Limited Liability Partnership and Investing
To qualify as a limited partnership, the agreement must have at least one general partner and one limited. These investments could be in real estate, oil and gas or other investment objectives.
The partnership is not a taxable entity. Each partner will be taxed based off of their investment in the agreement. The arrangement among the partners will normally have an end date where each partner will be paid out - if there is anything to payout.
Limited Partner Liability and Facts
The LP has limited financial exposure. He or she is only at risk to the investment into the partnership. Any debts above and beyond the assets in the partnership will not be incurred by the limited partner(s).
Investors who get involved in these agreements are looking for tax write offs, with the hope of high capital gains later on.
LP's normally have above average portfolios and can take the risk, both to capital and liquidity during the length of the partnership agreement.
LP's are paid out before General Partners when the partnership is liquidated.
General Partner Facts and Liability
The GP has unlimited personal liability. He or she is the manager or agent for the partnership investments. Should the entity have investment losses or operating losses above and beyond the cash or assets - the GP can be personally sued.
The GP can also be removed, should he do anything to violate the agreement in any way. A new GP would then be named.
Types of Investment Partnerships
There are a few key areas of investment in these arrangements. The goals vary, but they are largely focused on depreciation, depletion and capital gains. They include:
- Real Estate Investment
- Oil and Gas Investment
- General Business Investment
Distribution of Investment Assets
When the agreement ends or the entity goes out of business, the partnership must pay off certain creditors and other debts before the principals will be paid. The order of payout is:
The GP's financial interest is always paid out last.
Most major brokerage firms and financial advisors can help investors in getting involved in limited liability companies or other partnerships.
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