Describe a limited partnership.

Prepare for the ATT Law Exam. Practice with multiple choice questions, each providing hints and explanations. Be well-prepared for exam day!

A limited partnership combines active management by general partners with passive investment by limited partners. In this structure, there is at least one general partner who runs the business and bears unlimited personal liability for the partnership’s debts. At the same time, there are one or more limited partners who contribute capital but do not manage the day-to-day operations; their liability is limited to the amount of their investment in the partnership. This separation of roles explains why limited partners are protected from unlimited liability and why they must avoid participating in management. That’s why the description that a general partner must run the business while limited partners cannot participate in operations and have liability limited to their investment best captures the essence of a limited partnership.