Under what condition may a limited partner be liable as a general partner?

A limited partner typically enjoys limited liability, meaning they are only liable for the debts of the partnership to the extent of their investment. However, one condition under which a limited partner can be held liable as a general partner is if they allow their name to be used in the partnership's name. This can create an impression that they are an active part of the management and can expose them to liability for the debts of the partnership, essentially removing the protective shield of limited liability.

This principle stems from the legal concept that the public must be able to rely on the nature of a business’s structure. By allowing their name to be included in the partnership name, the limited partner effectively sends a message to third parties that they are participating at a level similar to that of a general partner. Thus, they may be held accountable for the partnership's obligations as if they were a general partner.

Activity in management could lead to the same liability outcome, but it is the use of their name that directly links to the perception and legal implications of being treated as a general partner. Similarly, signing partnership contracts or the existence of a financial loss does not, by themselves, necessarily alter a limited partner's liability status in the absence of other factors.