October 2, 2026 · 8 min read
General Partner (GP) vs Limited Partner (LP): Key Differences
Who runs a fund and who pays for it: how the two seats in a limited partnership differ on control, liability, pay and access to your money.
- Funds
- Private equity
- Comparisons
GP vs LP comes down to who runs the partnership and who funds it. The general partner (GP) manages a fund, makes every investment decision and carries unlimited liability for its debts. Limited partners (LPs) supply most of the capital and have no say in day-to-day decisions. They can lose no more than they put in.
If you invest money in a fund, a real-estate syndicate or an SPV, you are almost always the limited partner, or its equivalent. What changes from deal to deal is the fine print of that seat: what you pay the GP, when you can get out, and what you can vote on.
1.5–2.0%
Range in which annual management fees paid to GPs have held steady
20%
Carried interest rate in 71% of the funds sampled. This is the GP’s share of profit
GP vs LP in Finance: The Differences, Criterion by Criterion
The table compares the two seats on role, a typical example, control, liability, capital, economics, tax, liquidity and removal. Legal points follow Delaware law, where most US funds and SPVs are formed. Other jurisdictions have similar rules that differ in detail.
6 Del. C. §§17-303, 17-403, 17-214; IRS Pub. 541 (12.2025); 26 U.S.C. §1402(a)(13); ILPA Principles 3.0 (2019). Compiled October 2026.
The Verdict for the General Partner
The GP seat gives control in exchange for risk and time. The general partner decides everything and earns twice: a fee for running the fund and a share of the profit. In return, it carries the partnership’s liabilities and its fiduciary duties, the legal duty to act in the investors’ interest. It also bears the reputational cost of a bad fund. It is the seat for the manager. An investor gains nothing from taking on its liability without its authority.
The Verdict for the Limited Partner
The LP seat limits your downside in exchange for control and liquidity. A limited partner can lose its commitment and no more. It needs no expertise in running the investments. The agreement’s voting rights and the GP’s duties protect it. In return, it has no say in what is bought or when it is sold, and its money is committed for years. For anyone who invests and does not manage, it is the right seat, as long as the agreement is read before signing.
Why the GP Carries the Liability, and How It Limits It
Delaware law draws the line. To anyone outside the partnership, a general partner “has the liabilities of a partner” in an ordinary partnership (6 Del. C. §17-403). Ordinary partners are liable jointly and severally for all of a partnership’s obligations, so a creditor can pursue any one of them for the full amount (§15-306). A limited partner is not liable for the partnership’s obligations unless it is also a general partner or takes part in control of the business. Even then, it is liable only to people who reasonably believed it was a general partner (§17-303).
The statute also lists what an LP can do without crossing that line. It can sit on a partnership committee, consult and advise the GP, and attend meetings. It can also vote on amendments, admissions, asset sales and dissolution. This is why a fund’s LP advisory committee can approve conflicts without its members becoming general partners.
In practice, the GP’s unlimited liability is contained. The general partner is almost always a limited liability company of its own, so the people behind it are not exposed. Or the partnership can elect to be a limited liability limited partnership (LLLP). Its general partners then get the liability shield of an LLP, and its name must say so (§17-214).
GP vs LP in Private Equity, VC and Real Estate: Who Earns What
GP vs LP in private equity, or PE, is the template for the others. The GP charges a management fee on committed or invested capital. ILPA, the association of institutional fund investors, found that fee steady at 1.5–2.0% a year in its 2021 survey. The GP also takes carried interest, its share of the profit, which was 20% in 71% of the funds sampled. LPs receive everything else, in the order the distribution waterfall sets. The GP also invests its own money alongside. ILPA asks that this commitment be “substantial” and paid in cash, and that a fee waiver not stand in for it (ILPA Principles 3.0).
- GP vs LP in VC
- The same seats on a longer clock. Venture GPs often run several overlapping funds. LPs wait longer for distributions, because portfolio companies take years to list or be sold.
- GP vs LP in real estate
- The GP is the sponsor who finds, finances and manages the property. LPs fund most of the equity. The GP’s profit share is usually called the “promote,” and it typically sits above a preferred return to LPs.
