Limited partnership definition. Analyzing the definition of key terms often provides more insight about concepts. Limited partnership can be defined as – Partnership that has two classes of partners, limited partners and general partners. A limited partnership can be contrasted with a general partnership, general partnership being the default partnership, a partnership with one type of partner, general partners. General partners have mutual agency over the decision-making process of the partnership and are subject to greater liability risk than limited partners. A limited partner is restricted from the day to day decision of the partnership, not acting as an agent of the partnership, and therefore, not having as high of personal liability. Limited partners are often more like investors, individual with capital to invest. The reduced personal liability of a limited partnership allows general partners to generate capital investment from limited partners who would like to invest.