BROWSE

General Partner

Definition

In most countries, a general partnership is an association of persons or an unincorporated company with the following major features...

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.

Explaining '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.


Further Reading


Limited attention and the role of the venture capitalist
www.sciencedirect.com [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

The economics of the private equity marketThe economics of the private equity market
heinonline.org [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

Incentive problems and general partner compensation in limited partnership real estate investmentsIncentive problems and general partner compensation in limited partnership real estate investments
onlinelibrary.wiley.com [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

Financial contract design in the world of venture capitalFinancial contract design in the world of venture capital
www.jstor.org [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

Factors associated with general partner and relational uncertainty within early adulthood sibling relationshipsFactors associated with general partner and relational uncertainty within early adulthood sibling relationships
www.tandfonline.com [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

Exit options in corporate finance: Liquidity versus incentivesExit options in corporate finance: Liquidity versus incentives
academic.oup.com [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

The economics of small business finance: The roles of private equity and debt markets in the financial growth cycleThe economics of small business finance: The roles of private equity and debt markets in the financial growth cycle
www.sciencedirect.com [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

Economic abuse between intimate partners in Australia: prevalence, health status, disability and financial stressEconomic abuse between intimate partners in Australia: prevalence, health status, disability and financial stress
onlinelibrary.wiley.com [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …

The law and economics of hedge funds: Financial innovation and investor protectionThe law and economics of hedge funds: Financial innovation and investor protection
heinonline.org [PDF]
… General partner VCs act as agents for the limited partners in investing their funds … The analysis shows that the VC, as agent for both the entrepreneur and the general partners, does not … The implication of this result is that, although the entrepreneurs and limited partners could be …



Q&A About General Partner


What is a general partner?

A general partner is an owner of a partnership who has unlimited liability.

What does it mean that assets are owned on behalf of all partners?

Assets are owned on behalf of all partners, meaning that each partner has an interest in those assets. If one partner sells his or her share in the business, he or she will receive money for their share in the business's assets. However, they will not be able to sell their share in any other partner's portion of the business's assets without permission from that partner.

What can be the benefits of being a general partner?

General partners have more time to work on business development and growth.

What are some disadvantages of being a general partner?

General partners share management responsibilities which means they all have unlimited liability for the partnership's legal obligations including contracts and personal injury suits. For example, if one doctor in an office space commits malpractice against his or her client, courts will allow the client to proceed against all other doctors in the practice. If there is any judgment entered by the court in favor of the client, all doctors would have to pay that judgment amounting to unlimited liability for each doctor involved in the practice. This could potentially put them out of business because they would not be able to pay off such large judgments from their own pockets alone without help from other sources like insurance companies or investors.

How do partnerships differ from corporations?

Partnerships differ from corporations because corporations have limited liability; if one shareholder owns stock in a corporation and its value decreases dramatically due to poor management decisions or market conditions beyond its control, he or she may lose some money but will not lose everything invested into it like they would if they were involved with a partnership where there is no such thing as limited liability. Corporations also have more formal requirements for creation than partnerships do; most notably, corporate charters must be filed with state governments while no such requirement exists for partnerships (although many states require registration). Also unlike corporations which have shareholders who own shares representing portions of ownership within them, partnerships do not issue shares to represent ownership interests within them; instead they are composed entirely of owners called "partners" who own equal shares (i.e., percentages) within them and thus earn equal portions (i.e., percentages) when

Who typically becomes a general partner?

General partners are usually professionals such as attorneys, doctors and accountants.

How does this affect asset protection?

Because any partner can act on behalf of the entire business without knowledge or permission from others, it offers poor asset protection compared with corporations where owners are protected by limited liability rules that prevent creditors from collecting debts beyond what they invested into their businesses .

What are the major features of a general partnership?

The major features of a general partnership include equal responsibility and liability amongst partners, sharing profits in accordance with capital contributions, and defaulting on debts to creditors.

How can you override the default characteristics of partnerships?

You can override these characteristics by making an express agreement between partners.