Limited Partnerships - Launchopedia

An organization comprised of a general partner, who manages a fund, and limited partners, who invest money but have limited liability and are not involved with the day-to-day management of the fund. In the typical venture capital fund, the general partner receives a management fee and a percentage of the profits (or carried interest). The limited partners receive income, capital gains, and tax benefits.³
Limited partnership is a business organization with one or more general partners, who manage the business and assume legal debts and obligations and one or more limited partners, who are liable only to the extent of their investments. Limited partnership is the legal structure used by most venture and private equity funds. Limited partners also enjoy rights to the partnership’s cash flow, but are not liable for company obligations.⁵

FundingSage

Definitioner

General Partner

(GP) The partner in a limited partnership responsible for all management decisions of the partnership. The GP has a fiduciary responsibility to act for the benefit of the limited partners (LPs) and is fully liable for its actions.³

Venture Capital

Investment capital made available to high growth, scalable startups, typically beginning at the early stage, from a fund supported by accredited investors.⁶

Venture

Venture is often used for referring to a risky start-up or enterprise company.⁵

Equity

Ownership in the capital of a Company. In corporations, it is called “stock”; in limited partnerships or LLCs, it is called “interests” or “units.”³
This designation is given to a stockholder’s ownership in a company. The amount of ownership is obtained when an individual or corporation purchases one or more shares of stock (equity shares). The more equity purchased, the greater the ownership.⁴

Private Equity

A company ownership position that is not listed and cannot be traded on a public securities exchange. Issuance, ownership and exchange of private securities are regulated differently from those of public securities under federal and state law.¹
Equity securities of companies that have not “gone public” (are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer in the absence of a marketplace. In addition, there are many transfer restrictions on private securities. Investors in private securities generally receive their return through one of three ways: an initial public offering, a sale or merger, or a recapitalization.³
Private equities are equity securities of unlisted companies. Private equities are generally illiquid and thought of as a long-term investment. Private equity investments are not subject to the same high level of government regulation as stock offerings to the general public. Private equity is also far less liquid than publicly traded stock.⁵

Partnership

A nontaxable entity in which each partner shares in the profits, losses, and liabilities of the partnership. Each partner is responsible for the taxes on its share of profits and losses.³

Management Fee

Compensation typically paid annually from an investment fund to the general partner or investment advisor of the fund to cover administration costs, expenses related to investor relations and to compensate them for their services and expertise.⁶

Carried Interest

or “Carry³” The portion of any gains realized by the fund to which the fund managers are entitled, generally without having to contribute capital to the fund. Carried interest payments are customary in the venture capital industry, in order to create a significant economic incentive for venture capital fund managers to achieve capital gains.³

Related Terms Accrued Interest | Capital | Limited Partnership Related Articles

Three Things a Bank Wants to Know Before Giving You A Loan

Venture Capital – VC Investment

Capital Gains

The difference between an asset’s purchase price and selling price, when the selling price is greater. Long-term capital gains (on assets held for a year or longer) are taxed at a lower rate than ordinary income.³
Capital Gain is the gain to investor from selling a stock, bond or mutual fund at a higher price than the purchase price. The capital gain is usually the amount realized (net sales price) less your investment (adjusted tax basis) in the property. A capital gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.⁵

Related Terms Working Capital | Net Worth | Book Value Related Articles Five Documents Required for Organizing a Business

Capital

Financial capital is a term that can refer to the money exchanged between entrepreneurs and investors during a business deal. Entrepreneurs need to raise capital for their startups while investors can provide them with the needed capital (or funding). Financial capital usually comes with interest, and new business owners can use their financial capital in purchasing real capital (or machinery or equipment) for their new business.⁴

INFOGRAPHICS

INFOGRAPHICS

FundingSage

Popular Posts (Past Month)