How does a limited partner's liability differ from that of a general partner?

A limited partner's liability is restricted to their investment in the partnership, which is why this answer is correct. This structure allows limited partners to invest capital into the partnership without exposing their personal assets to the partnership's debts beyond what they have invested. In essence, if the partnership faces financial troubles or liabilities, limited partners are protected, and their risk is confined to the amount they contributed.

In contrast, general partners have unlimited liability, meaning they are personally responsible for all debts and obligations of the partnership. This aspect of their role puts them at significantly higher financial risk compared to limited partners. Thus, limited partners can enjoy a more secure investment role, typically without involvement in day-to-day management or operational decisions, which is the responsibility of general partners.

This distinction in liability is fundamental to the structure of limited partnerships, making it important for investors to understand their rights and obligations when considering participation in such business entities.