Limited Partnerships

A limited partnership is a form of business organization that offers some of the partner's limited liability. It consists of a general partner who organizes and manages the partnership and its operations, and limited partners who contribute capital but have limited liability and assume no active role in day-to-day business affairs. Unit shares in limited partnerships can be purchased through a securities broker-dealer or financial planner. There is no official secondary market, although some sponsors agree to make markets under certain circumstances, and a number of firms trade in partnership shares at distress prices.

Public limited partnerships usually have a $1,000 to $5,000 minimum purchase amount, with a $2,000 minimum for IRAs. Private limited partnerships require at least $20,000. Offerings frequently involve suitability rules, requiring that individuals meet minimum net worth, income, and tax bracket criteria. Most partnerships intend to dispose of their holdings within a specified period (typically seven to 10 years) and distribute the proceeds to investors as capital gains. Some limited partnerships stay in business much longer.



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