A limited partnership is a structure where some partners have limited liability, meaning they are not personally responsible for the partnership's debts and obligations beyond their investment, while others have unlimited liability and actively manage the business.
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Last Updated: February 19, 2026
When two or more people have a business idea that they’d like to try out, odds are they’ll want to form a business together. One potential structure they could choose is the business partnership. But what is a business partnership? That’s a good question, actually.
In business, there are three types of partnerships: a general partnership (GP), a limited partnership (LP), and a limited liability partnership (LLP). This guide will cover the limited partnership (see the business partnership definition guide or the limited liability partnership (LLP) definition guide for more information on those types).
A limited partnership is made up of at least two people. One is the general partner, and this person oversees business operations. The others are known as limited partners, and their responsibilities don’t involve the business’s management.
The general partner also holds unlimited liability for the business’s debt, and the other partners only hold liability equal to their investment in the company. In most states, limited partnerships are governed at the state level, meaning the partners might have to file with the Secretary of State to officially establish the business.
All business entities have their benefits, and the limited partnership is no different. Here are a few:
Limited partnerships are known for their easy formation process. They also aren’t required to have annual meetings or record minutes.
As mentioned before, the limited partners have personal liability protection if the business has to deal with debts or legal issues.
The general partner has full control over how the business is run. This can be a plus if this person is the only one of all the partners with business experience.
Limited partnerships offer significant protection through the charging order mechanism. Under Section 703 of the Uniform Limited Partnership Act (ULPA), which has been adopted by most states, a charging order is explicitly established as the exclusive remedy for judgment creditors of a partner.
If a partner faces personal creditors, these creditors are restricted to a charging order against the partner’s transferable interest. This means creditors can only receive distributions that would otherwise go to the debtor partner, without gaining any voting or management rights in the partnership.
Partnership interests (including those of limited partners) are therefore afforded a significant level of protection that prevents creditors from disrupting business operations, forcing liquidation, or interfering with partnership management.
Limited partnerships are granted “pass-through” taxation, meaning they don’t pay income taxes. Instead, the business’s profits and losses are passed through to the general and limited partner(s) who report their share of these on their tax return. The limited partners also aren’t required to pay self-employment taxes.
Entrepreneurs will have to carefully consider whether a limited partnership is the best entity for their business idea. Keep the following in mind:
Although these are just a few considerations, they’re the ones most partners should remember when creating their company.
Recommended article: Partnership Agreement Definition
Beyond simply being called an LP, a limited partnership has no other commonly used names.
The limited partnership entity may work better for certain industries than others. For example, family businesses, real estate investors, and even the entertainment industry use the limited partnership model when one person is best for running the business while the other partners invest in it.
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A limited partnership offers plenty of advantages, like control of the business for the general partner and limited liability for the other partners. It’s also one of the easiest entities to form.
If there’s one thing ZenBusiness loves to see, it’s an entrepreneur’s dream come to life. They offer plenty of affordable business formation services to help anyone get started. ZenBusiness can also help entrepreneurs run and grow their companies, which is especially helpful for first-time business owners. Get started today!
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
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