According to the Limited Partnerships Act 1907, A Limited Partnership (LP) is defined as a business partnership of “one or more general partners together with one or more ‘limited partners’”.
The General Partners, in all major respects, are in the same legal position as partners in a conventional firm: they have management control, share the right to use partnership property, profits as well as have joint liability for debts. They tend to assume more risk than limited partners.
Limited partners tend to contribute financially into the business and have limited liability. They are occasionally described to as ‘silent partners’. They are not liable for company debts, and they have no control over the management of the business. (unless they obligate themselves by a separate contract such as a guarantee)
Who Would Form a Limited Partnership?
LPs are not very common in the UK; however, it is mostly used by:
- Accounting firms
- Law Firms
- Finance Companies
It is also used by businesses that run projects that are time sensitive, such as:
- Film production
- Real estate businesses.
Who can be a member?
- A member can be an individual or corporate body.
- There should be at least 1 general partner and 1 limited partner. The same person cannot assume both positions.
How to set up a Limited Partnership?
- One has to fill out a LP5 Form
What is the difference between a LP and LLP?
With an LLP, members have limited liability for the business. In a Limited Partnership, only the limited partners are not liable for any losses the company may incur. They are only liable for ‘monies’ invested into the company; however, the General Partners are personally liable for any business debts or losses.
Limited Partnership must inform Companies House of any changes. These include:
- Details of Partners (new partners, name change)
- Amount contributed by the Limited Partner
- Liability of Partners
- Registered Name
- Registered Address