Limited Partner

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Incentive Distribution Rights - ...

    These give a limited partnership's general partner an increasing ...
  2. Passive Income

    Earnings an individual derives from a rental property, limited ...
  3. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  4. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There ...
  5. Silent Partner

    An individual whose involvement in a partnership is limited to ...
  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. Investing

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...
  5. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  6. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  7. Investing

    What's a Divestiture?

    Divestiture is when a company, government or other organization sells, shuts down or otherwise eliminates a division or operating unit. Divestitures happen for many reasons. Management may decide ...
  8. Professionals

    Porter's Five Forces

    Porter’s Five Forces is an analysis scheme created by Harvard Business School professor Michael E. Porter. Using this analysis tool, business managers can gauge the level of competition within ...
  9. Insurance

    How to Use a Waiver of Subrogation

    A waiver of subrogation means that a party to a contract waives the right to allow someone (usually an insurance company) to sue the other party to the contract in case of a loss.
  10. Professionals

    What does Joint Venture Mean?

    In a typical joint venture, two or more businesses agree to contribute capital and resources for a common project. Most often, that project produces something that earns revenue.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center