Exact Definition of Limited Partnership

Definition Limited Partnership

As an entrepreneur who probably wants to know how to safeguard your assets, it is important for you to know the definition of a limited partnership. This article will explain to you exactly what it is and how it may be good for your business to implement it. In addition to that, we will also provide you with some of the advantages you can benefit from when establishing a limited liability partnership. So read on and find out!

What is a Limited Partnership?

According to a Limited Partnership’s Definition is a type of partnership organization that limits the personal liability of some partners. In a general partnership, every partner remains personally liable for the debts of the partnership. What distinguishes the Limited Partnership is that at least one general partner is separated from the rest with unlimited personal liability, while the limited partners have their liability not exceeding their contribution to the partnership.

This type of partnership has been used for over two hundred years to allow some of the members of the association to passively invest in a partnership without fearing reprisals for the actions of other partners. While limiting liability, Limited Partnerships also keep the same flow-through tax treatment and much of the same contractual flexibility as a general partnership.

Pros Of Having a Limited Partnership

Let us put the limited partnership definition in simpler words. Based on the words we have just read, there are three main advantages we will be able to benefit from Flexibility, Pass-Through taxation, and Limited Liability.

Flexibility means that it is possible to organize company activities according to your needs. In a limited partnership, you will restrict the responsibility to the sums invested to the limited partners. The general partners, however, are personally accountable for the company’s debts.

Pass-through taxation doesn’t need a lot of explanation: limited partnerships will have certain tax advantages and they will be legally separated from your assets. The income is only taxed once, at the individual level, and not when it passes through the corporate level.

Finally, the limited liability indicates that you and the rest of the business partners won’t be held personally responsible for acts or decisions taken by the company. In other words, it relieves partners from the responsibility of meeting financial commitments from the firm.

Definition Limited Partnership

Creating your Partnership With Our Help

Now that you know the exact limited liability definition and the advantages you can benefit from, it is time to decide what type of association you want to create. If you do not want to do that by yourself, you can always contact the Corporate Center. Reach out to us at our phone number (800) 580-4870 or by email at and find out what is best for your partnership!