Characteristics of a Limited Partnership or LP:
- It does not require any formalities to be formed other than the agreement of the partners. However, it is always convenient to have a written partnership agreement.
- It must have at a minimum:
- A general partner with unlimited liability, and
- A limited partner with limited liability.
- The unlimited partner is responsible for the conduct and management of the LP, and liable for all its debts and obligations.
- The liability of the limited partner is capped at the amount of his contribution and cannot participate in the management of the LP
- The share in the profits and loses of the LP by the limited partner is limited by the amount of his contribution.
- Generally, the general partner tends to be an entity with limited liability, or the general partner limits his liability by purchasing liability insurance.