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What Is A "Limited Partnership"?

Partners who operate a business together as a "general" partnership are essentially each liable for any negligence of either partner and liabilities of the partnership. By comparison, a limited partnership is an entity formed to raise capital for business or investment ventures in which the partners (except for the managing or general partner) will not be participating in the day-to-day activities of the partnership, and will only be "at risk" for their own investment in the partnership.

A limited partnership is usually subject to the rules for passive activities, which may limit losses that exceed income or gains from this or other passive activities. Losses in excess of your investment and recourse debt may be non-deductible under the "at risk" rules. 

If you are involved in a limited partnership, you may find your Schedule K-1 quite confusing, due to the complexity of the laws involved. Often, the partnership will provide supplemental information that will help you prepare your return from the Schedule K-1. If you run into problems, you may need to see a tax professional for assistance.

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We do not offer legal advice. All information provided on this website is for informational purposes only and is not a substitute for proper legal advice. If you have legal questions, we recommend that you seek the advice of legal professionals.

Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.

Copyright 2017 Wink Tax Services / Wink Inc.
Last modified: January 30, 2017