What does a limited partnership consist of?

A limited partnership is defined by the presence of both general partners and limited partners, which is crucial for its formation and function. General partners actively manage the business and have unlimited personal liability for the debts and obligations of the partnership. In contrast, limited partners contribute capital and receive income, loss, and tax benefits, but they do not participate in the day-to-day management of the business. Their liability is typically restricted to the amount of their investment in the partnership, providing them with a degree of protection that is not available to general partners.

This structure allows for an effective balancing of control and investment risk. Limited partners can invest without exposing themselves to the full liabilities incurred by the business, while general partners can manage it without needing to attract as many individuals willing to take on active roles.

The other options do not accurately represent the structure or essence of a limited partnership. A limited partnership does not consist only of general partners without limited partners, cannot have limited partners with full liability, and does not imply that all individuals have equal stakes in the partnership. Understanding these distinctions is key to grasping the operational and liability aspects of limited partnerships.