How a Limited Partnership is utilized in Asset Protection

Limited Partnership in the U.S is a legal entity authorized by legislation and is formed by two or more persons. See also Family Limited Partnership

This partnership has at least one partner who is personally liable for all of the partnership debts namely the (General Partner) who manages the partnership and at least one partner who has no management role but who invests as a silent partner in the partnership namely the  (Limited Partner) and has no liability for the debts of the partnership and no decision making role.

Delaware has become the state of choice in the U.S when establishing a limited partnership arrangement. The Partnership legislation in Delaware affords excellent asset protection from the liabilities of the partnership for Limited Partners.

When establishing a Limited Partnership in Delaware, it is important to submit the management details to the appropriate state office. If this is not completed, the State may view the partnership as a General Partnership and not a Limited Partnership and as such none of the partners will have asset protection.

Features of the Limited Partnership

• Both General and Limited Partners
• The General Partners have unlimited Liability for the debts of the partnership
• The Limited Partners have limited liability to their investment in the partnership
• Delaware is the preferred state for the establishment of the Limited Partnership
• Any type of Entity can be the general partner under Delaware law
• The General partner manages the day to day affairs of the partnership
• The Limited partner is a passive investor only and has no management control
• Profits are shared on a predetermined basis
• Profits and losses flow through to the individual partners for tax purposes
• Any type of entity can be a partner