Account
Get our app
Account Sign up Sign in

Ask a Lawyer a Question

You'll hear back in one business day.


Creditors and lending institutions tend to prefer working with Limited Partnerships rather than Limited Liability Partnerships, primarily because in a Limited Liability Partnership, they can only reach the business assets. In a Limited Partnership, creditors can reach all of the personal assets of the general partner so long as they follow appropriate measures. The general partner in this partnership bears the brunt of the risk, but he or she also gets most of the power. In most states, limited liability partners in such a relationship cannot be as actively involved. They cannot commit the general partner to an agreement, and they cannot make the primary decisions for the business. In some states, this partnership is known as a silent partnership. The law provides significant limitations on the limited partners primarily because they do not have the same risks. Additionally, it prevents the limited partners from having all of the benefits.

The partnership itself can only be formed through an express Partnership Agreement. In addition to complying with state laws, that agreement must also specifically identify the partners and their roles within the partnership. The general partner has to be named, though in some states, the limited liability partners can be added at a later date. When it comes to filing taxes though, the partnership is taxed as a General Partnership. The one exception is for the limited liability partners who do not have to pay the taxes at the self-employment rate because they aren't considered active in the business. 

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.


Ask a lawyer

Our On Call attorneys are here for you.
Characters remaining: 600
Rocket Lawyer On Call® Attorneys

Try Rocket Lawyer FREE for 7 days

Start your Premium Membeship now and get legal services you can trust at prices you can afford. You’ll get:

All the legal documents you need—customize, share, print & more

Unlimited digital signatures with RocketSign®

Ask a lawyer questions or have them review your document

Dispute protection on all your contracts with Document Defense®

30-minute phone call with a lawyer about any new issue

Discounts! Incorporate for FREE + hire a lawyer with up to 40% off*

*Free incorporation for new members only and excludes state fees. Lawyer must be part of our nationwide network to receive discount.

Trusted and secure
Better Business Bureau A+ rating