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Limited partnership: Definition, operation, requirements and more 

What is a limited partnership?

This type of partnership, also known as a limited partnership, is primarily characterized by the fact that there can be two types of partners. On the one hand there are the general partners and on the other hand there are the limited partners, where the main point of difference has to do with the type of responsibility they have. Thus, if two people decide to create a company together, they adopt the legal power.

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The limited partnership is a type of personalist society and its mode of operation is very similar to the partnership. This type of partnership is often used for those who wish to consolidate a company with a small number of partners, but in this sense, formulate a project that aims at a commercial activity jointly, as is the case with law firms with few members.

Characteristics of a limited partnership

A limited partnership must have a corporate name or denomination, which in many cases includes the first or last name of one of the partners or those who are part of the partnership. The corresponding abbreviation must be added to this. Let’s see more characteristics of this type of society:

Social capital: this modality does not have a minimum capital required, so it can be started with a free value. The capital will be divided into interest shares and interest shares can be assigned through a public deed, a process that must be assessed by all the general partners. However, if it is a limited partner who wants to assign part of it, the decision must be approved by all the other limited partners.

Partners: as mentioned, in this type of partnership there are two types of partners, the general partners and the limited partners, who are governed by the rules of the partnership and the statutes established jointly. In this case, the partnership cannot have more than 25 limited partners and requires that at least two of them be subscribed to.

Liability of a company with a limited partnership: it is the liability that determines the functions and shares of the types of partners within the limited partnership. Thus, general partners have unlimited liability, subject to joint and several liability, while limited partners have limited liability, which is established according to the contribution made to the company’s capital.

Limited partnership by shares: in this case, the share capital is divided according to the shares represented in the securities and having the same value. Thus, in the event of the company’s dissolution, the reason for this may be related to losses, which may reduce the company’s assets, which would have an effect if less than 50% of the total assigned share capital is reached.

Organization of the limited partnership: firstly, its form of organization is mainly adjusted to the management of the general partners, who are in charge of the organization of the partnership or of the persons assigned to it.

Requirements: it is necessary to have a deed of incorporation, mainly, which includes general and fundamental data of the company, among them we find the name of the company, as well as the complete data of the partners, the domicile of the company, names of those who are part of the set of administrative procedures, the estimated duration of the company, the amount of people integrated to the company, the agreements established for the partners, the particular cats and finally, the capital that each one of the partners contributes.

What is a limited partnership

Steps to create a limited partnership

However, in order to set up a limited partnership, it is necessary to have a deed of incorporation that clearly includes the above-mentioned aspects. It is recommended that you seek the advice of an expert in the field, who may be a lawyer.

In the case of the limited partnership, the administration will be carried out by the general partners, while inspection functions will be performed by the limited partners. The general partners, also known as managing partners, will apply the rules within the partnership, and the limited partners will apply the rules within the limited partnership.

Articles of Association: in addition to the information contained in the documents for incorporation, such as the name and address of the company, among others, there are the articles of association, which must include the operation and work of the partners, since in this case they cannot participate in the management of the partnership unless they’re general partners.

Public deed: as mentioned, it must include all the general details of the company as a business, from the company name, to the corporate purpose or activity to be carried out, the names of the general partners or managers, as well as those of the limited partners, the initial share capital, the statutes and agreements created for its management, as well as other particular details according to the type of company and its objectives.

Advantages of a limited partnership

Although the general partners have a higher risk factor when forming a limited partnership, they have the free right to be part of the administrative organization of the same partnership. In this sense, they can participate within the management of the company and have the right to receive information about the status of the company, data that they can request at any time and that in no way will be denied, they can even participate within the social profits of the company.

Another aspect that must be highlighted of this type of society is that it does not establish a specific amount to be able to constitute it, where the partners are free to choose and to contribute as much as they consider to conform the social capital. It is possible that with this modality, the company can gather a greater amount of capital, this is due to the fact that it facilitates the entrance of capital of the limited partners and they do not intervene within the management of the company.

It is possible to determine the liabilities for debts and obligations of the company according to the type of partner in which it is classified and there is no maximum number of partners that must be present.

To start with the process of setting up your company, we recommend you have the support of an expert in the area, especially if you have no knowledge of these processes. Also, consult with the corresponding entities to start the process and find out about the steps you must take to begin with the incorporation of the city.