What’s the difference between a general partner and a limited partner? This is a question I get all the time.

Hey, there! It’s Billy with KeePon Cashflow, sharing some strategies and tactics that will help you make more money. They’ll help you have more control over your free time and ultimately live with less stress. If it’s your first time here, I’m going to ask you to subscribe to our channel. If you find value in this blog post, please like and share it with those who will find it helpful. It allows our community to continue to grow with likeminded people. But let’s get back to the answer you’re looking for, which is the difference between a general partner and a limited partner. The majority of you are probably into real estate, so you’ve likely heard these two terms before. They’re often used in different types of documents when you’re either leading a project or bringing in investors.
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A general partner is sometimes also called a GP, the sponsor, the key sponsor, and the promoter. In real estate, the general partner is the person or team that has day-to-day operational responsibility of the project. If you’re looking to bring in a multifamily apartment building, for instance, you’ll need to figure out how to get the property under contract. You’re the person negotiating it, while the general partner is doing their due diligence. They manage the daily operations either themselves or through a third party.

The GP is also responsible when it comes time to dispose of or sell the asset. Anything you can think of that’s actively managing the day-to-day operations of a property will fall under the purview of your general partner, including the operating agreement, which allows them to have authority over major decisions. This also means that any liabilities fall on the shoulders of the GP, too. They’re doing the lion’s share of the work.

On the other side of the equation, you’ve got the limited partner, or LP. This is the money person. They’re responsible for making money grow faster and harder than they’re actually working for it. For example, if you see there is a multifamily apartment deal or mobile home park that you can invest in, you can take your capital and put it into the project, becoming a limited partner.

The benefit to becoming a limited partner is that you can continue to do what you do best while also making your money work for you. You can choose the type of project you want to invest in, and you’ll also minimize your liability. If the deal goes sour, you could lose your capital, but you’ll never lose more than that. If you’re a general partner, on the other hand, your exposure to loss could be greater. The downside to being a limited partner is that you typically don’t have any decision-making authority. For some, that’s okay because they still have the responsibilities of their day job.

When trying to understand the difference between a GP and an LP, I would suggest consulting with your legal professional, especially if you’re going through a bunch of documents pertaining to your property. It would also be wise to consult your tax professional to see what type of deal you’re going into and how it will affect you and your specific situation.

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I hope this has cleared up the difference between a general partner and a limited partner. I’ve mentioned this in the past, but I’ve been working for a large company, so I’ve had the chance to be a general partner. On the other hand, because I like my job, I’ve also been a limited partner in some property dealings. By working for a big multinational company while also building my own company at the same time, I’ve figured out a step-by-step process for how to become successful, no matter which role I take on.

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I’ve spelled out this process in a simple eBook. There’s a new version now, so all you need to do is click here and leave your email address. Let’s call it a little gift from me to you. While you’re at it, let me know your thoughts on the difference between a GP and an LP. What makes the most sense for you?

This is Billy Keels with KeePon Cashflow. That’s my two cents for today. As always, hasta la próxima!

You can also check out my latest podcasts and collaborations here keeponcashflow.com/podcasts/