What is a Limited Partner

A limited partner is a part-owner of a company whose liability for the firm's debts cannot exceed the amount that an individual invested in the company. Limited partners are often called Silent Partner.

A limited partner invests money in exchange for shares in the partnership but has restricted voting power on company business and no day-to-day involvement in the business.

Under its limited partnership status, the structure has a General Partner who assumes full liability and limited partners who are liable only up to the amount they contribute.

A general partner typically is compensated for controlling the company’s daily operations and making day-to-day decisions. As the business decision-maker, the general partner may be held personally liable for any business debts.

Although state laws vary, a limited partner doesn't generally have the full voting power on the company business of a general partner. The IRS thus considers the limited partner's income from the business to be passive income.

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