What is true regarding the liability of limited partners in a partnership?

Limited partners in a partnership have a unique liability structure that protects them from certain financial obligations of the partnership. Their liability is generally limited to the amount of their investment in the partnership. This means that they are not personally responsible for the debts of the partnership beyond what they have invested.

In the context of nonrecourse debt, a limited partner is typically not liable. Nonrecourse debt is a type of loan where the lender's only recourse in the event of default is the collateral pledged for the loan. Therefore, limited partners do not risk their personal assets to cover such debts, which aligns with the limited liability characteristic associated with their investment in the partnership.

Understanding this aspect is crucial, as it emphasizes that while limited partners can benefit from the profits of the partnership without risking more than their initial investment, they also bear no additional liability for debts that are nonrecourse, thereby providing them a protective financial boundary.