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How Designated Partner Is Different from a General Partner?

A limited partnership is a business venture in which two or more individuals, known as partners, come together to form a company. The general partner is responsible for the majority of business decisions, while the designated partner has a more limited role. It is often necessary to have complementary skill sets to succeed in their business ventures that come from different fields. In this article we shall see how a designated partner is different from a general partner.

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What Is a Designated Partner? A designated partner is a partner in a partnership who the other partners have designated to have special responsibilities or rights. In some partnerships, the designated partner may be responsible for management decisions, while in others, they may simply have a greater say in how the partnership is run. The designated partner may also be responsible for handling the partnership’s finances. 

A designated partner is a general partner who the other partners have assigned specific responsibilities. A designated partner may have limited liability for the debts and obligations of the partnership, depending on the partnership agreement terms.


What Is a General Partner?

A general partner is an individual or organization that owns and operates a business with one or more other partners. The general partner is primarily responsible for the day-to-day business management and has unlimited liability for the partnership’s obligations and debts. 

How Is a General Partner and Designated Partner Appointed?

A general partner is any person or organization with an ownership stake in and management responsibility for a partnership. A designated partner, on the other hand, is a specific individual or organization within the partnership that has been assigned specific duties and powers. The manner of appointment of each type of partner varies depending on the type of partnership and the laws of the jurisdiction in which it is formed.

The limited partnership agreement typically appoints a general partner. On the other hand, a designated partner is usually appointed by the limited liability company itself. In most cases, a designated partner must be an individual, not a corporation. While a general partner may be held liable for the debts and obligations of the limited partnership, a designated partner is only liable to the extent of their investment in the limited liability company.

What Are the Differences Between a General Partner and Designated Partner?

The general partner is the managing partner of the business and has full control over the day-to-day operations. On the other hand, the designated partner is a silent partner who provides financial backing but doesn’t take an active role in running the business.

The main difference between these two types of partners is that the general partner is responsible for all aspects of the business, while the designated partner only provides financial support. This means that the designated partner has less control over how the business is run and may not be aware of all the operation details.

Another difference is that the general partner usually receives a percentage of the profits, while the designated partner usually receives a fixed amount of money. This arrangement gives the general partner an incentive to grow the business and make it more profitable.

The designated partner usually has less financial risk than the general partner because they are not liable for any debts that the partnership incurs. On the other hand, the general partner is liable for all debts incurred by the partnership. 


Finally, it’s important to note that a designated partner can only be appointed if two or more partners are involved in the business. If there is only one partner, then that person is automatically considered to be the general partner. Although the differences between a general partner and a designated partner are negligible, a fine line must be followed during the incorporation and inclusion of a person in a Limited Liability Partnership.

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