All general partners share in operating the firm, and each partner has unlimited liability for the debts or other obligations incurred by the partnership. Unlike the General Partnership, a Limited Partnership cannot exist without a formal Certificate of Limited Partnership. This document is signed by each of the partners and is filed with the Secretary of State in Tennessee which has adopted the Uniform Limited Partnership Act. Partnership laws may vary from state to state. A Limited partnership may have one or more limited partners and must have one or more general partners.
Limited partners are free of general liability for the debts and obligations of the firm.
They risk only their investment if the firm fails to pay its bills or obligations. A general partner's liability, whether he is a partner of a general or limited partnership, is not limited only to his capital investment, but also includes his other assets as well. A limited partner may, but usually does not take part in the management of the partnership. With certain exceptions, if he does choose to take an active part in managing the business, he may be treated as a general partner and be subjected to unlimited liability for the obligations of the partnership. General partnerships are not subject to income tax.