LP (Limited Partner)
Content
Definition
An LP (Limited Partner) is an investor in a limited partnership who is not involved in the day-to-day management of the partnership and whose liability is limited to the amount of their investment.
Usage and Context
Limited Partnerships often attract investors who want to fund a business without running it. This way, they limit their risk and involvement.
Frequently asked questions
- Is a limited partner in a partnership personally liable for the debts of the business? No, a limited partner`s risk is just up to the amount they invest. They`re not liable for more than that.
- What is a liquidity preference multiple? A liquidity preference multiple shows how much investors get back compared to what they put in. A 2x multiple means they get twice their initial investment.
- What is a limited partner in a limited liability partnership? In a limited liability partnership, a limited partner invests money without taking part in management. Their loss is limited to their investment.
Benefits
Investors can`t lose more money than they put in. Limited Partners can earn money without being involved in daily operations.
Conclusion
Limited Partners put money into a business without managing it. They enjoy less risk and the potential for passive income.
