LLC Versus Limited Partnership

If John and Mary form a limited partnership to hold the property, one or both of them will serve as general partner. Since the general partner has unlimited liability for the debts of the partnership, if a liability arises out of the operation of the building, the general partner's assets will be exposed to that claim. The major problem with the limited partnership format is this unlimited liability of the general partner. From a tax standpoint, the limited partnership does not cause any difficulties and, as previously discussed, a creditor suing John or Mary for an outside liability would be limited to a charging order, which would not affect the property in the partnership. By forming an LLC, John and Mary can accomplish all of their objectives.