Paralegal Advanced Competency Exam (PACE) Practice Exam

A Limited Partnership differs from a general partnership primarily in the structure of liability and management responsibilities. In a Limited Partnership, there are two types of partners: general partners and limited partners. General partners manage the business and are personally liable for the debts and obligations of the partnership. In contrast, limited partners contribute capital and receive income without being involved in day-to-day management, and their liability is limited to the amount of their investment in the partnership.

This structure offers limited liability to the limited partners, protecting their personal assets in case the partnership faces legal issues or financial debt. This distinction is crucial for those who wish to invest in a business opportunity without taking on the full risks associated with general partnership decisions and liabilities.

The other options do not correctly describe the distinguishing features of a Limited Partnership. For instance, there can be limits on the number of partners in a Limited Partnership depending on state laws, and it does not require all partners to manage the business, as limited partners do not take part in management. Lastly, a Limited Partnership is not exclusively for corporate entities; it can comprise individuals as well.