What is a general partner?
A general partner is one of two or more people who jointly own a business and actively manage it. Job duties of a general partner often include managing staff, paying bills, and interacting with customers.
As an owner of the business, the general partner also has unlimited liability regarding the financial dealings of the partnership. In other words, they’re personally responsible for a company’s profits, losses, and liabilities.
General partnerships use investment portfolio management software to track and manage investor portfolios. This software gives professionals a holistic view of activities on behalf of clients, aggregates all relevant data, and uses tools for investment analysis.
Example of a general partner
The individuals involved in a general partnership benefit from its ability to expand their networks and develop business. For example, if two doctors who operate as sole practitioners want to increase their clientele, they may form a general partnership and bring specialized knowledge and expertise to help grow their businesses.
Advantages of a general partnership
Compared to other types of businesses, general partnerships are less formal and require less paperwork to get started. Some other advantages of being involved in a general partnership include:
- Joint taxes: The Internal Revenue Service (IRS) doesn’t require general partnerships to pay income tax. Instead, each partner receives their share of the profits as income and pays their own taxes.
- Ease of establishment and dissolution: Creating a general partnership is simpler and requires less paperwork than forming a corporation. Additionally, it’s easy to dissolve, and the partnership can be terminated at any time.
- No requirements for business formation: The partners themselves determine what to include in the contract and the rules of running their business.
- Shared management responsibilities: Since management responsibilities are shared, the partners have more time to devote to their respective professional duties.
- Easy access to capital: They have easy access to capital because partnerships use the general partners’ personal resources for financing.
- Expanded networks: By partnering, two sole proprietors can be their own bosses while using broader networks to develop their businesses.
- Equal rights to manage business operations: After forming a general partnership, all partners involved have equal rights to business operations. While this is an advantage, it makes sense for large partnerships to draw up an agreement to clarify each partner’s roles and responsibilities.
Disadvantages of a general partner
On the flip side, there are some disadvantages to joining a general partnership. For example, the partners could face unlimited liability. In a general partnership, any lawsuits against the business likely include all partners, and their personal assets may be subject to liquidation.
For example, if a patient sues a doctor for medical malpractice, all parties involved in the general partnership may be responsible.
General partner vs. limited partner
A general partner is typically either a managing partner or someone active in the company’s daily operations. General partners are fully involved in their businesses and are responsible for all business debts. They have unlimited liability and can make legally binding business decisions.
Limited partners, also called silent partners or investors, don’t handle the daily operation of the partnership. Instead, their primary role is to invest money and other resources into the business. Generally, the amount of capital they contribute to the company determines liability. Since they’re not personally liable, they don’t have to use their personal assets or money to pay off any business debts.
Amanda Hahn-Peters
Amanda Hahn-Peters is a freelance copywriter for G2. Born and raised in Florida, she graduated from Florida State University with a concentration in Mass Media Studies. When she’s not writing, you’ll find Amanda coaching triathletes, cuddling up with a good book, or at the theater catching the latest musical.
