Since the introduction of limited companies and LLP’s, limited partnerships are a less popular type of business structure. LP’s are still incorporated as they provide a more formal structure than a general partnership.
A Limited Partnership must register with Companies House by filing the LP5 form. When the LP5 form is not completed you are trading as a general partnership.
Limited Partnerships consists of two types of partners, there must be at least one general partner and one limited partner. The partners can be corporate entities (UK or Non-UK companies) or physical people. A general partners liability is unlimited and they are responsible for running the day to day business of the partnership. A ‘limited partner’ contributes an amount of capital in the form of cash or property to the business. The liability of the limited partner is set at the value contributed. They will not have to pay any further amount to debts of the business, they will simply lose the amount invested. A limited partner must not handle the day to day running of the company if they wish for their liability to remain at a set amount.
Members sign a partnership agreement which acts as the governing document for the business. This sets out how the partnership will be managed and outlines anything from how to appoint a new member to how the partnership can be dissolved by the partners. It is recommended that you seek professional advice from a solicitor when drafting an agreement.
Depending on personal circumstances a Limited Partnership can be more tax efficient for some business owners. Rather than the partnership paying corporation tax like a limited company, tax is deducted from the profits each member receives. A Limited Partnership is not suitable for every business and you may benefit from registering a limited by shares company instead. We suggest seeking professional advice from a qualified accountancy firm if you are not sure which legal structure would suit your needs. Choosing the right business vehicle is an important decision.
Small Firms Services do not provide Limited partnership formation or address services. This guide has been provided as an overview of this particular business format. If you wish to register a Limited partnership you will need to contact Companies House.