Not all investment products are made the same. Many investors searching for higher yields will find limited partnerships (LPs) to provide better interest rates, upwards of 5%, while promising ownership with limited liability. Although risk plays a major role when it comes to determining the best investment vehicle for your assets, LPs, are generally low risk alternatives. However, as an investor, you must recognize your risk limit in order to make wise, financial decisions. For some, high risk translates into higher earnings, while others find that a low risk investment strategy, can also offer the same returns and in some cases notable yields.
Ownership Benefits Without Liability
LPs offer a value-proposition that can be hard to find. For starters, an LP investment will make you a legal partner of the company, without the responsibility of managing the everyday operations, which is the general partner’s (aka the company offering the LP) undertaking. Investors are solely liable for capital invested into the business venture and are not accountable should the business incur any liabilities. Even under unfortunate circumstances such as lawsuits, or bankruptcy, limited partners remain unencumbered by proceedings. In worst case scenarios, the most a limited partner could lose is their capital investment in the venture. However, investing in an LP should not be taken lightly. In the same manner you would evaluate who you take on as a business partner, you should research the company offering the limited partnership. Look for a transparent and reputable company. A bad general partner could cost you your investment.
Limited Partnerships offer tax-deferred earnings. All profits and losses flow through the business entity to its partners, which is then taxable as personal income, unlike being double-taxed as a shareholder of a corporation. Because of this, a lot of the items provide tax benefits in some shape or form. In some cases, limited partners can possibly even offset losses. The only downside is that it may get slightly complicated when filing your taxes. Jakob Pek Fund provides its investors with quarterly statements summarizing account activity. Additionally, limited partners receive a K-1 form, at the end of the fiscal year, once the interest earned is received by the investor. This detailed information will have to be applied to certain areas on your tax return. To some investors, the tedious tax accounting is a small price to pay for earning impressive returns.
What makes limited partnerships attractive to investors? The considerable returns LPs yield. Usually, limited partnerships are formed for specific business ventures in natural resources, commodities, and real estate, which are profitable industries to begin with. Just like you’d buy stocks in a publicly traded company and receive dividends based on company earnings, you’re buying ownership in specific business ventures, when investing in an LP. You can expect your investment to earn interest in the area of 5% and sometimes greater than that. When investing in stocks, your returns are not guaranteed. It all depends on market fluctuations and company performance. LPs usually guarantee a fixed, predetermined interest rate for an investment term. Some find this provides a level of comfort, since you know exactly what your return on investment will be.
Turnover Made Easy
If you decide you no longer wish to be a part of a limited partnership, you are under no further obligation, besides your investment term, or terms specified in a partnership agreement. Aside from this, the partnership doesn’t have to be dissolved, nor is a majority consensus required for a partner to exit. It’s a great way to build a considerable return without encountering additional hassles should you decide to leave. The flexibility makes it easy for individuals to build wealth at a faster rate, for the many stages of life.