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I'm contemplating starting a LP in Illinois where I will be the general partner. I will seek to sell "units" in the LP to friends and family. The Starting Your Business in Illinois document says "Typically, public limited partnerships are sold through brokerage firms for minimum investments of $5,000.00, whereas private limited partnerships are put together with fewer than 35 limited partners who invest more than $20,000.00 each."

I will not be selling this LP through a brokerage firm but to select friends and family. My question is related to how a private LP is defined.

  1. What makes an LP public v. private?
  2. Are the number of limited partners and the dollar amount invested rules of thumb or are there strict requirements?
  3. Are these "sophisticated investor" requirements?

I will likely have 35 or less investors but their investments will be closer to $1,000 than $20,000. Also they will not meet the "sophisticated investor" requirements.

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1 Answer

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  1. A "public" limited partnership is one that has undergone an initial public offering and has been making the required securities filings to maintain its public status.

  2. I don't even think those are rules of thumb.

  3. Talk to a lawyer. The answer depends on the securities exemption you're going to be using to sell the units.

Limited Partnerships are not nearly as common as they used to be, having been supplanted largely by Limited Liability Companies, which provide the benefit of limited liability for ALL members. (In an L.P., the General Partner still retains liability for the partnership's activities.)

You definitely need to talk with a lawyer about doing this -- partnerships provide flow-through taxation, which has positives and negatives that are different from what people are used to when they invest in corporations.

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Def going to see a lawyer just trying to get some preliminaries. Interesting about the LLP. Thanks. – strimp099 Aug 9 '12 at 16:15

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