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General vs Limited Partnership Liability

In a general partnership, all partners have equal authority to manage the business and make decisions. Partners are personally responsible for all business debts and each partner is fully liable to pay another partner's share if they cannot. A limited partnership has both general and limited partners, where limited partners only risk their investment and have no management control, while general partners run the business but have unlimited personal liability for debts like in a general partnership.

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44 views1 page

General vs Limited Partnership Liability

In a general partnership, all partners have equal authority to manage the business and make decisions. Partners are personally responsible for all business debts and each partner is fully liable to pay another partner's share if they cannot. A limited partnership has both general and limited partners, where limited partners only risk their investment and have no management control, while general partners run the business but have unlimited personal liability for debts like in a general partnership.

Uploaded by

Mhali
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

DISCUSSION (1)

A GENERAL PARTNERSHIP
 is one in which all of the partners
 have the ability to actively manage or control the business.

 This means that every owner has authority to make decisions about how the business is run as
well as the authority to make legally binding decisions.

 Unless the partners have a partnership agreement, each partner will have equal authority.

PARTNERS IN A GENERAL PARTNERSHIP


 don't have any limit on their personal responsibility for the debts of the business.
 This means that the partner could lose more than just his investment in the business -
personal assets would have to be used to pay business debts if necessary.

EACH PARTNER in a general partnership


 is also "jointly and severably" liable for debts of the business.
 Joint and severable liability means
o is that each partner is equally liable for the debts of the business, but each is also totally
liable.
o So if a creditor can't get what he is owed by one or more of the partners, he can collect it
from another partner, even if that partner has already paid his share of the total debt.
o If someone sues your partnership and obtains a large judgment, and your partner doesn't
have the money to pay his share of it, you will have to pay the entire amount.

A LIMITED PARTNERSHIP
 has both limited and general partners.
 A LIMITED PARTNER
o is one who does not have total responsibility for the debts of the partnership.
o The most a LIMITED PARTNER can lose is his investment in the business.
o The trade off for this LIMITED LIABILITY is a lack of management control:
 A limited partner does not have the authority to run the business.
 He is really more or less an investor in the business.

A LIMITED PARTNERSHIP
 must have at least one general partner.

The GENERAL PARTNER OR PARTNERS


 are responsible for running the business.
 They have control over the day-to-day management of the business
 have the authority to make legally binding business decisions.

The PARTNERSHIP AGREEMENT


 will specify exactly which partner or partners have certain responsibilities and which
have certain authority.

GENERAL PARTNERS
 are also subject to unlimited personal liability for the debts of the business.

The GENERAL PARTNERS of a limited partnership


 are also jointly and severably liable for the debts of the business, just like partners in a
general partnership.

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