Partnerships

Limited Partnerships

Under the Limited Partnerships Act 1907 a limited partnership must consist of the following:

  • One or more persons called general partners, who are liable for all debts and obligations of the firm to the full extent of their wealth (unlimited liability).
  • One or more persons called limited partners, who, upon consideration of partnership debts, are liable only up to the amount of their initial capital investment.

Limited partners must comply with the restrictions governing them, which include not being involved in the general management of the business, and not being able to dispose of or withdraw their shares. If at any point a limited partner withdraws or is paid back part of his investment, he becomes liable for all the debts and obligations of the firm, and effectively becomes a general partner with unlimited liability.