Net Lawman summary of provisions
(Taken in part from the Registrar of Companies, copyright acknowledged)
What is it?
A limited partnership consists of one or more persons called general partners, who are liable for all debts and obligations of the firm; and one or more persons called limited partners, who contribute a sum or sums of money as capital, or property valued at a stated amount. Limited partners are not liable for the debts and obligations of the firm beyond the amount contributed. Beyond that, a limited partnership operates in the same way as any other "traditional" partnership.
A limited partnership is not a legal "person". It cannot contract or sue or be sued or hold property. It operates within precisely the same legal framework as a conventional partnership. A limited partnership is not the same as a limited liability partnership, regulated by the Limited Liability Partnerships Act 2000.
How do I create one?
You cannot create a limited partnership otherwise than by complying with the Act. Having said that, it is very easy to create a limited partnership - almost as easy as an ordinary partnership.
Do you need a partnership agreement?
Yes. There is no legal obligation to have a formal written document, but an agreement is essential to set out the responsibilities of the partners. If there is no agreement, or the agreement is silent on an important point, then the formal default provisions of the Partnership Act 1890 apply. That is decidedly to be avoided. The Net Lawman agreement is here.
How is a limited partner different?
The (one or more) limited partner is not liable to any third party beyond his contribution to capital, provided the partnership has been properly registered. Limited partners may not draw out or receive back any part of their contribution to the partnership during its lifetime or take part in the management of the business or have power to bind the firm. If they do, they become liable for all the debts and obligations of the firm up to the amount drawn out or received back or incurred while taking part in the management, as the case may be.
Who can be a partner?
Generally speaking, an individual or a legal body such as a company may be a partner in a limited partnership, either as a general or as a limited partner. A person cannot be both a general and a limited partner at the same time.
Are partners employees?
No. They are just partners. Money earned in the partnership business is taxed in accordance with the rules for taxation of partnerships.
Must limited partnerships register?
Yes. Until your partnership is registered, it will be regarded as a general partnership with both the general and limited partners equally responsible for any debts and obligations incurred. It is usual to register immediately the partnership agreement has been signed.
How do I register my limited partnership?
A limited partnership must be registered under the Limited Partnership Act 1907. To register, you must deliver a statement (Form LP5), signed by all the partners, to:
The Registrar of Companies
Crown Way,
Cardiff,
CF14 3UZ
Tel: 0870 3333636.
The form is FREE from Net Lawman when you buy our PTN301 Limited Partnership Agreement.
Can I choose any name?
No. Because a limited partnership is a registered animal, the name must be acceptable to the Registrar. Broadly speaking this means that you should avoid any name that may be confusing or misleading. As a matter of prudence, you should of course also avoid any name which is the same or similar to any other trade name. You can learn about names at the Net Lawman advice page here. Links to http://www.netlawman.co.uk/fan/business-names.php. You can check limited company names here Links to: http://www.companieshouse.gov.uk/info/ This link must be in a new window, so that user is back with NL when window closed.
Can an oversea limited partnership register?
Not usually. The Limited Partnership Act requires partnerships to register in that part of the United Kingdom where their principal place of business is situated or is proposed to be situated. An oversea partnership usually has its principal place of business overseas, and would not be registered for that reason.
Is there a limit on the number of partners?
A limited partnership may not normally consist of more than 20 persons. However, under section 717 of the Companies Act 1985 there are a number of exceptions to this rule. They relate almost exclusively to professional partnerships.
Do I have to publish any details of the partnership?
There are no special provisions relating to your limited partnership. You need publish only the information required by Form LP6.
What if some of my partnership details change?
If any alteration is made to any of the details previously registered, the Registrar must be notified of the change on Form LP6 within seven days.
Can a limited partnership be dissolved?
Yes. In the event of the dissolution of a limited partnership, the general partners must wind up its affairs unless the court orders otherwise. Subject to any agreement between the partners, a limited partner is not entitled to dissolve the partnership by notice, and the other partners are not entitled to dissolve the partnership merely by reason of any limited partner suffering his share to be charged for his separate debt.
