Learn something new every day
More Info... by email
A general partnership is a type of business partnership arrangement that involves the participation of two or more parties as business partners in a company organization. With this particular type of business arrangement, all partners share both the rewards and the potential liabilities associated with the operation of the company. Unlike other business types, a general partnership does not provide any type of limited liability for any of the partners, meaning that in the event of some type of litigation even the personal assets of the partners may be used to settle judgements ordered by a court.
The model of a general partnership normally provides all partners with equal benefits in terms of the profits earned by the company. Unless there are specific provisions within the founding documents of the company that create some sort of pecking order or priority of one partner over the others, all have the same range of powers or authorizations as the rest. This means that any one partner can transact business on behalf of the partnership, such as signing a contract or implementing a business deal that in effect commits the company for the duration of that contract.
Internally, the decision-making process may take on several forms within a general partnership. One common approach is to make decisions by a committee of the partners, with a simple majority rule being required to approve a specific action. In some cases, the partnership may be structured to require a greater percentage of support before a given strategy will be implemented, with some partnerships requiring up to 80% support before a measure is considered passed. The complexity of how decisions are made within a general partnership will often depend on the number of partners involved and what processes are considered to be necessary in order to protect the best interests of the business operation.
Just as a general partnership grants broad powers to all the partners, this arrangement also makes each of the partners accountable for any debts owed by the business. Any or all of the partners can be sued for non-payment of any outstanding debts incurred under the name of the company. Should the company not have enough assets on hand to settle those debts, the court of jurisdiction may order that the personal assets of the partners be used to settle that company debt. Since the degree of liability is not limited with a general partnership, it is possible for partners to not only lose the investment in the company proper, but also lose homes, shares of stock, and any other assets they own, if the circumstances surrounding the lawsuit are severe enough to merit the action.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!