Limited Partnership

The video tutorial explains the concept of limited partnerships, detailing their creation through state filing and the roles of general and limited partners. It highlights the limited liability protection for limited partners, who are not involved in management but can invest assets. The tutorial also covers compensation through profit distribution and the distinct tax treatment of passive income for limited partners, exempting them from certain taxes.

What is required to create a limited partnership?

• A notarized contract

• A verbal agreement between partners

• Filing with the state of organization

• Approval from a federal agency

Which of the following is true about the role of a limited partner?

• They can make all major decisions in the partnership.

• They can only provide assets and advice, not manage the partnership.

• They have full control over the partnership's operations.

• They are responsible for all debts of the partnership.

What is the extent of liability for a limited partner?

• Liability limited to the amount invested

• Unlimited liability for all partnership debts

• Liability for half of the partnership's debts

• No liability at all

How is the income of a limited partner classified for tax purposes?

• Active income

• Passive income

• Capital gains

• Ordinary income

What tax advantage might a limited partner have?

• Exemption from all taxes

• Exemption from FICA taxes

• Exemption from state taxes

• Exemption from federal income tax