Limited Partnerships Definition and Risks

A limited partnership is a business with a particular legal and financial structure:

  • A person (the “general partner”) manages the partnership.
  • Associates (the “limited partners”) supply the capital, but their liability is limited to their investment outlay.

These partnerships usually invest in a particular sector such as real estate or the oil and gas industry.

Expected return

The return is in the form of dividends or capital gains (or losses).

These partnerships often provide tax benefits that are transferable to the limited partners. The actual return will depend in part on the way the investor makes use of these tax benefits.


The resale of these securities may be subject to certain conditions. There is often no market for resale. Also, for some limited partnerships, the general partner may buy back the securities under certain conditions.


Medium to high. The risk depends on the nature of the partnership’s activities. An investment in units of limited partnerships may be more suitable for sophisticated investors. Also, the related tax deductions may be denied. If the partnership is dissolved, the remaining assets, after repayment of all debts, are distributed to the limited partners.