In business registration terminology, a major vast of people imply General Partnership
when they use the term “partnership”. However, in business world, another form of partnership exists, which is called Limited Partnership
. In short, a general partnership applicable when both partners have administrative, management and operation control on the business. On the other hand, a when the partnership business is operated, administered and managed by only the single partner and the other partner has no administrative, management or operational control (except contributing capital only), a limited partnership comes into place.
Four major characteristics distinguish a limited partnership from a general partnership:
- A limited partnership is operated by a single “general partner” with unlimited liability, supported by other “limited partners.”
- The “limited partners” contribute capital but cannot be involved in the company’s management, administration or decision making.
- The single “general partner” gets a bigger share of the earnings in exchange for increased contributions and risk.
- The liability of the limited partners is capped in proportion with the capital contribution