How do limited partnerships differ from general partnerships?

Limited partnerships indeed consist of both general and limited partners, which is a fundamental characteristic that differentiates them from general partnerships. In a limited partnership, general partners manage the business and are personally liable for the debts and obligations of the partnership, while limited partners contribute capital but do not take part in daily management and have liability limited to the extent of their investment in the partnership.

This structure allows for a separation in the roles and liabilities of the partners, providing a means for investors to participate in the business without assuming full liability. This is in direct contrast to general partnerships, where all partners share equal responsibility for managing the business and are personally liable for its debts.

The other options do not accurately depict the relationships or requirements of partnerships. For instance, a written agreement is common in both types of partnerships to delineate roles and responsibilities. Furthermore, limited partners have limited liability, not unlimited, which is part of the appeal of limited partnerships. General partnerships can have multiple partners, so the idea that there can only be one is incorrect. Thus, recognizing that limited partnerships include both general and limited partners is crucial for understanding their structure and operational framework.