The general partner(s), also called managing partners, have management control, the right to use firm assets, share in the partnershipâ€™s profits and have joint and personal liability for all firm liabilities. The general partners shall have the authority to act as agents and bind the partnership in the normal course of business. The implied authority of a managing partner empowers him/her to carry out the following acts:
In the name of the firm, he/she can purchase, sell and pledge goods.
Obtain loans for the safety of such assets.
On behalf of the firm, he/she can receive debt payments.
The partner can accept, issue exchange loans, pledge notes, and other financial dealings on behalf of the firm.
On behalf of the firm, the partner can lease premises and appoint employees.
The partner does not have implied authority on the following matters:
Entering into partnerships with others in the name of the company.
Sale or transfer of fixed property belonging to the company.
Acquiring or purchasing immovable property on the firmâ€™s behalf.
To open a bank account in his/her name, for the company.
Withdrawal of a claim or procedure file in the name of the firm.
Cancel or waive any claim or part of a claim made by a company.
In such matters, the expressed authority should be given to the partner in the partnership deed.
Liability for Partnership Debts
If one of the business partners operates within their perceived or actual authority, then all partners are legally bounded by the conditions agreed upon with that partner. However, certain restrictions apply. Under the following circumstances, obvious authority is not binding on the enterprise:
The partner has no real authority, and the third party does not believe they are partners.
The third party knows that the partner making the agreement has no real authority.
Partners have a personal responsibility for corporate business obligations, inferring that in case the partnership cannot repay the lenders or the business fails, the partners are singly responsible for each debt repayment. Their assets such as bank accounts, cars, and even homes can be tracked by the lenders. However, in the case of a limited partner, the debt is limited to their investment.
Authority of a Limited Partner
Limited partners have finite authority, meaning they are only responsible for debts to the extent of their investment in the firm, and they owe no personal debt to third parties. To maintain this protection, limited partners should not have the authority to manage or make decisions related to the day-to-day operation of the partnership. Suppose the limited partner takes over the business of the company. In that case, the limited partner will be solely responsible to any third party who genuinely believes that the limited partners are regular partners.