A limited partnership is similar to a standard general partnership, however, there must be at least one of the partners deemed a general partner. As a general partner, they are liable for the debts and obligations of the partnership. Contrarily, the limited partners are not. Like general partnerships, many States require limited partnerships to register as an existing business entity operating in the State. A partnership agreement is used among the general and limited partners to dictate the partners’ rights, duties and obligations. Thus, a limited partnership is similar in many respects to a general partnership, with one essential difference. Unlike a general partnership, a limited partnership has one or more partners who cannot participate in the management and control of the partnership’s business. A partner who has such limited participation is considered a “limited partner” and does not generally incur personal liability for the partnership’s obligations. Generally, the extent of liability for a limited partner is the limited partner’s capital contributions to the partnership. For this reason, limited partnerships are often used to provide capital to a partnership through the capital contributions of its limited partners. Limited partnerships are frequently used for hedge funds, real estate transactions, and entertainment-related projects. Like a general partnership, however, a limited partnership may govern its affairs according to a limited partnership agreement. Such an agreement, however, will be subject to applicable State law. States have for the most part relied on the Revised Uniform Limited Partnership Act in adopting their limited partnership legislation. A limited partnership must have one or more general partners who manage the business and who are personally liable for partnership debts. Although one partner may be both a limited and a general partner, at all times there must be at least two different partners in a limited partnership. A limited partner may lose protection against personal liability if she or he participates in the management and control of the partnership, contributes services to the partnership, acts as a general partner, or knowingly allows her or his name to be used in partnership business. However, “safe harbors” exist in which a limited partner will not be found to have participated in the “control” of the partnership business. Safe harbors include consulting with the general partner with respect to partnership business, being a contractor or employee of a general partner, or winding up the limited partnership. If a limited partner is engaged solely in one of the activities defined as a safe harbor, then he or she is not considered a general partner with the accompanying potential liability. Except where a conflict exists, the law of general partnerships applies equally to limited partnerships. Unlike general partnerships, however, limited partnerships typically file a certificate with the appropriate State authority to form and carry on as a limited partnership. Generally, a certificate of limited partnership includes the limited partnership’s name, the character of the limited partnership’s business, and the names and addresses of general partners and limited partners. In addition, and because the limited partnership has a set term of duration, the certificate must state the date on which the limited partnership will dissolve. The contents of the certificate, however, will vary from state to state, depending on which uniform limited partnership act the state has adopted.
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