What is a General Partner?

A general partner is someone who jointly owns a business and has unlimited liability. They have the power to make business decisions without the prior approval of other partners.

General partners are commonly established through a general partnership agreement. They can also be part of a limited partnership.

What is a general partnership?

A general partnership is a legal entity between two or more people to establish a business together. These people become general partners and are fully responsible for all business debts and legal liabilities. These partners share all assets and profits of the business.

What are the advantages of having a general partnership?

Forming a general partnership is easier and cheaper than establishing a limited liability partnership or corporation. It requires less paperwork and filing a general partnership on the state level is often not required in the US.

Another advantage concerns the way in which these partnerships are taxed. General partnerships do not pay income taxes. Instead, partners file business losses and profits on their individual tax returns. When a business is doing well, general partners get to share in the profits. They are also easy to dissolve if needed.

General partnerships are also beneficial because they take the skills and resources of multiple people. It’s easier to raise funding because each business partner has their own list of contacts to reach out to. Having multiple partners of different skill sets helps them address each other’s weaknesses and use each partner’s unique strengths to benefit the business.

What are the disadvantages of having a general partnership?

Unlimited liability is the main disadvantage of a general partnership. For example, imagine that a general partnership of 3 dentists is established. One of the dentists botches an important surgery, and the company is sued by the patient. If the guilty dentist cannot afford to pay the full settlement, the other 2 partners are liable to make the remaining payment.

General partners are also responsible for all business debts. This means that creditors can go after a partner’s personal assets if the business fails to repay its debts. Another disadvantage is that a partner cannot transfer his ownership to anyone else without prior consent of all other partners.

What are the other partnership types?

A limited partnership is one in which there is one general partner and several limited partners. In this arrangement, the general partner has unlimited liability while the limited partners are only liable for their investment in the business. Limited partners do not help manage the business and have less of a say in business decisions.

A limited liability partnership is one in which all partners benefit from limited liability and help manage the business. There is no general partner in a limited liability partnership. Partners are not liable for irresponsible actions of other partners, and they are commonly used by professional service businesses like law firms.

A general partner is someone who runs a business and is subject to unlimited liability. General partners are established in general partnership and limited partnership agreements.

General partnerships are made up of partners who share in company profits and personal liability for the business. They are easy to set up, have tax benefits, and combine the resources of multiple partners. However, partners must be aware of the risks assumed with a general partnership.

In contrast, a limited partnership consists of only one general partner and multiple limited partners assuming less liability. In a limited liability partnership, there is no general partner, and all partners are protected from personal liability.