Definition
What is Limited Partnership (LP)?
A fund structure where investors are limited partners with flow-through taxation and liability limited to their investment.
A Limited Partnership (LP) is a common structure for venture capital, private equity, and alternative investment funds. It consists of a General Partner (GP) who manages the fund and makes investment decisions, and Limited Partners (LPs) who provide capital.
Key Characteristics: - Flow-through taxation - Income, losses, and tax credits flow directly to investors - Limited liability - LP investors can only lose their invested capital - GP management - General Partner has full management control - Fixed life - Typically 10 years with possible extensions - Capital calls - Investors commit capital that's called over time
Tax Treatment: - No entity-level tax - profits/losses flow to individual LP tax returns - Tax paid at investor's marginal rate (not PIR) - Requires annual tax filing for LP income - May include tax losses that can offset other income
LPs are particularly common for venture capital and private equity funds where the closed-end structure and flow-through taxation align well with the investment strategy.
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Educational Content Disclaimer
This glossary provides general educational information only and does not constitute financial, legal, or tax advice. Definitions and explanations are simplified for educational purposes and may not cover all aspects or nuances of each term.
Before making any investment decision, you should seek independent advice from appropriately qualified professionals. Wholesale Investor does not recommend or endorse any particular investment, strategy, or fund manager.