The Limited Partnership (LP) represents an evolution from the general partnership. In a general partnership, unlike a corporation or LLC, none of the partners benefit from liability protection. So when the business owes money and does not have the money to pay, partners will have to pay from their own pockets.

A limited partnership establishes two partnership tiers: general partners and limited partners. Limited partners benefit from limited liability, but generally cannot have any substantial role in the management of the company. Most commonly, limited partners are passive investors in the company. General partners are responsible for managing the company, and have no liability protection.

A New York limited partnership also cannot have perpetual duration. A specific date when the partnership must end has to be entered into the Certificate of Limited Partnership to be filed with the New York Department of State.

Compared to the corporation or LLC, a New York limited partnership is not a widely used form of business entity. One instance where a limited partnership is used is where the general partners seek investors but want to restrict the management rights of those investors. Some investors are more confident investing due to the fact that a general partner has no liability protection.

Licensed professionals wanting to operate their business in the partnership form should utilize as registered limited liability partnership (LLP) or professional service limited liability company (PLLC).