Limited Partnership (LP)
Definition:
A Limited Partnership (LP) is a business structure that includes at least one general partner who manages the business and assumes full liability, and one or more limited partners who invest capital but have limited liability and no management control. This structure is commonly used for investment, real estate, and business ventures where passive investors contribute funds without taking on operational responsibilities.
Limited Partnership (LP) Information
A Limited Partnership allows investors to participate financially in a business while limiting their personal risk to the amount of their investment. General partners oversee day-to-day operations and are personally responsible for the partnership’s debts and obligations. Limited partners, on the other hand, act as passive investors, benefiting from profits without being exposed to full liability.
This structure is especially useful in industries such as real estate development, private equity, and film production, where investors provide funding but prefer not to manage the business directly. LPs are formal legal entities that must be registered with the state and operate under a written partnership agreement.
Florida Legal Definition
Under **Florida law**, a Limited Partnership is governed by the **Florida Revised Uniform Limited Partnership Act**, found in **Chapter 620, Florida Statutes**. It defines an LP as a partnership formed by two or more persons, with at least one general partner and one limited partner.
General partners are personally liable for the debts and obligations of the LP, while limited partners’ liability is restricted to their investment, provided they do not participate in management. LPs in Florida must file a **Certificate of Limited Partnership** with the **Florida Division of Corporations (Sunbiz)** to gain legal recognition. The Act also allows for amendments, dissolution, and conversion to other business entities.
How It’s Used in Practice
Limited Partnerships are commonly used in Florida for investment and asset management purposes.
- Real estate developers use LPs to bring together capital investors and managing partners.
- Family Limited Partnerships (FLPs) are used for estate planning and transferring wealth while maintaining control.
- Private equity and venture capital funds often operate as LPs to separate management from investors.
- Attorneys help draft partnership agreements outlining profit sharing, roles, and dissolution procedures.
- LPs provide tax benefits since profits and losses pass through to the partners’ personal income tax returns.
Key Takeaways
- A Limited Partnership (LP) includes both general and limited partners with distinct roles and liabilities.
- General partners manage the business and assume full liability, while limited partners have restricted liability and no management authority.
- Governed in Florida by Chapter 620, Florida Statutes, requiring registration with the Division of Corporations.
- Commonly used for real estate, investment funds, and estate planning purposes.
- Offers flexibility in profit sharing and management while protecting passive investors from personal liability.
Disclaimer: The information and opinions provided are for general educational, informational or entertainment purposes only and should not be construed as legal advice or a substitute for consultation with a qualified attorney. Any information that you read does not create an attorney–client relationship with Barnes Walker, Goethe, Perron & Shea, PLLC, or any of its attorneys. Because laws, regulations, and court interpretations may change over time, the definitions and explanations provided here may not reflect the most current legal standards. The application of law varies depending on your particular facts and jurisdiction. For advice regarding your specific situation, please contact one of our Florida attorneys for personalized guidance.
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