Limited Partnerships Funds: All You Need To Know

A partnership having two or more participants is known as a limited partnership (LP), which should not be confused with a limited liability partnership (LLP). While limited partners do not participate in corporate management, the general partner controls and manages the enterprise. In contrast, the limited partners of a limited partnership fund have limited liability for the debt up to the amount of their investment and the general partner of the limited partnership has unlimited liability. 

 

Learning about Limited Partnerships Funds

Both general partners and limited partners are necessary for the existence of a limited partnership. The liability of general partners is limitless, and they have complete managerial authority over the company. Limited partners have little to no management responsibility and are only legally liable for the amount of their investment in the LP.

 

Different Types of Partnerships

A partnership usually has two owners. General partnerships, limited partnerships, and limited liability partnerships exist. The three variants share some traits but differ in others.

Each partnership member must provide cash, real estate, labour, talents, or other resources to split the firm's revenues and losses. One partner takes daily choices that affect the firm.

 

Limited Partnership (LP)

Limited Partnership (LP) funds are commonly used to invest in assets such as real estate. Unlike typical partnerships, LP partners may have limited liability, exempting them from corporate debts beyond their initial investment.

The limited partnership's general partners run the business daily and are responsible for debts and legal fees. Limited (or silent) partners provide capital but cannot manage the company's operations and are immune from future financial responsibilities.

 

General Partnership (GP)

When all partners equally share in the earnings, managerial duties, and debt liability, that arrangement is known as a general partnership. To prevent future disagreements, the partners should specify their intention to divide earnings and losses unequally in a formal partnership agreement.

Commonly, a joint venture is a kind of general partnership that is active until a project is finished or a specific amount of time has passed. Each partner has an equal right to manage the company and split any gains or losses. They also have a fiduciary duty to act in the company's best interests as well as the interests of the other members.

Limited Liability Partnership (LLP)

A partnership in which all members have limited responsibility is known as a limited liability partnership fund (LLP). The management activities are open to all partners. Contrary to a limited partnership, in which there must be at least one general partner with unlimited liability and where the limited partners are not permitted to participate in management. 

LLPs are frequently utilized to structure professional services firms like law and accounting offices. LLP partners aren't accountable for the bad behaviour or carelessness of other partners, though. 

 

Summing Up:

Due to its capacity to generate capital without sacrificing control, limited partnership funds are typically used by hedge funds and investment partnerships. Limited partners invest in an LP and have little to no say in how the company is run, but their liability is restricted to the amount they personally invested. The Hong Kong LPF is managed and operated by general partners, but their responsibility is unbounded.