What type of partnership structure allows for both limited and unlimited liability?

A limited partnership is a structure that allows for both limited and unlimited liability within the same entity. In a limited partnership, there are general partners who manage the business and are personally liable for its debts, thus carrying unlimited liability. On the other hand, there are limited partners who contribute capital but do not participate in management; their liability is limited to the amount they invested in the partnership. This dual nature of liability allows a balance between those who wish to take an active role in the business and accept more risk, and those who prefer to limit their exposure while still investing.

This differentiates a limited partnership from other structures. For instance, in a general partnership, all partners have unlimited liability, which means each partner is personally liable for the debts of the partnership. A limited liability partnership (LLP) has all partners enjoying limited liability, protecting them from personal liability for debts, but it does not have both structures combined. A sole partnership would involve a single individual who bears all liability, without any partners involved. Thus, the unique aspect of having both types of liability in a limited partnership makes it the correct answer.