limited partner

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.