What is one disadvantage of a limited partnership?

Limited partnerships are designed to have a clear distinction between general partners and limited partners. The key feature of a limited partnership is that limited partners contribute capital and share in the profits but do not participate in the management of the business. This limitation is intended to protect them from liability beyond their investment.

The correct answer points out a significant disadvantage for limited partners: their lack of involvement in management decisions can restrict their control over the investment. Limited partners may have concerns over how their capital is being managed but are typically unable to influence strategic choices, operational decisions, or other critical aspects of the business. This separation of responsibilities is beneficial for general partners who manage the business but can be a drawback for limited partners who desire more control over their investments.

The other options present different scenarios that are either misconstrued or do not accurately reflect the structure of limited partnerships. For instance, limited partners enjoy limited liability, meaning they are not liable for the debts of the partnership beyond their investment. Hence, they face no unlimited liability. Moreover, it is not required for all partners to actively manage the business, as that responsibility falls solely on general partners. General partners are responsible for the control, management, and operational decisions of the partnership, and the sharing of profits does occur