LP and GP in Real Estate

What are LP and GP in Real Estate?

In real estate, a Limited Partnership (LP) involves passive investors, with limited liability, known as limited partners (LPs), and active managers with full liability, called general partners (GPs). A General Partnership (GP) is where all partners actively manage the business and share equal liability for its debts and obligations. These structures are chosen based on investor roles, liability preferences, and are used in various investments, including syndicated real estate investments.

Limited Partnership (LP): This is a partnership structure where there are one or more general partners (GPs) and one or more limited partners (LPs). The general partners manage the day-to-day operations of the partnership and are fully liable for the partnership's debts and obligations. Limited partners, on the other hand, have limited liability, which is typically capped at the amount of their investment. They are passive investors and do not participate in the day-to-day management of the business. In real estate, an LP is often used for investment projects like the development of a large property.

General Partnership (GP): In a general partnership, all partners share in the management of the business and are equally liable for the business's debts and obligations. This means that each partner can be held personally responsible for the actions of the partnership. In a real estate context, a GP arrangement might be used when two or more individuals or entities join together to develop or manage a property, sharing both the responsibilities and the profits (or losses).

Each of these structures has its own legal, financial, and tax implications, and they are chosen based on the goals and preferences of the investors and managers involved in the real estate project.