Limited Partnerships

Limited partnerships are less common but are often used as specialist investment vehicles.

Limited partnerships are formed under the Limited Partnerships Act 1907. In many ways, they are similar to general partnerships so there is a considerable overlap in the rules which apply. However, there are number of important exceptions.

As with a general partnership, a limited partnership must be formed between two or more people who carry on a business in common with the goal of making a profit. However, a limited partnership must be registered at Companies House in order to benefit from limited status.  

A limited partnership will have two different types of partners:

• At least one ‘general partner’ who has management responsibility and unlimited liability for the partnership’s debts and other obligations.
• At least one ‘limited partner’ who invests in the partnership but does not take an active role in its management. Their liability is limited to the amount of capital that they invested.

As with general partnerships, it is common to have a formal written agreement setting out the relationship between partners and how the partnership will operate. This agreement is private document and does not need to be filed at Companies House. In the absence of a written agreement (which would be particularly rare for limited partnerships as they are generally used for specialised purposes) there are default rules which apply to regulate the relationship between the partners.

A limited partnership in England and Wales doesn’t have a separate legal identity (this is different in Scotland). The partners owe each other the same duty of good faith as those in general partnerships.

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