General Partnership vs Limited Partnership
Compare general and limited partnerships — who has authority and who has liability.
Overview
In a general partnership all partners share management and unlimited personal liability. In a limited partnership, general partners run the business and bear unlimited liability while limited partners contribute capital and have liability capped at their investment. LPs are common in real estate and private equity.
Choose General Partnership when...
Avoid general partnerships in most cases — use an LLC or LLP for liability protection. GPs are mostly historical or for specific tax situations.
Choose Limited Partnership when...
Use limited partnerships for real estate syndications, private equity funds, or VC funds where managers and investors have distinct roles.
Our Verdict
General partnerships are dangerous because every partner is fully liable for any partner's actions — this is why most professional service firms use LLPs (limited liability partnerships) or LLCs instead. Limited partnerships remain useful in capital-pooling structures (real estate, PE/VC funds) where active managers (GPs) take on liability and passive investors (LPs) contribute capital.
Frequently Asked Questions
What is the difference between General Partnership and Limited Partnership?
In a general partnership all partners share management and unlimited personal liability. In a limited partnership, general partners run the business and bear unlimited liability while limited partners contribute capital and have liability capped at their investment. LPs are common in real estate and private equity.
When should I choose General Partnership over Limited Partnership?
Avoid general partnerships in most cases — use an LLC or LLP for liability protection. GPs are mostly historical or for specific tax situations.
When should I choose Limited Partnership over General Partnership?
Use limited partnerships for real estate syndications, private equity funds, or VC funds where managers and investors have distinct roles.
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