Question

A typed response please.

How does a general partnership differ from a limited partnership?

Answer 1

Difference between General partnership and Limited partnership:

1) Meaning: The general partnership refers to a relationship wherein all the business partners contribute to the daily activities of the business; whereas in a limited partnership the partner may just have contributed funds to the business however does not participate in the daily activities of the business.

2) Profit and Loss Sharing: In general partnership the profits and losses are shared equally by partners in the structure. However in the limited partnership the profits and losses are shared as per the investment amount or the clauses within the binding agreements and contracts.

3) Agency Powers: In general partnership the partners can undertake the legally binding decisions and bind the business to a contract or a business deal. Conversely in the limited partnership the partners don’t holds this ability

4) Control/ Management: General partners hold a complete control of the operations of business and are responsible for it. On contrary the limited partners have minimal to no control of the operations of business.

5) Personal Liability: In general partnership the general partners can be used to pay off debts during bankruptcy however in the limited partnership they can be sued according to the investment percentage.

6) Structure: The general partnership is less complex compared to the limited partnership