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

The Observer has reported that some of Richardson's current limited partners had expressed interested in joining with the new owner. Rick Rothacker, Katherine Peralta And Joseph Person, charlotteobserver, "Hedge fund manager emerging as likely buyer of the Carolina Panthers," 11 May 2018 Top venture firms also are capitalizing on the increasing interest from sovereign-wealth funds and other limited partners that back large funds. Yuliya Chernova, WSJ, "Sequoia Capital’s Growth Fund Tops $6 Billion in Record Haul," 26 Apr. 2018 Allows firms to assemble a base of investors (known as limited partners) that actually want to invest in crypto specifically, as opposed to being forced to as part of a bigger fund. Theodore Schleifer, Recode, "Why are big VCs opening up crypto funds?," 21 June 2018 Term Sheet caught up with Quintini to discuss her experience as a limited partner, investing in moonshot projects, and the importance of a strong ethical foundation in tech. Polina Marinova, Fortune, "Term Sheet -- Wednesday, June 20," 20 June 2018 If more than seven existing limited partners express interest, the firm will choose three at random and reserve four tickets for the biggest investors. Fortune, "This Crypto Hedge Fund Is Paying Investors' $10,000 Poker World Series Buy-In Fees," 20 June 2018 There is some worry that limited partner could block the deal. Theodore Schleifer, Recode, "Lerer Hippeau is taking over Binary Capital’s portfolio after Justin Caldbeck’s departure," 26 Mar. 2018 Hamilton convinced a number of remarkable limited partners to back her fund, including Susan Kimberlin, Marc Andreessen, Chris Sacca, Stewart Butterfield, and Ellen Pao. Polina Marinova, Fortune, "Term Sheet -- Wednesday, January 24," 24 Jan. 2018 Manning is still considering Navarro’s offer to become a limited partner, according to the sources, who spoke on the condition of anonymity because of the confidential nature of the Panthers' sale. Joseph Person, charlotteobserver, "Exclusive: Panthers bidder wants Peyton Manning to be part-owner | Charlotte Observer," 9 May 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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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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