A limited partnership is a partnership formed by two or more persons or entities and having a) one or more general partners, who engage actively in management and control the business and have unlimited personal liability for the partnership’s debts and obligations, and b) one or more limited partners, who are not personally liable for the partnership debts and obligations unless they participate in the control of the business. There is great latitude in who can serve as a general or limited partner. In either case they can be individuals, corporations, partnerships, limited partnerships, trusts and the like.
These entities are formed by filing a Certificate of Limited partnership, recording it with the Secretary of State, and paying a filing fee for the initial set up and then again on an annual basis, there will be Franchise Tax Board minimum fee.
Suffice to say that these entities, properly structured give the flexibility of a partnership; including all of the tax benefits of a partnership. Further, they put a limitation on liability as relates to the limited partners. This protection is very similar to the protection of a corporate veil which one obtains by setting their business up inside of a corporation. Additional layers of insulation can be established within the limited partnership by actually taking some of the interest that might normally be taken as individual interest as corporate partnership, or limited partnership interests within the partnership itself.