Limited partnerships governed by the Limited Partnerships Act 2008 are becoming a more and more popular structure for a variety of commercial and farming ventures in New Zealand, says Rainey Collins Associate Claire Tyler.
Writing in the latest issue of the New Zealand Law Society Property Law Section magazine The Property Lawyer, Mrs Tyler says limited partnerships give one partner (the general partner) the responsibility for the day-to-day running of the business or venture and the liability for the venture. A limited partner generally contributes financially, but does not have any liability for the venture (other than the initial capital it put in).
"Limited partnerships can be a viable option for many investors (including overseas investors) who do not want to be involved in the day-to-day running of a business or venture, but are able to contribute capital," she says.
A limited partnership is a legal entity which is registered with the Companies Office in the Limited Partnerships register. They operate in a similar way to a standard partnership, where generally partners each contribute towards the initial capital of the partnership, and share the profits and losses based on their contribution to the capital.
"However, unlike standard partnerships, they are registered entities (through the Companies Office) and are a separate legal entity on their own."
Mrs Tyler says there are some tax advantages of using a limited partnership, in particular that it is not taxed as a separate entity; the partners are instead taxed personally on any profits. She says clients should be encouraged to take tax advice when considering setting up a limited partnership.