What distinguishes a limited partnership from a general partnership?

A limited partnership is characterized primarily by the differentiation in the roles and liabilities of its partners. In a limited partnership, there are two types of partners: general partners and limited partners. General partners manage the business and have unlimited liability for the partnership's debts, while limited partners typically do not participate in the day-to-day operations and their liability is limited to their investment in the partnership.

This distinction is crucial because it allows individuals to invest in the business without taking on the full risks associated with management and liability. It enables a structure where limited partners can contribute capital and benefit from the partnership's profits without being involved in management decisions or being at risk for business debts beyond their initial contribution.

Other options do not accurately define the differences: all partners do not participate in management in a limited partnership, which leads to flexibility in operations; unlimited liability applies only to general partners, not to all partners within the structure; and there is no rule that limits a partnership to just two partners, as multiple partners can exist in both types of partnerships.