Limited Partner


DEFINITION of 'Limited Partner'

A partner in a partnership whose liability is limited to the extent of the partner's share of ownership. Limited partners generally do not have any kind of management responsibility in the partnership in which they invest and are not responsible for its debt obligations. For this reason, limited partners are not considered to be material participants.

BREAKING DOWN 'Limited Partner'

Because they are not material participants, the income that limited partners realize from their partnerships is treated as passive income, and can be offset with passive losses. However, there are a handful of exceptions to this rule. For example, limited partners who participate in a partnership for more than 500 hours in a year may be considered general partners.

  1. Passive Income

    Earnings an individual derives from a rental property, limited ...
  2. Incentive Distribution Rights - ...

    These give a limited partnership's general partner an increasing ...
  3. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There ...
  4. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  5. Maquiladora

    A Spanish term for a factory located near the United States-Mexico ...
  6. Public-Private Partnerships

    A business relationship between a private-sector company and ...
Related Articles
  1. Retirement

    Discover Master Limited Partnerships

    These unique investments provide significant tax advantages.
  2. Investing Basics

    Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  3. Options & Futures

    An Investor's Checklist To Financial Footnotes

    Footnotes to the financial statements contain very important information, but reading them takes skill.
  4. Stock Analysis

    Pepsi's Partnership with Sodastream

    Examine Pepsi's partnership with SodaStream, what each company hopes to gain, and learn how the latest battle in the cola wars may play out.
  5. Entrepreneurship

    Samsung and Google: A Beautiful Friendship?

    Google and Samsung have more than a hardware/software relationship. These two technology giants have collaborated time and again to define mobile's future.
  6. Entrepreneurship

    Taxes in New York for Small Business: The Basics

    Learn how small businesses are taxed in New York, and understand how tax rates vary based on whether the business is an S corporation, LLC or partnership.
  7. Professionals

    Read These Tips Before Selling Your Advisory Biz

    Here are three tips financial advisors should follow when prepping their practice for a sale to help with a smooth transaction and transition.
  8. Investing Basics

    2 Ways Hedge Funds Avoid Paying Taxes

    Learn about two strategies hedge funds use to minimize their tax liabilities. Read why some hedge funds are in the reinsurance business in Bermuda.
  9. Stock Analysis

    How To Start Your Own Private Equity Fund

    Here's a how-to guide on starting on starting a private equity firm.
  10. Investing

    Hybrid Business: Rise of Nonprofits in Private Sector

    Businesses are embracing a mutually beneficial partnership wherein the ideals of the nonprofit sector are coupled with profit motive and capacity to scale.
  1. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  2. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  4. What are the benefits for a company investing in a greenfield investment?

    Advantages of greenfield investments include increased control, the ability to form marketing partnerships and the avoidance ... Read Full Answer >>
  5. What is a family Limited Liability Company (LLC)?

    A family limited liability company (LLC) is formed by family members to conduct business in a state that permits such form ... Read Full Answer >>
  6. What is the difference between a silent partner and a general partner?

    Business structures provide benefits to business owners and entrepreneurs. In the small business arena, the most common business ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center