Limited Partnerships
Chapters in this video
- 0:00 Gary's chainsaw juggling circus and the LP structure
- 1:20 General partner authority versus limited partner passivity
- 2:47 The management participation liability shield killer
- 3:12 Pass-through taxation, K-1, and phantom income
- 5:02 Illiquidity, suitability, and the near-retirement veto
- 6:53 Rapid-fire exam recap
What this video covers
- The two partner roles in a limited partnership (LP): what general partners (GPs) control versus what limited partners (LPs) risk
- Why a limited partner who participates in management decisions loses the liability shield and is treated as a general partner with unlimited personal liability
- How pass-through taxation works via Schedule K-1 (Form 1065), and why the partnership entity itself pays no income tax
- The phantom income trap: partners are taxed on allocated share of partnership income, not on cash distributions actually received
- How Internal Revenue Service (IRS) passive activity rules restrict limited partnership losses to offsetting only other passive income
- Why typical 7-12+ year holding periods and zero secondary market liquidity make limited partnerships unsuitable for clients near retirement
- The interplay between Regulation D private placement offerings, accredited investor status, and fiduciary suitability determinations
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 65 course also includes adaptive practice questions and spaced-repetition flashcards, free through December 31, 2026.