In essence, they are selling all the rights to the film to get money to finance it. This usually gives the filmmaker no reward. Another option is to find limited investors. Or, perhaps, Mom and Dad, or that rich aunt across the country can fork out some cash. There's also the good ol' credit card an option many independents have taken.
Limited partnerships involve many legalities.
The filmmakers must file with the security exchange commission and have a lawyer, business plan, proposal, etc. Plus, there must be a preset budget. And, if filmmakers don't raise all of the money they set out to raise in a specified period of time, they have to start over. This film is now sitting on the shelf with other great ideas he hopes will one day get funded. Small budgets often limit filmmakers to two takes for each shot and no special effects.