Limited Partnerships

Limited Partnerships by Fishbein Law Group

A limited partnership is a unique business structure authorized by state law, blending the characteristics of a general partnership and a corporation. Governed by the Uniform Limited Partnership Act (ULPA), which most states have adopted, limited partnerships are formed and operated under specific legal guidelines.

Like a corporation, establishing a limited partnership requires a formal agreement—known as the limited partnership agreement—and filing a certificate of limited partnership with the state. This certificate publicly discloses key details such as the names of the general partners, the registered office, and the nature of the partnership’s business.

A limited partnership consists of at least two partners, divided into general and limited partners. General partners, like regular partners, bear personal liability for the partnership’s debts. In contrast, limited partners, akin to corporate shareholders, are only liable up to the amount of their investment and are not involved in day-to-day management. If limited partners do participate in management, they risk losing their limited liability protection and being treated as general partners.

**Important Tip:** If you serve as a general partner in a limited partnership, consider using a corporation or LLC as the general partner to shield yourself from personal liability.

For tax purposes, a limited partnership is treated like a regular partnership: it doesn’t pay taxes, and profits and losses pass directly to the general and limited partners.

Limited partnerships are beautiful when the partnership is expected to incur losses or has tax implications that benefit investor-limited partners. This structure allows these investors to personally take advantage of certain tax benefits, which would not be available to corporate shareholders.

Limited partnerships are viral among licensed professionals—such as doctors, lawyers, and engineers—whose professional licenses expose them to personal liability. This structure protects their personal assets from potential claims. For more information on asset protection through Family Partnerships or to discuss your specific needs, contact Fishbein Law Group.