General Partner vs Limited Partner

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 4,036 reviews

Jump to Section

Need help with a Partnership Agreement?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

General partners vs. limited partners play two very different roles. While the former manages staff, pays bills, and works with customers, the latter primarily exists to provide capital funding.

Whether you are the owner of a partnership or just thinking about it, the article below outlines everything you need to know.

Difference Between a General Partner and a Limited Partner

The primary difference between a general partner and a limited partner is their role in the company. General partners manage daily operations, while limited partners are silent investors. However, limited partners can make some decisions regarding the company’s financial performance to protect their investment.

It can pay to be that optimistic when starting a business, and passion is essential to its profitability and competitive advantage. However, beginning a partnership takes a far more skeptical approach. The more time you spend analyzing both sides of the coin, the better decisions you will make over the long run.

What is a General Partner?

General partners, or GPs, handle the daily operation of a general partnership. They have authority over and responsibility for the company’s profits, losses, and liabilities. There is a lot of personal financial risk that comes with being a general partner.

General Partner Example

General partners are the eyes and ears on the ground when it comes to running a business. However, it’s hard to determine how they’re different from limited partnerships, and examples can provide clarity.

Here’s an example of how a general partnership works:

  • Ariel, Pablo, and Jordan want to start a landscaping company
  • The three individuals meet and discuss the proposed terms and conditions
  • They speak with their lawyers independently to review the proposal
  • Ariel, Pablo, and Jordan return for another meeting to finalize their thoughts
  • They determine that a general partnership is right for them
  • Ariel, Pablo, and Jordan draft and sign a general partnership agreement
  • They also check with their secretary of state’s office for other requirements
  • After fulfilling state mandates, the three people now become general partners under a partnership

This web page also discusses general partners.

Meet some lawyers on our platform

Zachary J.

53 projects on CC
View Profile

Kristen R.

40 projects on CC
View Profile

Matthew S.

2 projects on CC
View Profile

Michael M.

182 projects on CC
View Profile

What is a Limited Partner?

Limited partners, also called silent partners, don’t handle the daily operation of a partnership. Investing money and other resources into the business is their primary role. Investors may become limited partners to invoke asset protections on business liabilities.

Limited Partner Example

As you can see, limited partners vs. general partners are much different from each other. However, it’s still challenging to know when an LP might work for you as an investor or investee.

Here’s an example of how a limited partnership works:

  • Midas, Inc is a real estate limited partnership (RELP) investor
  • They partner with developers and provide funding
  • Mavis Sheraton Homes is a local commercial development group
  • Midas, Inc approaches Mavis about investing as a limited partner
  • Mavis likes what Midas has to say, and they agree
  • Midas cuts them a check for a new project
  • Mavis has full say and control over how they use the money
  • Midas receives investment payments under their LP agreement

The most crucial element from the above-referenced examples is that both companies spent timing drafting agreements. While many states recognize oral contracts, proving your allegations is far more challenging when a dispute arises. Instead, always get your agreements in writing so that everyone is on the same page.

Partnerships Explained

Partnerships are an excellent opportunity for individuals who want to start a business together. However, it would be best if you also considered the options when it comes to business formations.

Below, we’ve outlined a side-by-side comparison of how both types of partnerships work:

General Partnership

General partnerships , or GPs, are not corporations, so they are not required to register with the state to operate legally. They exist by default when two or more people enter into a business together to make a profit.

You must meet two conditions to form a general partnership:

  • Condition 1 . There must be two or more owners in the company
  • Condition 2 . They agree to take responsibility for debts and losses

Every partner in a general partnership can enter into contracts or business deals that bind the other partners. While this is advantageous, it also implies that you have complete faith in the person or persons with whom you launch your business. Starting a company with a friend or family member may be enjoyable, but they may not make the greatest business partners.

Most general partnerships draft a partnership agreement to prevent and resolve disagreements. This contract spells out the company’s governance structure as well as each owner’s rights and responsibilities. In most cases, the agreement also covers voting rights and profit distribution.

General partnerships dissolve when one of the partners dies, becomes disabled, or leaves the company. In these situations, a business partnership agreement can specify what should happen if something happens to one of the partners. You should always get legal advice from partnership agreement lawyers for personalized advice.

Here is another web page that describes general partnerships.

Limited Partnership

Limited partnerships , or LPs, are separate legal entities from a business. For any other person to be a limited partner, the company must have at least one general partner. General partners can be an individual, a group, or a business can serve as general partners.

Limited partners aren’t involved in the day-to-day operations and management of the company. For example, they can’t choose a board of directors . However, they usually have a say on whether or not to liquidate the company.

The limited partner only contributes money to the partnership, and the general partners make all spending decisions. Limited partners are not personally liable for the debts or lawsuits of the company. However, the limited partner will lose money if the business fails.

