What is a primary characteristic of a limited partnership?

A primary characteristic of a limited partnership is that only general partners manage the business. In this structure, the general partners are responsible for the operational management and liabilities of the partnership, while limited partners usually contribute capital and share in the profits without being involved in daily operations. This distinction is critical as it protects the limited partners, who face liability only up to the amount of their investment, thus limiting their risk.

Limited partners typically do not engage in the management of the business to maintain their limited liability status, which is a defining characteristic of this partnership type. If they participate in management, they risk losing their limited liability protection. This arrangement allows for a separation of responsibilities and risk, enabling investors to benefit from the business potential while safeguarding their assets in other areas.