commonly seen in the investment context, where a general partner manages a fund and solicits outside investors to invest in the fund as limited partners, who act in a passive manner and enjoy the benefits of limited liability protection. LPs that seek investment from outside investors are particularly common in the real estate context. It is very unlikely to see startups or closely held companies form as limited partnerships. Those types of companies typically form either as traditional corporations or limited liability companies. The reason is that LPs have a strict two-tiered corporate structure that does not allow for much flexibility, and because there is less case law governing LPs than, for example, corporations. LPs, like LLCs, rarely if ever become publicly traded companies; corporations almost also are the entity of choice when going public.