Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What type of partnership limits the liability of investors to their total investment?

1. General Partnership

2. Limited Partnership

3. Joint Venture

4. Equity Partnership

The correct answer is: Limited Partnership

A limited partnership is structured in such a way that it includes both general partners and limited partners. The general partners manage the operations of the partnership and have unlimited personal liability for the debts and obligations of the partnership. In contrast, limited partners are essentially investors who contribute capital but do not participate in the management of the business. Their liability is restricted to the amount of their investment in the partnership, meaning that they cannot lose more than what they have contributed. This structure provides a level of protection for those who invest in the partnership but wish to limit their risk exposure. Understanding this structure is crucial for real estate professionals, as it can influence investment strategies and the choice of business entity when involving other parties in real estate deals. The other options, while they may involve partnerships or collaborations, do not provide the same limitation on liability for investors as a limited partnership does.