- GP vs LP in finance generally
- Any limited partnership works this way. One or more partners manage and carry liability. Others contribute capital and take limited liability. Funds are the familiar use, and there are others.
GP vs LP Funding: Who Provides the Money, and When
In a fund, LPs do not wire their money on day one. They sign a commitment, and the GP draws it down through capital calls as it finds investments, usually over several years. An LP that misses a call can lose part of its stake under the agreement’s default terms. Delaware law does not require the GP to contribute capital at all: a general partner can be admitted without one (§17-401). So its commitment depends on the agreement and on what LPs insist on.
Control over the money runs one way, with brakes. ILPA recommends that a super-majority of LPs, counted by the size of their interests, can remove the GP or dissolve the fund without cause. It also recommends that a simple majority can suspend the investment period, for example when a key person leaves. Whether a particular fund gives LPs those rights depends on its agreement. No statute grants them.
An LP’s protections are almost entirely contractual. The statute limits what you can lose, and the agreement decides what you can do.
GP vs LP vs LLP: Three Different Things
The letters overlap, but the structures differ. GP and LP are roles inside one limited partnership. An LLP is a different kind of entity altogether.
- General partnership
- Every partner manages, and every partner is jointly and severally liable for the partnership’s obligations (6 Del. C. §15-306(a)).
- Limited partnership (LP)
- At least one general partner who manages and is liable, and limited partners who are liable only to the extent of their capital.
- Limited liability partnership (LLP)
- A general partnership that has registered so that its obligations are “solely the obligation of the partnership.” No partner is personally liable for them (§15-306(c)). Law and accounting firms use this form.
- Limited liability limited partnership (LLLP)
- A limited partnership whose general partners also receive the LLP shield (§17-214).
The Same Two Seats in a Single-Deal SPV
A single-deal SPV, a vehicle set up to buy one company’s shares, divides the same roles. That holds whether it is formed as a limited partnership or as an LLC. In an LLC, the manager or managing member plays the GP’s part, and the members play the LPs’ part. On Axevil, each deal has one dedicated Delaware SPV managed by Axevil Capital, LLC. Investors hold interests in that vehicle, and the vehicle holds the company’s shares. Unlike in a fund, you see the company before you commit, and the money is usually paid in once. How the structure works is covered in SPV investing and what is an SPV.
How GPs and LPs Are Taxed
A partnership generally pays no US income tax itself. It passes its profit and loss through to the partners. Each partner reports its distributive share, its slice of the profit, from Schedule K-1, the tax form the partnership sends. The share is reported whether or not any cash was paid out (IRS Publication 541). The two seats differ in two places. A limited partner’s distributive share is excluded from self-employment income, apart from guaranteed payments for services (26 U.S.C. §1402(a)(13)). And the GP’s carried interest has its own holding-period rule, covered in the carried interest loophole.
General Information, Not Tax Advice
Who counts as a “limited partner” for self-employment tax has been contested in US courts. Partnership tax also depends heavily on your own facts and jurisdiction. Take your K-1 or local equivalent to a qualified adviser.
Common Mistakes About the Two Seats
- Assuming limited liability means limited lossIt caps what you owe beyond your commitment. You can still lose the whole commitment.
- Forgetting the uncalled commitmentIn a fund, you owe the full amount you signed for as it is called. What you have paid so far is only part of it.
- Expecting to exit when you likeAn LP interest usually needs the GP’s consent to transfer. Selling one is a negotiated secondary sale.
- Reading the GP’s fee without its commitmentA GP with little of its own money in the fund is aligned with LPs mainly through carry.
- Taking part in managementAn LP that goes beyond the statutory safe harbor risks being treated as a general partner by those who relied on it.
The Terms This Page Uses
- General partner (GP)
- The partner that manages a limited partnership and is liable for its obligations.
- Limited partner (LP)
- A partner that contributes capital, takes no part in management and is liable only up to its commitment.
- Limited partnership agreement (LPA)
- The contract that sets the fund’s terms: fees, carry, waterfall, voting, removal and transfer.
- Commitment
- The amount an LP agrees to invest, drawn down over time through capital calls.
- Management fee
- The GP’s annual fee for running the fund, charged whether or not it makes money.
