General partnership is the default form of business organization whenever two or more people work together with a view to making a profit, whether the terms are formalized in a written agreement or not. Typically, all partners play a part in the day-to-day management of the business.
Limited Liability Partnership (LLP) is a newer type of partnership which affords individual partners protection from liability similar to that of a shareholder in a corporation but without the "double taxation" which affects most corporations. LLPs are typically favored by professional firms, such as lawyers and accountants. Each state has its own law governing LLPs, the types of businesses which may form LLPs, and the extent of the limitation of liability.
Limited partnership refers to an arrangement where, to make partner, a person provides capital to the company for limited control over operations. Limited partners are considered passive partners as most of the decisions and day-to-day operations are the responsibility of the general partner(s).
Other than the degree of power, another difference between general and limited partners is that limited partners are only liable up to the amount of their investment. That means if they've invested $100,000 in the business, they are only liable for paying off $100,000 in any partnership debts.
This form of business organization may be chosen to avoid the taxation, administrative, and regulatory obligations which come with incorporation, and this form of organization is commonly used by start-ups before the business becomes profitable. Limited partnerships are commonly formed to manage private equity funds and are also popular in oil and gas exploration and real estate development enterprises.