The limited partner, on the other hand, must avoid becoming involved in the business. They could be construed as more than a limited partner and held personally liable for debts and other claims if this is not the case.

The amount of activity a limited partner can have while still being considered a limited partner varies by state. Limited partners also deduct business income from their personal taxes and are not subject to self-employment taxes, like general partners.

You can learn more about limited partnerships here .

Can a General Partner and Limited Partner be the Same Person?

No, a general partner and a limited partner cannot be the same person. Limited partners cannot exist without a general partner. However, a general partner can co-exist with another general partner.

If a limited partner spends too much time directing a business, they could be on the hook for liabilities. As such, you should always have a partnership agreement in place regardless of your role.

Do LLCs Have General Partners?

No, limited liability companies , or LLCs, don’t have general partners. Instead, they have members . However, LLCs can form a partnership with another person or entity.

LLCs lawyers can help you handle legal issues surrounding general partners and limited liability companies. They can also provide ongoing support and legal counsel in case unanticipated issues arise.

Get Legal Help with Business Formations

Do you need legal help with general and limited partnerships? If so, corporate lawyers can answer your questions surrounding joint ventures. Post a project in ContractsCounsel’s marketplace to get flat fee bids for free today.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Pura R. on ContractsCounsel
View Pura
5.0 (3)
Member Since:
July 22, 2020

Pura R.

Healthcare Law and Employment Expert
Free Consultation
Get Free Proposal
Miami, FL
13 Yrs Experience
Licensed in FL
Nova Southeastern University

Pura Rodriguez, JD, MBA is the President and Managing Partner of A Physician’s Firm, based in Miami. She represents healthcare providers from different specialties in a broad range of issues, including contract review, business planning and transactions, mergers and acquisitions, vendor and contract disputes, risk management, fraud and abuse compliance (Anti-Kickback Statute and Stark), HIPAA compliance, medical staff credentialing, employment law, and federal and state regulations. She also assists providers in planning their estates, protecting their assets, and work visa requirements.

Eric M. on ContractsCounsel
View Eric
5.0 (3)
Member Since:
July 25, 2020

Eric M.

Lawyer
Free Consultation
Get Free Proposal
Pembroke Pines, FL
15 Yrs Experience
Licensed in FL, TX
University of Baltimore

Experienced and business-oriented attorney with a great depth of contract experience including vendor contracts, service contracts, employment, licenses, operating agreements and other corporate compliance documents.

Scott S. on ContractsCounsel
View Scott
5.0 (11)
Member Since:
July 28, 2020

Scott S.

Principal
Free Consultation
Get Free Proposal
New York, NY
42 Yrs Experience
Licensed in NY
New York University School of Law

I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.

Brianna N. on ContractsCounsel
View Brianna
5.0 (2)
Member Since:
June 16, 2021

Brianna N.

Attorney
Free Consultation
Get Free Proposal
New York
7 Yrs Experience
Licensed in NY
Touro Law School

Brianna is a well-respected New York licensed attorney with a Juris Doctorate degree in law from Touro College Jacob D. Fuchsberg Law School and bachelor’s degree in Business Administration and Management from Dowling College. Since becoming an attorney, she has practiced in various areas including business law, corporate law, residential real estate, commercial real estate, criminal law, traffic law, employment law, landlord tenant law, estate planning, and has represented intermediaries in procurement and the personal protective equipment industry. Brianna has broad and extensive business experience; She is an entrepreneur and co-owner of a microtechnology manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer and Human Resource Manager for the company. While building the manufacturing business, she created a brokerage firm for business transactions and has managed several other businesses which she has ownership interest in. Brianna’s involvement in these various businesses over the past 15 years provides a unique skillset to her clients; Not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight, experience, and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint, and as a result she is able to help prevent unforeseen business ramifications. She conducts extensive risk assessments on behalf of her clients and minimizes exposure to potential liability without “over lawyering” agreements. One of Brianna’s main areas of focus is drafting and negotiating agreements. Negotiation is a passion of hers which was applied in law school while she was a member of the Alternative Dispute Resolution Society, notably winning Touro Law School’s intraschool negotiation competition. In her more recent years, Brianna has removed herself from her various business interests to focus on her law practice. Brianna has a strong moral compass and believes in quality over quantity. She treats every client as a top priority; thus, she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client. Brianna has broad and extensive business experience; She is an entrepreneur and co-owner of a microtechnology manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer and Human Resource Manager for the company. While building the manufacturing business, she created a brokerage firm for business transactions and has managed several other businesses which she has ownership interest in. Brianna’s involvement in these various businesses over the past 15 years provides a unique skillset to her clients; Not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight, experience, and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint, and as a result she is able to help prevent unforeseen business ramifications. She conducts extensive risk assessments on behalf of her clients and minimizes exposure to potential liability without “over lawyering” agreements. Additionally, she specializes in drafting and negotiating agreements. Negotiation is a passion of hers which was applied in law school while she was a member of the Alternative Dispute Resolution Society, notably winning Touro Law School’s intraschool negotiation competition. In her more recent years, Brianna has removed herself from her various business interests to focus on her law practice. Brianna has a strong moral compass and believes in quality over quantity. She treats every client as a top priority; thus, she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client.