- Carried interest
- The GP’s share of the fund’s profit, paid after LPs receive their capital and any hurdle.
- LP advisory committee
- A committee of LP representatives that reviews conflicts and certain decisions without taking part in management.
- LLLP
- A limited liability limited partnership: a limited partnership whose general partners also have limited liability.
- Schedule K-1
- The tax form a partnership sends each partner, showing that partner’s share of profit and loss.
Questions About GPs and LPs
Not through the partnership’s debts, as long as it stays out of control of the business. But it can lose its whole commitment, and it may still owe capital that has not been called. The agreement can also require it to return distributions to cover fund liabilities, up to a cap.
Yes. A GP usually invests its own commitment alongside the LPs and earns returns on it as they do, on top of its fee and carry. In Delaware, a person who is both is liable as a general partner.
The venture firm, through an entity formed for that fund. This is typically an LLC controlled by the firm’s partners. The firm’s management company usually receives the management fee, and the GP entity receives the carry.
The sponsor, who finds, finances and manages the property. LPs fund most of the equity. The sponsor’s profit share is usually called the “promote,” and it typically sits above a preferred return to LPs.
Only what the agreement gives them. That usually means votes on amendments, extensions, conflicts and, in many funds, removing the GP. Day-to-day investment decisions are the GP’s alone.
In substance, yes. You supply capital, and the manager runs the vehicle. If the SPV is an LLC, you are a member and the manager is the managing member. The division of control and liability is the same.
Where the Rules on This Page Come From
Rules and figures were last checked on October 1, 2026. Legal points are Delaware law and US federal tax. Other jurisdictions differ. Market figures come from ILPA’s published survey and describe funds in general. They do not describe any particular SPV.
- 01Delaware Code · Title 6, Ch. 17, Subch. IIICurrent statute§17-303 — limited partner liability and the safe-harbor list; §17-302 voting
- 02Delaware Code · Title 6, Ch. 17, Subch. IVCurrent statute§17-403 — general partner liabilities; §17-401 admission without contribution
- 03Delaware Code · Title 6, Ch. 17, Subch. IICurrent statute§17-214 — limited liability limited partnerships
- 04Delaware Code · Title 6, Ch. 15, Subch. IIICurrent statute§15-306 — joint and several liability; LLP exception
- 05Internal Revenue Service12.2025Publication 541, Partnerships — pass-through taxation and Schedule K-1
- 06Cornell LII · 26 U.S.C. §1402Current statute§1402(a)(13) — limited partner’s distributive share excluded from self-employment income
- 07Institutional Limited Partners Association2019ILPA Principles 3.0 — GP commitment in cash, removal and suspension thresholds
- 08Institutional Limited Partners Association10.2021What Is Market in Fund Terms? — management fees 1.5–2.0%, 20% carry in 71% of funds
This page explains how a market works. It is not investment advice, not a recommendation of any security, strategy or company, and not an offer to sell or a solicitation to buy anything. Private companies may never list or be acquired, positions in them can be illiquid for years, and the entire amount invested can be lost. Figures are accurate as of the dates shown and change. Requirements for investor status, and the tax treatment of a private holding, differ by jurisdiction — the jurisdiction is named wherever this page discusses either. Prepared by the AXEVIL Capital research team. Tax rules described here are United States federal rules unless another jurisdiction is named; they change every year and depend on your own facts. Nothing here is tax advice — take your documents to a qualified adviser.
What closed on the private market in the past two weeks
The rounds that priced, the tender offers that opened and the listings that filed — with the structure of each deal and the date on every figure. Written by the team that reads the paperwork.
Where to go from here
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Fund fees & metricsWhat Is Carried Interest? Definition, How It Works and ExamplesCarried interest is the share of profit a fund or SPV manager keeps, usually 20%, paid after investors get their money back. How it works, with an example.
Fund fees & metricsWhat Is a Distribution Waterfall? Definition, How It Works, ExamplesA distribution waterfall is the order in which a fund or SPV pays out money from a sale: capital back first, then a minimum return, then the manager’s share.
Private markets & secondariesSPV Investing: How Investing Through a Special Purpose Vehicle WorksSPV investing pools investors into one legal entity that buys shares of a single private company. The steps, how the vehicle is built and who runs it.