General Partner

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Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated August 5, 2020

What is a General Partner?

A general partner is a member of a partnership that can incur debt or obligations on behalf of the partnership and is personally liable for those debts or obligations.

How Does a General Partner Work?

In some partnerships, all the partners are general partners, and they are all liable for the debts and obligations of the business. In other partnerships, some of the partners are general partners and others are limited partners. In those cases (called limited partnerships, or LPs), one or a handful of general partners manage the day-to-day operations of the business and are personally liable for the business's debts.

Unlike general partners, limited partners have no daily management role, cannot encumber the business, and are not personally liable for the business's debts. Instead, they receive a share of the firm's profits in exchange for their capital investments, and usually the worst that can happen is that the value of their investment falls to zero. Limited partners who take managerial roles could be considered general partners in the eyes of the law.

Why Does a General Partner Matter?

General partners bear the lion's share of the risk in a partnership. They must make important decisions about the company, and they must be prepared to forfeit their personal assets in a worst-case scenario. Day-to-day management and risk burdens are two reasons general partners usually receive management fees in addition to large percentages of the partnership's profits.

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