A partnership provides an alternative vehicle to a company whilst offering limited liability to the owners, making them a great vehicle for holding assets or investments on behalf of a family as an alternative to a trust. They are usually transparent from a tax perspective and as such provide for a different type of planning to that of other vehicles available.
A Limited Partnership differs to that of a General Partnership in that it has at least one General Partner and at least one Limited Partner. The General Partner takes on the same role as in a General Partnership, managing the day to day operations with unlimited liability.
However, it is integral that a Limited Partner(s) whilst contributing financially to the business, does not play an active role in the business in order for them to benefit from restricted liability (based on the amount of capital they contribute) thus gaining some crucial protection in that they are not personally liable for any business debts. They can also be eligible to benefit from a tax perspective.
Limited partners need to understand that they can become personally liable if they do not stick to their passive role. At Sentient, we have extensive experience in setting up and managing Limited Partnerships on behalf of our clients and fully understand the role and responsibilities of the General Partner.