Limited Partner (LP)

In a limited partnership structure — the most common legal wrapper for private equity, venture capital, and private credit funds — two classes of participant exist. The general partner manages the fund and bears unlimited liability; the limited partner supplies the capital and, in exchange for stepping back from control, is shielded from losses beyond what they invested. That liability protection is the structural trade-off at the heart of the arrangement.

For wealthy families, the LP role is the standard entry point into private markets. A family might commit capital to a buyout fund, knowing they will receive capital calls over several years, distributions as investments are realized, and quarterly reports — but will have no say in which companies the manager buys or sells. Control rests entirely with the general partner.

A common confusion is equating "limited" liability with "limited" loss potential. The liability cap protects an LP from lawsuits or debts of the fund's portfolio companies; it does not protect against the fund itself losing value. An illustrative example: a family that commits $5 million could lose that full amount if the fund performs poorly, but creditors of a portfolio company cannot come after the family's other assets.