Limited partnerships (LP) have been the go-to entity for certain kinds of industries for years. The most prevalent use has been in real estate, where the ownership is usually made up of one person who manages the operations and the cash flow, and the rest of the partners are silent partners, or “limited partners”. Why limited? “Limited” in this context means that the liability, or financial exposure, of the silent partners is limited to what they put into the partnership. So if there’s a claim against the partnership, the managing partner, known as the General Partner (the GP), bears the brunt of the liability, which may very well exceed the GP’s investment. LPs are going by way of the dinosaur as LLCs become the more favored entity for real estate development.
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