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 and Disadvantages 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.

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 Partnership - LP

    A limited partnership exists when two or more partners jointly ...
  2. Silent Partner

    An individual whose involvement in a partnership is limited to ...
  3. Publicly Traded Partnership (PTP)

    A publicly traded Partnership (PTP) is business organization ...
  4. Form 1065

    Form 1065 is a tax document used to report the profits, losses, ...
  5. Joint Liability

    Joint liability denotes the obligation of two or more partners ...
  6. Return Of Capital

    Return on capital is that return from an investment that is not ...
Related Articles
  1. Insights

    Limited Liability Partnership (LLP): The Basics

    Limited liability partnerships (LLPs) are a flexible, legal and tax entity that allows partners to benefit from economies of scale while also reducing their liability.
  2. Small Business

    4 Business Partnership Mistakes To Avoid

    When two or more people get together to run a business, the odds of conflict and financial risk increase without the proper controls in place.
  3. 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.
  4. Small Business

    Should You Have A Business Partner?

    What are the advantages of having a business partner? What are the advantages of doing it yourself?
  5. Investing

    MLP Investors to Benefit Under a Trump Tax Regime

    Trump’s new tax plan could spell big savings for investors in master limited partnerships.
  6. Managing Wealth

    Key Questions to Ask Before Moving in Together

    Moving in together is a big step. Here are some key financial questions to ask your partner before you make the move.
  7. Investing

    5 Stocks to Invest in the Decline of Oil Storage Capacity (MMP, EDP)

    Discover five stocks that may likely benefit from the decline of oil storage capacity, and learn about their core business operations.
  8. Investing

    Learn the Lingo of Private Equity Investing

    Because of the non-public nature of private equity, it can be difficult to the learn the lingo. We break it down here.
  9. Managing Wealth

    Tips for Talking About Money at Every Step of a Relationship

    How much you talk about money differs, depending on the stage of the relationship.
  10. Retirement

    Unmarried Couples and Estate Planning

    When it comes to estate planning, unmarried couples need to take extra steps to protect their assets.
RELATED FAQS
  1. Limited, General vs Joint Venture Partnership

    Learn the differences between general partnerships, limited liability partnerships, limited partnerships and joint venture ... Read Answer >>
  2. How are business decisions made in a partnership?

    Understand how partners in a business can tackle decision making, and learn the options available for partnerships to develop ... Read Answer >>
Trading Center