A limited partnership is a creature of statute, which means it must be created in accordance with the statutes, filed with the Secretary of State and the fee paid. Liability is not limited until filed. It is used most frequently to allow a person to invest in a business, share in its profits, avoid unlimited liability that is involved in a general partnership, and limit risk to the amount invested.
A limited partnership has two types of partners: general partners and limited partners. A general partner has no limited liability and is exposed to all liability of the partnership, regardless of his ownership interest. The income and losses of a limited partnership flow through to the partners. The second type of partner in a limited partnership is a limited partner, who is not subject to the same amount of personal liability for the obligations of the partnership. A limited partner is typically liable only to the point of his investment and is not involved in the day-to-day business and operation of the partnership.
Limited partnerships, like general partnerships, should have a written partnership agreement.