A limited partnership is a type of legal entity in which there are at least two partners, One of whom has limited liability and one who does not. The number of partners can be greater than two, But each is either a personally liable partner (limited liability) or a limited partner or silent partner (limited liability). It is important to note that for a limited partnership to be considered a limited partnership, There must be both general partners and silent partners.
As the name suggests, A limited partnership is a form of partnership, Meaning there are at least two parties (partners) who agree to work together and share liability and income to pursue a common goal. While some aspects of the design depend on the type of partnership (e. G. Liability in a limited partnership), The actual extent of cooperation, The extent of liability and the distribution of income can be regulated in a memorandum of association according to the wishes of the partners.
Owner of a limited partnership
By definition, The owners of a limited partnership fall into two categories: general partners and dormant or limited partners. Each party must be represented by at least one partner. The difference between the parties lies in the extent of their participation in governance, Liability and sharing of corporate profits.
General partners in a limited partnership are those who bear unlimited liability for the company"s obligations. They have the right to participate in the management of the company, To vote on decisions and to determine the overall course of business development. General partners are usually also the ones who represent the company in dealings with third parties, As only they can enter into contracts with third parties on behalf of the partnership.
Limited or silent partners in a limited partnership are those whose liability for the company"s obligations is limited to the extent of their contributions. In other words, Their liability does not extend beyond the amount they have invested in the company. This means that limited partners are better protected in the event of poor business planning and failures, But their influence within the partnership is limited as well. Limited partners cannot participate in the management of the company, I. E. They can invest, But they cannot control day-to-day operations or how their investments are managed.
Functions of a limited partnership
The main function of a limited partnership is to boost the partners" chances of increasing their individual profits and security in comparison to what they would gain if they operated individually. Entering a partnership agreement may also allow the partners to compensate for the weaknesses, And utilise the strengths, Of each individual: one of the partners may bring significant financial assets, Another may be able to offer well-developed manufacturing facilities, While another may have a wide network of clients, Etc.
Other than that, Limited partnerships have no special functions and are mainly distinguished from other legal business structures by the way the roles are distributed between partners. A limited partnership can engage in any type of business activity, Including trade, Services, Manufacturing, Etc.