The fundamental differences between general partnership and limited partnership relate to the liability and obligations of partners.
General partnership mandates each partner being "jointly and severally" liable for debts of the business or each partner assuming unlimited liability for the partnership's debts. A partner is not just liable for the contracts entered by other partners, but also responsible for any negligence on the other partners' part.
For instance, one partner taking on a debt makes all partners liable to repay the debt. If one or more partners do not repay the debt, the creditor realizes the outstanding amount from other partners' personal assets even if those partners have already paid their share of the debt. Similarly, if someone sues the partnership and forces it to pay a huge compensation, one partner becomes liable to pay up the entire amount from personal assets if the other partners do not have the money to pay their share, irrespective of the partner’s share in the partnership.
In a limited partnership, the obligations fall only on the general partner’s personal assets, with the liability of the limited partner limited only to his actual financial contribution to the partnership. Thus, a creditor unable to recover a debt from one partner can take away from another partner only the amount invested by that partner in the partnership. A compensation lawsuit that exceeds the assets of the partnership might cause the general partner to lose personal assets, but the loss for the limited partner is limited only to the investment made.
The 2001 amendments to the Uniform Limited Partnership Act has removed the general-partner liability for partnership obligations and made debts of limited partnerships the sole responsibility of the partnership. This equates Limited Partnership with Limited Liability Partnerships.