Over time, the use of the English Limited Partnership (‘English LP’) has evolved. Although the legislation under which English LPs are registered is over 100 years old (Limited Partnership Act 1907), they can typically be utilised for modern purposes such as real estate holding, wealth management and other investment holding vehicles.
Roles of the General and Limited Partners
An English LP must undertake business with a view of making profit and be formed between two or more parties. The English LP must have at least one General Partner and one Limited Partner.
The General Partner holds the responsibility for the day to day management and running of the LP’s business, and has unlimited liability for the LP’s its debts and obligations.
The Limited Partner invests capital into the English LP but does not take an active role in the management of the entity. The Limited Partner has limited liability in the English LP up to the value of the amount of capital contributed by the Limited Partner.
Registration of an English LP
To register an English LP, a form LP5 must be submitted to Companies House with the approval / signature of all Partners.
The LP5 must include:
- The proposed name of the English LP
- General nature of business
- Principal place of business
- Full name of the general partner(s)
- Full name of the limited partner(s)
- Term of partnership (if any)
- Sum contributed by each limited partner and if the contributed has been paid in cash or otherwise
Key Features and Benefits of the English LP
There are a wide range of benefits in utilising English LPs:
1. Limited Liability for the Limited Partner: The Limited Partner can benefit from receiving profits in the English LP whilst also benefitting from limited liability on their investment.
2. Use of Corporate General Partners: Although General Partners have unlimited liability, corporate partners are permitted. Therefore, if correctly structured, they can protect themselves from unlimited liability.
3. Fiscal Transparency: The English LP is fiscally transparent, meaning that all income, profits and losses flow through to the Partners.
4. Filing Requirements: English LPs which are not defined as ‘qualifying partnerships’ are required to prepare its accounts under the Partnership (Accounts) Regulations 2008 (SI 2008/569) in order to demonstrate its financial positions and to assist with the preparation of the Partnership tax return. English LPs, which is not a separately legal entity, are not currently required to file a confirmation statement or maintain a person(s) of significant control register for inspection to the public.
5. Privacy of the Limited Partnership Agreement: The English LP may have a written Limited Partnership Agreement between the general partner(s) and the limited partner(s). If the English LP has been registered for a specific purpose, the clauses of the agreement may be tailored depending on that purpose. The partnership agreement might also state the rights and obligations of the partners including the capital contributions and profit sharing ratios. The English LP benefits from maintaining the limited partnership agreement as a private document which does not need to be filed or disclosed with Companies House.
Please note that this commentary does not purport to be a comprehensive review of the tax implications of English LP and does not cover private fund limited partnerships nor authorised partnerships. Detailed appropriate advice should be taken regarding all parties before considering this solution.