Jaclyn I. on ContractsCounsel
View Jaclyn
Member Since:
September 10, 2020

Jaclyn I.

Attorney
Free Consultation
Get Free Proposal
New York, NY
13 Yrs Experience
Licensed in NJ, NY
Hofstra University, Maurice A. Deane School of Law (J.D.)

Jaclyn is an experienced intellectual property and transactional attorney residing and working in NYC, and serving clients throughout the United States and internationally. She brings a targeted breadth of knowledge in intellectual property law, having years of experience working within the media, theater, PR and communications industries, and having represented clients in the music, entertainment, fashion, event production, digital media, tech, food/beverage, consumer goods, and beauty industries. She is an expert in trademark, copyright, and complex media and entertainment law matters. Jaclyn also taught as an Adjunct Professor at Cardozo School of Law, having developed and instructed the school’s first Trademark Practicum course for international students. In her spare time, Jaclyn’s passion for theater and love for NYC keeps her exploring the boundless creativity in the world’s greatest city!

Yoko T. on ContractsCounsel
View Yoko
Member Since:
July 22, 2020

Yoko T.

Principal
Free Consultation
Get Free Proposal
Minnesota
4 Yrs Experience
Licensed in MN
Lewis & Clark Law School

A bilingual attorney graduated from J.D. with a C.P.A. license, an M.B.A. degree, and nearly ten years of experience in the cross-border tax field.

Chester A. on ContractsCounsel
View Chester
Member Since:
July 21, 2020

Chester A.

Attorney
Free Consultation
Get Free Proposal
Atlanta, GA
25 Yrs Experience
Licensed in GA, IN
University of Miami School of Law

With over 24 years of practice, Chet uses his vast experiences to assist his clients in the most efficient manner possible. Chet is a magna cum laude graduate of University of Miami School of Law with an extensive background in Business Law, Commercial Real Estate, Corporate Law, Leasing Law and Telecommunications Law. Chet's prior experience includes 5 years at two of the top law firms in Georgia and 16 years of operating his own private practice.

Steven C. on ContractsCounsel
View Steven
Member Since:
July 21, 2020

Steven C.

Managing Partner
Free Consultation
Get Free Proposal
Dallas, TX
42 Yrs Experience
Licensed in LA, TX
University of Houston

Steve Clark has been practicing law in DFW since 1980. He is licensed in both Texas and Louisiana state and federal courts. He concentrates his practice on business clients and their needs. He has been a SuperLawyer in Texas since 2011, and is Lead Counsel rated in Business Law. He is also a Bet the Company litigator in Texas.

Kamilah H. on ContractsCounsel
View Kamilah
Member Since:
July 25, 2020

Kamilah H.

attorney
Free Consultation
Get Free Proposal
Long Beach, CA
14 Yrs Experience
Licensed in CA
Whittier Law School

I am a top-performing bi-lingual legal services professional with a proven record of success. Reputation of assessing and evaluating client’s needs and providing individualized solutions in line with those needs while efficiently handling multiple tasks simultaneously. Able to create a collaborative work environment ensuring business objectives are consistently met. Seeking an attorney role within a legal setting to apply skills in critical thinking, executive communications, and client advocacy.

Cynthia F. on ContractsCounsel
View Cynthia
Member Since:
July 24, 2020

Cynthia F.

Managing Partner
Free Consultation
Get Free Proposal
Los Angeles, CA
13 Yrs Experience
Licensed in CA
Western State - College of Law

I run a small law firm in Pasadena, CA. I have been practicing for almost 10 years and the other attorneys at my firm each have 12+ years of experience. We focus on business and employment law, protecting and defending business owners. While my clients are all sizes, I particularly enjoy helping smaller companies and individuals manage their legal needs without the high price tag.

Jessica K. on ContractsCounsel
View Jessica
Member Since:
January 16, 2021

Jessica K.

Litigation Attorney
Free Consultation
Get Free Proposal
Florida
7 Yrs Experience
Licensed in FL
University of Florida Levin College of Law

I assist individuals and businesses across the state of Florida with litigation, contract drafting, contract interpretation, and issues that may arise because of contract terms, including demands (cease-and-desist letters) and litigation. I have experience with non-compete agreements, privacy policies, website terms, settlement agreements, intellectual property disputes, and many other disputes. Please reach out if I can help you with a litigation- or contract-related project!

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call