Global Business & Taxation

Limited Partnerships

The Limited Partnership Act 2012 provides a legal structure, under which high net worth individuals and institutions are able to invest funds as limited partners, leaving the deployment and management of those funds to the general partners. Such an arrangement is useful to those investors who seek to avoid the hassle of managing business operations, whilst at the same time being mainly concerned with the return on their investment.

A limited partnership blends the advantages of a partnership with those of a limited company. It gives its owners the flexibility of operating as a partnership, while also having the option of existing as separate legal persons. This type of entity is, therefore, also highly suitable for individuals engaged in professional services such as lawyers, architects, accountants and management consultants.

The limited partnership may also be a useful vehicle for investors who do not wish to take an active role in the management of the entity, in the case of equity funds for instance limited partnerships (as the name suggests) have the ability to limit both the liability risk and the business involvement of certain partners known as “limited partners.” This feature is particularly useful for attracting investment partners who would like to participate in the profits of the company but not necessarily its risks or daily operations.

The principal attraction of the limited partnership for the partners is its tax transparency. Profits and losses are attributed to the partners themselves who will be taxed according to their proportionate share of such profits and losses.

The LP holding a GBL 1 may elect to be taxed as a company, in which case it will be liable to tax at the maximum effective rate of 3% on its foreign sourced income.