Can a limited partner lose more than their initial investment?

In a limited partnership, a limited partner is typically defined as someone who invests capital but does not participate in the management of the business. This role allows them to limit their liability to the amount they initially invested. Therefore, if a limited partner refrains from any managerial activities and does not take part in decision-making, they cannot lose more than their initial investment.

The protection of limited liability is a central feature of limited partnerships, ensuring that limited partners’ financial risk is confined to their contribution to the partnership. This means that, barring certain exceptions, they are shielded from being held personally responsible for the debts and obligations of the partnership beyond their committed capital.

Some scenarios such as personal guarantees or being involved in management activities can expose a limited partner to greater financial risk, but in the context of the question, if they strictly adhere to their role as a passive investor, their potential for loss is limited to their investment. This is why the notion that limited partners cannot exceed their losses is fundamentally accurate when they do not engage in management activities.