What is a key characteristic of limited partners in a Limited Partnership (LP)?

In a Limited Partnership (LP), a key characteristic of limited partners is that they may not participate in management. This restriction is crucial because limited partners are typically investors who provide capital but do not have a role in running the business. Their liability is limited to the extent of their investment, meaning they are not personally liable for the debts and obligations of the partnership as long as they do not engage in management activities.

This structure allows individuals to invest in a venture without exposing themselves to the same level of risk and liability associated with being an active participant in the management of the partnership. If limited partners start making management decisions, they risk losing their limited liability status and could become personally liable for debts. Thus, understanding the limitations on management participation is essential in recognizing the protective benefits afforded to limited partners in an LP structure.