General partner

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General partner: a person who joins with others to run a business. They can legally bind the partnership and are responsible for its actions. General partners have unlimited personal liability for the partnership’s debts, meaning their personal assets could be used to pay those debts. If the partnership is dissolved, a general partner’s share of the assets may be used to pay creditors before any remaining assets go to the partners.

Limited partners have limited liability, so they’re not personally responsible for the partnership’s debts and their personal assets aren’t at risk for business debts. They typically do not have management power and cannot bind the partnership; they may participate in other ways, but not in making binding business decisions.

Tax rules vary by country, but many partnerships use pass-through taxation, where profits and losses pass through to the partners to report on their personal taxes. In the United States, general partners usually pay self-employment taxes on their share of profits, while limited partners generally do not because they aren’t active managers.

There are four main types of partnerships: general partnership, limited partnership, limited liability partnership, and limited liability limited partnership. Most formations require at least one general partner.

Rules and treatment can differ by country, with some places treating partnerships as separate legal entities and others applying pass-through taxation.