A separate legal entity, this type of business includes a general partner and one or more limited partners who invest capital into the partnership, but do not take part in the daily operation or management of the business. The limited partners limit their amount of liability to the amount of capital invested in the partnership. The general partner shoulders the personal liability for the debts and obligations of the partnership. Business operations are governed, unless otherwise specified in a written agreement, by majority vote of voting partners. LPs are legal entities formed with the Connecticut Secretary of the State.
LPs provide a legal structure to the establishment of the business. From a capital investment standpoint, limited partners are shielded from the liability in that their liability is dependent upon the amount of capital invested. In addition, dividends distributed to all partners are reported on the partners' personal income tax return. There are no restrictions as to the amount of dividends that the general partners may receive from the business. General partners of a LP may be in the form of another person or company.
As a separate legal entity, LP's may own property, sue, and be sued in LP's name.
In a LP there must be at least one general partner and it is the general partner(s) that incur unlimited liability.
As in any partnership, a LP must draft a partnership agreement, which governs how the business is operated. In a LP the partnership agreement must state a date of termination.
Since a LP is a legal entity, the formation of a LP requires more legal documentation than in a general partnership.