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Limited Partnerships

Because of the unlimited liability to which partners are subject, you may be reluctant to assume the risk. One way around this is to form a limited partnership. In a limited partnership there are two kinds of partners general and limited. General partners assume unlimited liability for the business. The liability of limited partners is confined to the amounts of their investments. However, in exchange for this limited liability, limited partners are restricted from taking an active role in the company’s management.

The withdrawal of a limited partner from the business does not necessarily dissolve the partnership, should others wish it to continue. In a limited partnership the risk can be shifted from one partner to another. It cannot be avoided entirely, though, because every limited partnership must have at least one general partner. If you decide to set up a limited partnership, you must give public notice to this effect, stating that one or more partners have limited status. Otherwise it is assumed that a general partnership exists, in which all partners have unlimited liability.