LP / LLP
Partnerships
- What it is
- Forms of partnership: LP — limited, LLP — limited liability
- LP
- There is a general partner with full liability and limited partners who are investors
- LLP
- All partners’ liability is limited; the form is popular with professional firms
- Taxes
- Often transparent: the partners are taxed, not the partnership itself
- An important nuance
- Tax transparency in one country does not guarantee the same treatment in another
In plain words
An LP (limited partnership) and an LLP (limited liability partnership) are two forms of partnership. In an LP there is a general partner who manages the business and bears full liability, and limited partners who contribute money and risk only up to their contribution. This structure is typical of investment funds.
In an LLP all partners have limited liability, while the partnership logic of management is retained. The form is popular with professional firms — legal, consulting, audit — where the partners run the business together but do not want to be liable with their personal property for their colleagues’ mistakes.
The tax feature of both forms is transparency: in many jurisdictions the partnership itself pays no tax, and income is allocated to and taxed on the partners. Hence the main practical risk: the country of your tax residence may look at the same structure differently. That is why the treatment is always checked on both sides, not only in the country of registration.
Where partnerships are found
How the forms differ
- The general partner manages
- Full liability rests with them
- Limited partners — a contribution
- Liability limited for everyone
- Partnership-style management
- Popular with professional firms
- Often transparent
- The partners are taxed
- The treatment depends on the country
- Treated differently in another country
- Reporting requirements
- Disclosure of partners
How to approach the choice
- 01Define the partners’ roles
- 02Check the tax treatment in both countries
- 03Fix the partnership agreement
- 04Register the structure
- 05Keep up the reporting
What you need to know
- In an LP the general partner is fully liable
- In an LLP all partners’ liability is limited
- A partnership is often transparent for tax
- Another country may treat the structure differently
- The partnership agreement is the key document
Common mistakes
- Assuming tax transparency is universal
- Not setting out a partner’s exit in the agreement
- Ignoring the general partner’s role in an LP
- Using the form without understanding the liability
- Not checking the treatment in your country of residence
What this means for a BRIDGES client
If your income comes through a partnership, it is a separate matter to check when relocating: countries view such structures differently. We raise this question in advance so that no unexpected obligations appear after the change of residence.
Frequently asked questions
01 /How does an LP differ from an LLP?
An LP has a general partner with full liability and limited partners who are investors. In an LLP all partners have limited liability.
02 /What does tax transparency mean?
The partnership itself pays no tax: income is allocated to the partners and taxed on them. But the treatment depends on the particular jurisdiction.
03 /Why can this become a problem?
Because another country may characterise the same structure differently and tax it under its own rules. The treatment is checked on both sides.
04 /Who is liable for debts in an LP?
The general partner — in full. Limited partners risk only up to their contribution, provided they do not take part in management.
05 /Why do professional firms use LLPs?
The partners run the business together but are not liable with their personal property for each other’s mistakes. It is a convenient structure for such firms.
06 /What must be set out in the agreement?
Roles and powers, profit distribution, decision-making, the entry and exit of partners, dispute resolution.
See also
Read next
This material has undergone editorial review by BRIDGES.
Income coming through a partnership?
We will check how your new country of residence will view it — before the move.