Sponsor, General Partner, and Manager (GP)

Definition

The party that organizes a deal, controls the investing entity as general partner or managing member, and is paid through fees and a promote in addition to returns on its own invested capital; each of these payments draws on project cash. Gains on a profits interest the sponsor holds in connection with substantial investment services are short-term capital gain unless held more than three years^[1].

Federal law

Formed under state law. No Act of Congress creates it; the federal laws below apply to it as described.

1. Tax Cuts and Jobs Act (popular name), Pub. L. 115-97, § 13309, 131 Stat. 2130. Governs tax treatment of a sponsor's profits interest held in connection with investment services (26 U.S.C. § 1061). Official text: govinfo.gov, U.S. Government Publishing Office.