Thus the main advantage to this business entity is that it allows the general partner the freedom to run the business without interference, and gives the limited partners diminished liability if things go wrong. If he does participate more, it is altogether possible that he or she may viewed as general partner in the eyes of the law, with its attendant liability risks. Another key benefit of the limited partnership, aside from the diminished liability of the limited partners and freedom of the general partner, is that it pays no income tax. Income and losses are attributed proportionally to each partner and accounted for on their respective tax returns. Because of this flow-through tax treatment, a limited partnership is often the structure of choice for real estate ventures and investment securities groups.
Most states require that a limited partnership agreement be in writing.
A limited partnership also must file a certificate with their secretary of state, and it is obligated to file a Form 1065 with the IRS every year. Because forming a limited partnership is a complicated task, a seasoned business attorney should be utilized. Those who have made these types of ventures succeed say the key is to have jobs and assignments clearly delineated. That way, there is less room for misunderstanding since everyone knows whose job is whose. He would like to hear from you if you have a good story to share, a unique perspective or other words of wisdom for fellow entrepreneurs.