Definition: A general partner is member or partner in a partnership who has unlimited liability and is liable for his portion of all partnership debts. A general member is also a managing member or one of the members who is actively responsible for the partnership’s management. There can be more than one general partner in every partnership.
General partnerships consist entirely of general partners. This means that all partners are unlimitedly liable for the partnerships actions. In other words, that a customer can not only sue the partnership for its business assets, but the customer can also sue all of the general partners for their personal assets. General partners have unlimited liability. They could lose their business and all of their personal assets.
This is the main reason why limited liability partnerships were invented. Many people wanted to get into business but didn’t want the liability of owning a partnership. A limited liability partnership must have at least one general partner. This partner bears unlimited liability just like he did in a general partnership. The rest of the partners can be limited partners.
What Does General Partners Mean?
This means that only their interest in the business can be lost. If the same customer sued a limited liability company, he would be able to sue the company of its assets and only the general partner. The limited partners would be safe from personal lawsuits. This structure encourages people to start businesses.
Being a general partner isn’t all-bad. General partners have the authority to run the business and make decisions. Limited partners by law cannot do either of these things. Limited partners are simply investors.