The death or bankruptcy of a limited partner is not a ground for dissolution. The fact that a limited partner is a 'person of unsound mind' is not a ground for dissolution of the partnership by a court, unless the person's share in the partnership cannot be otherwise ascertained and realised.
Who is responsible for registration at Companies House?
The general partners are responsible for the delivery of Forms LP5 and LP6 (whether or not the preparation of the documents was delegated to accountants or to anyone else).
The Limited Partnership Act 1907 provides for the imposition of penalties for various defaults in carrying out the requirements of the Acts and for failing to send to the Registrar the required forms.
Can the status of partners be switched between general and limited partners?
Yes, but it would be unusual for circumstances to require such a change. Furthermore, anti fraud measures require that notice of any arrangement or transaction under which a general partner will become a limited partner in the firm must be advertised in the London, Edinburgh or Belfast Gazette, as the case may be. Notice must also be advertised in the Gazette of any arrangement or transaction under which a limited partner's share in the firm will be assigned to somebody else. Until this is done these arrangements or transactions have no effect.
Transactions with third parties
The law of "ostensible authority" applies to partner transactions. Every partner is an agent of the limited partnership. The limited partnership is bound by every contract made by any partner, unless first, the partner had no authority to make the contract and second, the third party was aware of that fact. The limited partnership is bound even by contracts by former partners, unless the other party has been told that the former partner is no longer a member, or the registrar has received a notice to that effect. When to use a limited partnership
We do not know why limited partnerships have not been used more widely. They provide a simple shelter against liability for one partner. Consider this scenario:
In a limited partnership between Anna Coombs, Mohammed Pervaiz and Pervaiz Oil Ltd, only Pervaiz Oil Ltd is a general partner. The two individuals are limited partners. The partnership engages in oil exploration and incurs liabilities it cannot meet. Only the general partner is liable. It may have no assets. The estates of the two general partners are safe.
To preserve the limited liability status, neither Anna nor Mohammed may take any part in the management of the partnership. In a personal capacity, neither of them does so. However, Mohammed is a director of Pervaiz Oil, the general partner, so he is exceedingly well informed with regard to the business of the limited partnership.
The shares in which profits are divided may be changed from time to time, to suit the taxation obligations of the partners.
Profits are attributable to the partners because there is no corporate entity. Capital losses can be set against capital gains elsewhere.
There is no reason why there should not be a far larger number (up to 20) of partners, divided among general and limited partners as they decide. A limited partnership may therefore be a suitable vehicle for one or more partners to manage a project into which others have contributed money, as for example a property development project. Comparison with limited liability partnership
The business areas where the use of a limited partnership might be beneficial are similar to those where you may also consider a limited liability partnership. In choosing between a limited partnership and a limited liability partnership, you should consider:
- Do you want the corporate structure of an limited liability partnership or the partnership structure of a limited partnership?
- Which method best suits the tax requirements of the proposed partners?
- Will one form or the other affect the ability of the partnership to borrow money?
- In a limited partnership the limited partners are wholly excluded from management - or they risk losing their limited status. Despite the fact that in practice it may be very difficult for any creditor to prove that a limited partner had ever interfered in management, this is a substantial disadvantage as against a limited liability partnership, where all partners have the same status for the application of limited liability.
- In a limited partnership, some party is always liable down to his last penny (even if that person is a limited company. In a limited liability partnership, no partner is liable beyond the extent of cash he has contributed.
- In a limited partnership, the limited partners may take no part in the management, or they risk losing their limited status. In a limited liability partnership, all partners may take part in management - though in practice, most limited liability partnerships are formed in circumstances where one or more partners do control the business to the exclusion of others.
If you are interested in trading through a limited partnership, Net Lawman can not only provide the documentation, but also advise on structure and many other aspects. | 
