General Partner vs. Limited Partner

Attribute	General Partner	Limited Partner
Liability	Unlimited	Limited to investment
Management	Active role in decision-making	No role in day-to-day operations
Investment	Contributes capital	Contributes capital
Profit Sharing	Shares in profits and losses	Shares in profits and losses
Taxation	Subject to self-employment tax	Pass-through taxation

Roles and Responsibilities

General partners and limited partners are both types of partners in a business, but they have different roles and responsibilities within the partnership. General partners are actively involved in the day-to-day operations of the business and have decision-making authority. They are responsible for managing the business, making strategic decisions, and overseeing the overall operations. Limited partners, on the other hand, are passive investors who contribute capital to the business but do not have a say in the management or decision-making process. They are not involved in the day-to-day operations and their liability is limited to the amount of their investment.

Liability

One of the key differences between general partners and limited partners is their liability in the business. General partners have unlimited personal liability for the debts and obligations of the business. This means that if the business is unable to pay its debts, general partners can be held personally liable and may have to use their personal assets to cover the debts. Limited partners, on the other hand, have limited liability and are only liable for the amount of their investment in the business. Their personal assets are protected from the business's debts and obligations.

Decision-Making Authority

General partners have decision-making authority in the business and are responsible for making strategic decisions that affect the operations and direction of the business. They have the power to enter into contracts, hire employees, and make other important decisions on behalf of the partnership. Limited partners, on the other hand, do not have decision-making authority and are not involved in the day-to-day operations of the business. They have a more passive role and are not responsible for making decisions or managing the business.

Profit Sharing

General partners and limited partners also differ in how they share in the profits of the business. General partners typically receive a larger share of the profits because they are actively involved in the management and operations of the business. They may also receive a salary or management fee for their work. Limited partners, on the other hand, receive a fixed return on their investment or a percentage of the profits, but they do not have the opportunity to earn additional income through salary or management fees.

Duration of Partnership

General partnerships and limited partnerships may also differ in terms of the duration of the partnership. General partnerships are typically formed for a specific project or venture and may be dissolved once the project is completed. Limited partnerships, on the other hand, may have a longer duration and may continue for an extended period of time, depending on the terms of the partnership agreement. Limited partnerships may also have provisions for adding or removing partners, which can affect the duration of the partnership.

Tax Implications

General partners and limited partners may also have different tax implications based on their roles and responsibilities in the business. General partners are typically considered self-employed and are responsible for paying self-employment taxes on their share of the profits. They may also be subject to additional taxes, such as the Medicare surtax, depending on their income level. Limited partners, on the other hand, are considered passive investors and may be subject to different tax rules, such as the passive activity loss rules, which limit the amount of losses that can be deducted from passive investments.

Conclusion

In conclusion, general partners and limited partners have distinct attributes that differentiate their roles and responsibilities within a business partnership. General partners are actively involved in the management and decision-making process of the business, while limited partners have a more passive role and are not involved in day-to-day operations. General partners have unlimited personal liability for the debts of the business, while limited partners have limited liability. The two types of partners also differ in how they share in the profits of the business and may have different tax implications. Understanding the differences between general partners and limited partners is essential for anyone considering entering into a business partnership.