A general partner is one of the two or more investors who own a business jointly and take up day-to-day roles in regulating the same. A general partner gets the authority to act on behalf of the business even without the permission or knowledge of other partners.
Unlike a silent or limited partner, the general partner could have unlimited liability for the business’s debts.
In simple words, a partnership is any business company or organization that at least two people develop and agree to share the profits as well as expenses. Specifically, this arrangement is appealing to creative, medical and legal professionals who want to be their own boss and expand the reach of their skills.
Along with that, a partnership also provides a variety of opportunities to acquire investment for developing and maintaining the business on such a scale that could have been impossible for a single person to do so.
In these situations, every professional can turn a general partner under the terms and conditions set by the partnership agreement. General partners get to share responsibilities as well as the expenses and profits of operating the business.
Typically, general partners brings specific knowledge and skills to the partnership and contribute to contracts and clients.
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A general partner could be held responsible for the liabilities occurring in the business. For instance, if this one is a medical clinic, a patient gets the right to sue the general partner for malpractices done with his treatment.
Also, in certain scenarios, courts may allow clients to fight against all of the general partners in a company. Moreover, if the case is dragged to the court, and the judge supports the client, general partners will have to take financial responsibility.
Not just that, the general partner who has invested the most in the company may have to give a considerable proportion in the form of a penalty. Likewise, the personal assets of the general partner could also be subjected to liquidation.
In case the company is a limited partnership, only one person gets to become the general partner while other members will take limited liability. Thus, their responsibilities towards debts will be restricted to the amount that they have invested in the company.
Basically, a limited partner will be no more than an investor whose role doesn’t involve taking actions in the business decisions.