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If you want to attract investors while retaining management of the business and having the flexibility of a partnership, then a limited partnership (LP) might fit the bill.
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A limited partnership (LP) is like a general business partnership, but it offers limited liability protection to some partners. At least one partner must be a general partner—who faces unlimited personal liability. The others can be “silent partners” who can have no say in the business, but who don’t have personal liability. Unlike general partnerships, LPs must file formation documents with the state.
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The limited partnership (LP) structure is especially appealing to types of businesses where a single, limited-term project is the focus, such as real estate or the film industry. LPs can also be used as a form of estate planning in that parents can retain control of their business while transferring interest to their children.
Limited partnerships (LPs) allow for pass-through taxation, although a partnership return must be filed. The LP’s income (or loss) shown on this return is passed-through to the partners’ individual tax returns. The partners must then report these items on their individual tax returns and pay any necessary tax. Special rules limit the losses of the limited partners—and their income counts toward the Net Investment Income Tax.