Assume a Legal Entity's capital structure consists of the following accounts

General partner capital$ 80,000

Limited partner capital. 720,000

Total capital. $800,000

Their question:

A Reporting Company is the sole general partner of the Legal Entity.The limited partnership capital was contributed by unaffiliated individual investors recruited by a regional boutique investment bank.The Reporting Company is paid a $60,000 management fee.The limited partners expect the partnership to be highly successful over the next five years.The investment bank estimated that the distribution of income to these investors should be at least $100,000 during the time period.

What is the maximum amount of expected losses that the Legal Entity can expect to sustain without being considered a variable interest entity (VIE)?

Answer: $740,000 ($800,000 - $60,000)

My question:

Why did we added the general partner and limited partner together and what would happen if the legal entity is a VIE?

If i can get the explanation of VIE in easy wording that would be helpful, i know how to identify one but really confused with the underlying concepts of it and determination of expected gains or losses.