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Limited Partner (LP)

A limited partner (LP) is an investor in a limited partnership who contributes capital but has limited liability and no involvement in the day-to-day management of the business.In return for their investment, LPs receive a share of the partnership's profits, but their liability is restricted to the amount of capital they have invested. Limited partners are typically passive investors in private equity funds, venture capital funds, or real estate partnerships.

Example

A limited partner invests $500,000 in a private equity fund, receiving a portion of the fund’s profits without being involved in the management of the portfolio companies.

Key points

• An investor in a limited partnership with limited liability and no managerial role.

• Liability is restricted to the amount of capital invested.

• Common in private equity, venture capital, and real estate partnerships.

Quick Answers to Curious Questions

Limited partners provide capital and share in the profits but have no involvement in managing the partnership’s operations.

Their liability is limited to the capital they have invested, protecting them from further financial losses beyond their contribution.

Limited partners receive a share of the profits generated by the partnership, typically without taking on significant managerial responsibility or risk.