Question

What is the relationship between Limited Partners and General Partners? Can you explain elements of Limited Partnership Agreement?

Answer 1

Relationship between Limited Partner and General Partners:

General partner normally known as active partner who is participating in day to day operation of business. A general partner can act on behlf of the company where as he has unlimited liability in terms of financial dealing of the firm.

Limited partner is normally act as a silent partner who has limited liability in terms of financial debt and liabilities of the firm and they will have limited responsibility also like they are not participating in day to day business activities of the firm.

Element of Limited Partnership Agreement:

Earlier in General Partnership Agreement every General Partner was responsible for all duties and responsibilities and specially in case of liability their liability was unlimited, It means when any liability comes then personal assets of their partner can be use to settle down to such liablities so limited partnership agreement comes in light to remove such kind of problems. Limited liability partnership is specially designed to eliminate the risk of losing personal assets to business liabilities.

Under Limited Liability there are two kind of partners, one of them general partner and another one limited partner. Limited partner will be liable extent to his personal investments which was introduced by him in this partnership. Limited Partner do not responsible foe firm's debt and in other hand they do not have control on day to day activies of business.

There are some various elements regarding Limited partnership agreement.

1) Profit Sharing Ratio

2) Partnership Deed

3) Mutual Agency

4) Declaration of Limited Partner and General Partner

5) Fixation of Limited Liability and responsibilities regarding limited partnes

6) Agreement should be stamped under prescribed authority