What distinguishes a general partnership from a limited partnership?

The distinction between a general partnership and a limited partnership primarily revolves around the concept of liability. In a general partnership, all partners share unlimited personal liability for the debts and obligations of the business. This means that if the partnership incurs debt or faces legal issues, each partner's personal assets can be at risk to satisfy those debts.

In contrast, a limited partnership includes both general partners and limited partners. While the general partners manage the business and are exposed to unlimited liability, the limited partners contribute capital but do not have a role in managing the business’s day-to-day operations. Their liability is limited to the extent of their investment in the partnership, which means their personal assets are typically protected from the partnership’s liabilities. This characteristic allows limited partners to invest in a partnership without bearing the same risk as general partners.

The other options presented do not accurately capture the fundamental difference between these two types of partnerships. For instance, registration requirements can vary between regions and do not serve as a definitive differentiator. Similarly, the assertion that limited partners are active in daily operations incorrectly characterizes their role, as they are usually passive investors. Lastly, there is no restriction on the total number of partners a general partnership can have, which is not confined to just two partners.