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Unlike a general partnership, a limited partnership can only be formed through a written agreement establishing the status of one or more “general” partners and one or more “limited” partners.

Yes. A limited partnership is created as a legal entity by filing a Certificate of Limited Partnership (or equivalent document) with the Secretary of State or other state agency handling entity formations.

Yes. A written LP agreement is required to identify the status of general and limited partners and to describe the profit and loss allocations among other provisions.

The general partners all have equal authority and power unless a written partnership agreement provides otherwise. An agreement may give one or more partners specific powers or authority to act on behalf of the partnership. This additional power and authority may be all-inclusive or limited to certain specific situations. Limited partners are prohibited from participating in management (with a few exceptions for major changes in the partnership) or they risk losing their limited liability protection.

The partnership agreement will specify each partner’s percentage share of profits and losses. A partner may have one percentage interest for profit distributions and yet another percentage interest for loss allocations.

A limited partner who retains this status by not improperly participating in the management of the partnership business is only at risk for the capital contributed to the partnership. A limited partner has no personal liability for any claims against the partnership and the limited partner’s personal assets are not at risk.

No. A limited partnership, just like a general partnership, is not a tax-paying entity. It is a “pass-through” tax entity where profits and losses are allocated to each partner on a pro rata basis. Each partner then reports his or her share of profits on a personal 1040 tax return and pays income tax at the individual level. The partnership files an “information” return at the federal and state level indicating the profit or loss allocations made to each partner.