Disadvantages of Doing Business in Limited Partnership
There are many disadvantages of doing business in limited partnership.
Without election on part of the limited partnership to become a limited liability limited partnership, this form of entity must have at least one general partner to look after the day to business of the firm, who is personally liable for the debts and obligations of the limited partnership. So the general partner has unlimited personal liability.
Limited partners have to give up their right to take part in the management and control of the limited partnership in lieu of enjoyment of limited liability. Limited partners are not liable for the debts of the firm in excess of his capital contribution.
The provisions of Limited Partnership Act of different states or jurisdictions are on the above lines.
Unlike proprietorship or general partnership, a lot of documentation and formalities are associated with the creation of limited partnership, since it is a creature of the statute. Like corporations, limited partnerships have to comply with many reporting requirements.
In addition, limited partnerships are required to distribute annual schedules to every partner reporting their distributive share of profit or loss in the limited partnership.
Limited partnerships may be liable to state income taxes depending on the law of the concerned jurisdiction.
