In this video, I explain limited partnership as it is covered on the CPA exam.
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A limited partnership is a type of business arrangement that involves two main types of partners: general partners and limited partners. In this setup:

General Partners: These are the individuals who manage the partnership and are actively involved in the daytoday operations of the business. Crucially, general partners bear personal liability for all debts and obligations of the partnership. This means that if the partnership owes money or faces legal issues, the personal assets of the general partners can be used to settle these debts.

Limited Partners: These partners contribute capital (money or other assets) to the partnership but do not participate in its management. Their liability is typically limited to the amount of their investment in the partnership. This means that if the partnership incurs debts or legal problems, limited partners are only at risk of losing their investment in the business, and their personal assets are usually protected.

The key feature of a limited partnership is this division of roles and responsibilities. General partners take on more risk because they're responsible for the partnership's liabilities, but they also have control over the business decisions. Limited partners, on the other hand, have less control over the business but also enjoy protection from extensive personal financial risk. This structure makes limited partnerships a popular choice for businesses where some investors want to contribute capital without being involved in the daytoday operations or assuming significant liability.

NonPerpetual Life of a Limited Partnership: By default, a limited partnership isn't designed to exist forever. Its lifespan is not perpetual unless the partnership agreement explicitly states otherwise. This means that the partnership is typically set up for a specific duration or until a certain event occurs, after which it may dissolve unless the partners agree to extend its life.

Formation and Structure Similar to a Corporation: A limited partnership must be established according to specific state laws, much like a corporation. This process involves filing certain documents with the state government. In this setup, limited partners are akin to shareholders in a corporation. They provide capital (money or other resources) in exchange for a stake in the partnership, similar to how shareholders invest in a corporation for stock. However, like shareholders, limited partners do not engage in managing the business, a role reserved for the general partners. This structure offers a blend of investment opportunity without the responsibility or risk of managing the business, much like shareholders in a corporation.

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