A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). It is a partnership in which only one partner is required to be a general partner.
The GPs are, in all major respects, in the same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership. As in a general partnership, the GPs have actual authority as agents of the firm to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership’s business.
Like shareholders in a corporation, LPs have limited liability, meaning they are only liable on debts incurred by the firm to the extent of their registered investment and have no management authority. The GPs pay the LPs a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement. General Partners thus carry more liability, and in cases of financial loss, the GPs will be liable.
So a Limited Partnership might work in the following way. If I need $750,000 to develop my pub, I might have $250,000 of either my own or borrowed money and require $500,000 to get the pub built and open. If I form a Limited Partnership and appoint myself as the General Partner with a 50% share of the business, I can offer Limited Partnership Units at a cost of $50,000 per unit and look to sell these to investors who will then become my Limited Partners. If I sell these units to 10 different investors, each of those investors will own a 5% stake in the business, and if any investor wants to buy more than one unit, they will also increase their shareholding accordingly.
If you decide to go in this direction you should consult with an attorney who specializes in setting up this type of business partnership.