What is the key characteristic of a limited partnership?

A limited partnership is defined primarily by the distinction between general partners and limited partners. In a limited partnership, only general partners have the authority to manage the business and make decisions. They bear unlimited personal liability for the debts and obligations of the partnership. In contrast, limited partners contribute capital and share in the profits but do not participate in the day-to-day management of the business, and their liability is limited to their investment in the partnership.

This structure allows limited partners to invest without taking on the same risks as general partners, who are responsible for managing the partnership and, therefore, face greater potential for personal financial loss. This characteristic is fundamental to the nature of a limited partnership, distinguishing it from other forms of partnerships where all partners might be equally involved in management and share in liabilities.

Other options reflect misunderstandings about the nature of limited partnerships. For example, equal liability typically applies to general partnerships rather than limited ones. Additionally, there is no requirement that all partners be individuals, as entities can also be partners. Lastly, limited partnerships inherently have restrictions on liability for limited partners, contrasting with the idea of having no restrictions.