WHAT IS A LIMITED PARTNERSHIP, AND HOW THE CONCEPT WORKS?
When we come across the term ‘Partnership’, it generally refers to a firm of two or more persons who carry out a business to generate profit. A partnership must have a minimum of two partners, which can generally go up to a maximum of 20 partners.
A Partnership is characterised by the unlimited liability of the partners when it comes to paying the debts and liabilities of the partnership firm. Most businesses that run to provide a professional service, like accountants, lawyers, or doctors, operate their business under a Partnership. But what is meant by a Limited Partnership, and what are the key considerations when forming one?
Let us now understand the features of a Limited Partnership.
What is Meant by a Limited Partnership?
A specialised form of Partnership allows the partners to establish a business entity with the flexibility of a general partnership while providing special rights and duties for the limited partners. Such Partnerships are formed under the Limited Partnerships Act 1907.
What are the Characteristics of a Limited Partnership?
Some of the differentiating characteristics of a Limited Partnership include the following:
- Number of partners – A Limited Partnership consists of at least one general partner and one limited partner. Therefore, the maximum number of partners in a Limited Partnership is generally 20. However, where it is a banking partnership, the limit restricts to 10 partners except for up to 50 partners in case of an investment and loan finance partnership.
- Limited Liability – It is essential to note that while a Limited Partnership protects limited liability for the limited partners, it does not have the status of a separate legal entity. It is also essential to consider that the limited partners must not be involved in the management affairs of the firm since having any such involvement will no longer protect their limited liability status, and they will be exposed to unlimited liability just as the general partners of the firm.
- Registration with the Companies Registration Office (CRO) – A Limited Partnership must be registered with the CRO and in pursuance of the 1907 Act. The application for registration of a Limited Partnership is filed on Form LP1, signed by both the general and the limited partners. Without such registration, the partnership will be considered a general partnership. In this case, any limited partners will be deemed general partners and, therefore, e will be liable for all the obligation obligations/debt partnership firm.
- Filing Requirements – A Limited Partnership avails certain relaxations from compliance relevant to filing information/documents to the CRO. These include exemption from filing with the Register of Beneficial Owners and, in some cases, the requirement to file accounts. However, any changes to the registered particulars must be notified to the CRO on Form LP2.
Are you looking to register your business as a Limited Partnership in Ireland or require more information? Feel free to contact our Support Agent today at 00353 1 4013286.