A limited partner (LP) is an investor in a limited partnership who contributes capital but does not participate in the day-to-day management of the business. Their liability is limited to the amount of their investment.
Limited partners are passive investors who benefit from the partnership's profits without bearing unlimited personal liability. For example, if an LP invests $100,000 in a venture capital fund and the fund suffers losses, the LP can lose at most their $100,000 investment — their personal assets are protected.
Limited partnerships are common in private equity, real estate, and venture capital. LPs include institutional investors like pension funds, endowments, and high-net-worth individuals seeking access to alternative investments.