What is a 'General Partner'

A general partner is an owner of a partnership who has unlimited liability. A general partner is also usually a managing partner and active in the day-to-day operations of the business. Because any partner in a general partnership can act on behalf of the entire business without the knowledge or permission of the other partners, being a general partner offers poor asset protection.

If a general partner is ever required to meet the partnership's financial obligations, his or her personal assets may be subject to liquidation. In the case of a limited partnership, only one of the partners will be the general partner and have unlimited liability. The other partners will have limited liability as long as they do not take an active role in managing the business, so their personal assets will not be at risk.

BREAKING DOWN 'General Partner'

A partnership is a business entity formed when at least two or more people agree to go into business together. General partners typically create a partnership agreement to spell out the details of their partnership. Unlike other business entities such a corporation or a limited liability corporation (LLC), no state filing is required to form a partnership.

Benefits of General Partnership

A partnership can be a beneficial choice of business entity for legal, medical or creative professionals who want to expand their business reach. For example, an attorney or medical doctor may choose to partner with other professionals on the same field to build or expand a practice. Each professional becomes a general partner under the terms of the partnership agreement. General partners typically bring specialized knowledge and skills to the partnership, and also contribute to the partnership's pool of contacts. Because the general partners share management responsibilities, more time is available for general partners work on business development and growth.

General Partnership Issues

The disadvantages of being a general partner pertain to the issue of liability. General partners are jointly and severally liable for the partnership's legal obligations including contracts and personal injury suits. For example, a group of medical doctors sharing an office space, support staff and accounting services can legally be considered a partnership where each of the doctors is a general partner in the practice. When a client files a lawsuit against one of the doctors for professional misconduct, courts have allowed the client to proceed against all general partners in the medical practice. If the court enters a judgment in favor of the client, all general partners would have to pay the judgment and the general partner with the most money would have the most to lose even if she or he did not commit the misconduct.

Partnership Terms

General partners share business profits and losses equally unless the partnership agreement states otherwise. Additional partnership terms usually also include provisions about how remaining shares of the partnership will be divided when a partner withdraws from the business. State partnership law applies when general partners do not spell out terms in their partnership agreement.

RELATED TERMS
  1. Limited Partner

    A partner in a partnership whose liability is limited to the ...
  2. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  3. Partnership

    A business organization in which two or more individuals manage ...
  4. General Partnership

    A arrangement by which partners conducting a business jointly ...
  5. Schedule K-1

    A tax document used to report the incomes, losses and dividends ...
  6. Subscription Agreement

    An application by an investor to join a limited partnership. ...
Related Articles
  1. Small Business

    What is a Partnership?

    A partnership is an organization where two or more owners operate a business.
  2. Taxes

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  3. Small Business

    MLPs and Limited Partnerships: How They Differ

    Limited partnerships and master limited partnerships have one difference that makes all the difference.
  4. Insights

    Limited Liability Partnership (LLP): The Basics

    LLPs are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
  5. Small Business

    How To Create A Business Succession Plan

    Make sure the business you built continues to thrive long after you've left the helm.
  6. Investing

    What is Carried Interest?

    Carried interest is the percentage of a private equity or a hedge fund’s profits that its general partners receive as compensation.
  7. Trading

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  8. Managing Wealth

    Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.
  9. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  10. Financial Advisor

    Partners Group: Investment Manager Highlight (PGHN)

    Get an inside look at some of the key executives and the investment approach of the global private equity investment firm Partners Group.
RELATED FAQS
  1. What's the difference between limited liability partnership and general partnership?

    Learn the differences between general partnerships and limited liability partnerships; each type has unique traits, benefits ... Read Answer >>
  2. What is the difference between a silent partner and a general partner?

    Understand the difference between a person designated as a silent partner and a general partner under the partnership business ... Read Answer >>
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Find out why it is important to safeguard your general partnership in the even that one member becomes disabled, dismembered ... Read Answer >>
  4. Which terms should be included in a partnership agreement?

    Understand what specific terms should be included in a business partnership agreement and how each affects the partners in ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center