limited partner

noun

Definition of limited partner

: a partner in a venture who has no management authority and whose liability is restricted to the amount of his or her investment — compare general partner

Examples of limited partner in a Sentence

Recent Examples on the Web

For a venture capitalist like Moritz, a direct listing solves his problem, which is getting out of an investment cleanly, either selling shares or distributing them to the limited partners that invest in their funds. Owen Thomas, SFChronicle.com, "Can Silicon Valley break the IPO?," 21 Aug. 2019 Sequoia, Hillhouse and Warburg Pincus declined to comment on their investors, known as limited partners, or LPs. Los Angeles Times, "Teachers, firefighters from California to New Jersey seek Chinese tech riches," 7 Aug. 2019 Epstein rose to the rank of limited partner, one step below full partner. Janna Herron And Kevin Mccoy, USA TODAY, "From private island to private jet: What is 'billionaire' Jeffrey Epstein's net worth?," 14 July 2019 Essentially this is the bonus round (usually 20 percent) after a certain return to the limited partners. Neil Senturia, San Diego Union-Tribune, "A look into the mind of the venture capitalist investor," 8 July 2019 Plus, a good chunk of the money untapped next year will be made by venture capitalists and their investors or limited partners (like Lance Armstrong). Theodore Schleifer, Recode, "The 2019 IPO class headlined by Uber will create a ton of new wealth. Will the billions go to mansions or missions?," 20 Dec. 2018 Chris Lyons, a partner on Andreessen Horowitz’s market-development team, will manage the relationships between the limited partners and the firm’s main fund. Yoree Koh, WSJ, "Kevin Durant, Will Smith Top the Lineup for a New Venture-Capital Fund for Black Investors," 13 Aug. 2018 At Sequoia, Stevens became involved with numerous well-known companies, before leaving his full-time position there in 2012 to become a limited partner. Marc Stein, New York Times, "Warriors Minority Owner Barred for a Year After Shoving Toronto’s Kyle Lowry," 6 June 2019 But there was some wrangling and negotiating over what would happen to the $175 million second fund — which has slightly different limited partners than the first does. Theodore Schleifer, Recode, "Binary is handing over its second fund to Lerer Hippeau.," 16 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'limited partner.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of limited partner

1824, in the meaning defined above

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Last Updated

12 Sep 2019

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The first known use of limited partner was in 1824

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More Definitions for limited partner

limited partner

noun

Financial Definition of limited partner

What It Is

A limited partner is a member of a partnership who cannot incur debt or obligations on behalf of the partnership and is not personally liable for those debts or obligations. Limited partners contrast with general partners, who can incur debt or obligations on behalf of the partnership and are personally liable for those debts or obligations.

How It Works

In some partnerships, all the partners are general partners. That is, they are all liable for the debts and obligations of the business. In other partnerships, some of the partners are general partners and others are limited partners. In those cases (called limited partnerships, or LPs), one or a handful of general partners manage the day-to-day operations of the business and are personally liable for the business's debts. They act as the core management team for the business and are obligated to keep the limited partners informed about the condition and performance of the business.

Unlike general partners, limited partners have no daily management role, cannot encumber the business and are not personally liable for the business's debts. Instead, they receive a share of the firm's profits in exchange for their capital investments, and usually the worst that can happen is that the value of their investment falls to zero. (It is important to note that limited partners who take managerial roles could be considered general partners in the eyes of the law.) This limited liability is what often attracts investors to limited partnerships.

General partners, on the other hand, are personally liable for the actions of the business and the other general partners, even if those actions appear unreasonable, excessive or if they result in legal judgments against the business. General partners can lose far more than their initial investments.

Why It Matters

General partners bear the lion's share of the risk in a partnership. Limited partners are more like silent investors. General partners must make important decisions about the company, they must be able to trust each other's judgment, and they must be prepared to forfeit their personal assets in a worst-case scenario. These management and risk burdens are two reasons general partners usually receive management fees as well as a larger percentage of the partnership's profits above a certain level.

Partnerships are generally not taxable entities; rather, the income is passed in a pro rata fashion to the partners, who pay applicable federal, state and local income taxes.

Source: Investing Answers

limited partner

Legal Definition of limited partner

see partner

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