Registration of partnerships (LLP/LP): which countries are still relevant?

Today, it is quite common to find information that such organizational and legal forms as LLP and LP (partnerships) have lost their relevance in connection with the problems of conducting business through them due to the impossibility of opening a current bank account, the openness of data on final beneficial owners of partnerships, etc.

In this article, we will try to understand whether the registration of partnerships remains relevant as of 2024, what are their features, whether the problems that are usually outlined as disadvantages of conducting business through LP/LLP really exist, and we will also analyze possible ways of solving those issues that prevent business owners from using partnerships while doing business.

Difference between LP and LLP

LP is a limited partnership that is not considered a separate legal entity and operates on the basis of the Partnership Agreement. LP activities are governed by the Limited Partnerships Act 1907, Partnership Act 1890.

LP is created from at least two partners: managing and limited. At the same time, the Managing partner is responsible for the obligations of the enterprise, while the responsibility of the limited is determined by the size of his contribution to the partnership. In addition, in an LP, only the Managing Partner is authorized to manage the partnership, while a limited partner cannot manage the business, sign documents on behalf of the company, and has no right to withdraw his contribution until the LP is terminated.

Unlike an LP, a Limited Liability Partnership (LLP) can involve all partners. In addition, a feature of LLP is that this type of legal entity regulates limited liability for its members; is taxed as a partnership and has appropriate organizational flexibility.

The main myths about partnerships

• Unable to open a corporate account

It is obvious that any company, including a partnership, needs an open bank account or an account in the payment system to carry out business activities. Indeed, some banks have introduced several restrictions for LP/LLPs, which make it impossible to open a current account, following the introduced KYC, CRS and AML standards.

However, the statement that it is impossible for partnerships to open an account either in a bank or in a payment system is false. As a rule, refusals to open a partnership account are due to the failure to submit the entire package of corporate documents, which is more complicated compared to a regular LTD. This is, for example, the Partnership Agreement, which, as a rule, should contain information about the roles of each of the partners and their percentage ratios, the business plan of the partnership, identification documents for all partners, and not only for the final beneficiaries, etc.

At the same time, a significant number of banking institutions offer the option of opening a current account for a partnership for the purpose of carrying out business activities on the condition that the entire package of corporate documents is provided to the company. You can contact us for the possibility of selecting banks or payment systems for your partnership, which is carried out by us considering a number of factors: type of business, turnover of the partnership, countries for incoming and outgoing payments, etc.

• Public data on the company’s beneficiaries

This myth is partially true. Thus, previously information about the ownership structure of partnerships was not publicly available. In this regard, they were often used as offshore structures.

There are currently beneficial ownership disclosure requirements for English LLPs and Scottish LPs. However, English LPs are still not subject to the obligation to report beneficial owners to Companies House. Thus, the specified information is unavailable to an unlimited number of persons.

However, recognizing the specified “data publicity on beneficiaries” in relation to most partnerships as a negative factor does not seem justified now, since in view of the introduction of CRS information exchange, in any case, the indicated information will be known to the supervisory authorities of the respective countries. Therefore, the use of partnerships as offshore structures in 2024 does not seem entirely justified and appropriate.

Why do you need to create partnerships?

LLPs are mainly created to carry out professional activities: providing legal, accounting, medical services. The LLP business organization structure allows each partner to have limited liability both from third parties and from other partners. Basically, this feature of an LLP seems to be useful in case of the possibility of filing lawsuits, because in an LLP, other partners and the legal entity itself will not be responsible for the actions of an individual partner, which is decisive during the provision of legal and medical services, in those areas where the risk of making mistakes due to negligence is more than in other types of business.

Another defining feature of an LLP is the option of appointing senior, junior partners, that is, such a business structure that allows for continuous professional development for members of the legal entity.

As for LPs, this form of business is most popular for hedge funds and real estate investment trusts who, by creating LPs, want to protect their investors from the financial consequences of a failed venture.

Options for partnership registration countries

Please note that the organizational and legal form of partnership is quite widespread throughout the world. The choice of country for the incorporation of a partnership depends on several factors: geographical presence, location of counterparties, ease of doing business in the country of registration of the partnership.

We offer to register a partnership in the two most common jurisdictions for the functioning of partnerships: Great Britain and Canada . If you need to choose the best option for doing business, choose a jurisdiction based on your needs and requests, provide information on the specifics of doing business in a specific country, or open an account for partnership, contact the lawyers of Bcorp. We will analyze your case, provide our recommendations and help you in opening a partnership and its further maintenance.