Why a limited partnership?
The key defining element of an LP is that there must be a general partner (who assumes unlimited liability) and a limited partner (whose liability cannot exceed their financial investment). The limited partners are passive (silent partners), so they do not participate in the direction or management of the business. Limited Partnerships are particularly appealing to short-term ventures such as creating movies, projects with a clear end-date, etc.
Although some liability remains, limited partners are not generally accountable for business debts. LPs also have pass-through taxation, because income tax is not paid by the business. In addition, LPs provide an excellent avenue to provide a partner (the general partner) control over a project without investor or limited partner interference. It also allows a company the ability to raise capital without threatening the control or management of the business. Lastly, LPs have minimal annual responsibilities such as documentation of meetings, etc.
Important to KNow
Like corporations and LLCs, As with most other entity options, LPs require a registered agent to live within the state of incorporation. This individual must receive important tax and legal documents, etc.