limited partnership

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limited partnership

n. a special type of partnership which is very common when people need funding for a business, or when they are putting together an investment in a real estate development. A limited partnership requires a written agreement between the business management, who is (are) general partner or partners, and all of the limited partners. Each limited partner makes an investment of funds into the partnership and is supposed to receive a pre-stated share of the profit, which is ordinarily greater than that of each of the general partners up to a point (such as return of the investment), and, thereafter, the limited partners will receive a lesser share than the general partner(s). The limited partners also will receive the tax benefit of a "passed through" loss (a personal income tax deduction for part of the loss) during the development stages of the partnership when the expenses exceed any receipts. Quite often there is also a provision for eventual buy-out of the limited partners by the general partner(s). The limited partners may not participate in the management decisions of the partnership or they will lose their limited partnership status. They do have the power to vote to remove the general partner(s), although usually the partnership agreement is structured so that such removal is virtually impossible unless the general partner in question has committed fraud. Since the limited investors have no control of the conduct of the partnership they should make sure they have considerable knowledge about the reputation and record of the general partner(s) and the type of business. In fact, state laws require that there be some pre-existing acquaintanceship between the general and the limited partners or a detailed prospectus provided by the general partner(s) meeting very stringent and specific federal requirements of disclosure. The maximum number of limited partners is set by state law to prevent using interests in the limited partnership as if they were shares of stock in a corporation. In addition to priority in profit, tax deductions, and potential share in the success of the enterprise, the limited partner is "limited" in potential loss, since all he/she can lose is his/her investment, and the general partners alone are subject to claims, debts in bankruptcy and lawsuits against the partnership. Limited partnerships must file their name and names and addresses of general partners with the Secretary of State or other designated officer in the state in which the partnership is created so the public can find out who the responsible parties are. Like a corporation, a limited partnership may not have a name which is too similar to another limited partnership or corporation. (See: partnership, limited liability, partner, general partner)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.

limited partnership

a partnership under which it is possible for a person to become a partner upon terms that his liability to the creditors of the firm should be strictly limited (rather like that of a shareholder in a company). Such a person is in the position of a sleeping partner with limited liability. See also LIMITED LIABILITY PARTNERSHIP.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
American Hotel Income Properties REIT LP (AHIP) (TSX:HOT.UN) (OTCQX:AHOTF) on Monday released a cash distribution of CAD0.075 per limited partnership unit (unit) for July 2015.
Existing partnerships, limited partnerships and limited liability companies are governed by prior law until Jan.
1.469-5T(e)(3)(i) treats a partnership interest as a limited partnership interest if (1) the interest is designated a limited partnership interest in the limited partnership agreement or the certificate of limited partnership, without regard to whether the partnership interest holder's liability for the partnership's obligations is limited under applicable state law; or (2) the partnership interest holder's liability for the partnership's obligations is limited, under the law of the state in which the partnership is organized, to a determinable fixed amount (e.g., the sum of the holder's capital contributions to the partnership and contractual obligations to make additional capital contributions to the partnership).
The family limited partnership (FLP) is a valuable planning technique offering numerous advantages to the owners of a closely held business.
Taken together, the decisions call into question whether the statutory presumption that interests in limited partnerships are passive necessarily extends to LLCs and LLPs.
469(h)(2) reads: "interests in Limited Partnerships--Except as provided in regulations, no interest in a limited partnership as a limited partner shall be treated as an interest with respect to which a taxpayer materially participates." Observation.
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As a limited partnership established among family members, an FLP lets a donor place assets into a partnership and gift noncontrolling interests to family members.
The program is especially applicable to pension funds, real estate investment trusts, general and limited partnerships, financial institutions, joint ventures and other real property owners and managers.

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