What form of partnership allows some of the investors to limit their lialbility?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The form of a partnership that allows some of the investors to limit their liability is (the exact name can vary) a limited liability partnership.

In this sort of a partnership, many of the investors are typically protected from liability to some extent.  The extent to which each of the investors is liable for debts incurred differs from one jurisdiction to the next, but all jurisdictions offer some limitations on liability.

In many jurisdictions, there is a requirement that at least one of the partners be designated as a general partner.  General partners have all of the decision-making power in the firm, but also have unlimited liability.  The other partners, often called limited partners, have no decision-making power but do enjoy some limits on their liability.

mormomneat's profile pic

mormomneat | Student, Undergraduate | eNotes Newbie

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The partnership that makes it possible for some investors to limit their liability is a special form of partnership, called a limited partnership.  In a limited partnership one or more partners are appointed as general partners and have unlimited liability for the debts of the firm.            

The limited partners in most cases  are not allowed to be active in the management of the firm. In some cases the partners are professionals in different fields that has nothing to do with business.

In a limited partnership the limited partners are only liable for their initial contribution.

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