In some cases, all the partners of a limited partnership may be investors only and not managers. The partnership may hire an outside general manager (employee) to make the day-to-day decisions, and therefore, acts as the manager. In this case, the general manager is an employee of the business, but since they are not a partner (aka owner), their income is just like that of an employee in any business.
How You Get Paid as A Non-Partner General Manager or As General Partner of a Limited Partnership Is Different. Here Is What You Need to Know
A partner in a limited partnership that is a decision-maker (general partner) is considered an employee of the business by the IRS and is treated differently than limited partners. Income for general partners is considered earned income and is subject to additional taxes but also to additional potential tax deductions. Moreover, as a general partner, you are exposed to additional liabilities.