What characterizes a Limited Partnership?

• A. Two or more people/entities with at least one General Partner and the others Limited Partners
• B. All partners have unlimited liability
• C. There is no General Partner
• D. It is always taxed as a corporation

Answer: (A)

In a Limited Partnership, there are two kinds of partners and a clear division of roles and liability. There must be two or more partners, with at least one general partner who runs the business and bears unlimited personal liability for the partnership’s debts, and one or more limited partners who contribute capital and share in profits but have liability limited to their investment and typically do not participate in management. This structure lets passive investors support the business without exposing their personal assets beyond what they invested, while the general partner handles operations and assumes broader risk.

Tax-wise, the partnership usually isn’t taxed as a separate entity like a corporation. Instead, profits and losses pass through to the partners to report on their own tax returns, unless the partnership elects to be taxed as a corporation.

So the defining description—two or more partners with at least one general partner and the others as limited partners—best matches a Limited Partnership. The other statements conflict with how limited partnerships allocate control and liability, or with their general tax treatment.