Where two or more people want to go into business together but wish to avoid all the formalities and expense of a company, they would use a partnership structure. Professional advisors, such as lawyers and accountants, have traditionally used a partnership structure for their business. A partnership has less legislative governance than a company and can be more flexible in its treatments of the partners’ responsibility for liabilities and share of profits. Partners are also personally liable for any debts the business incurs.
One form of partnerships is where all the partners are “general” partners and participate in the management of the business. In this structure, the only restrictions on sharing profits and withdrawing capital are those agreed between the partners.
As well as general partnerships, the Partnership Law sets out the rules for “ordinary” limited partnerships. However, limited partners must not participate in the management of the business and a limited partner’s right to share in the profits or withdraw capital is restricted.
The Exempted Limited Partnership is another form of partnership which is specially designed to provide more flexibility to suit the needs of the financial industry in Cayman. The Cayman Islands Exempted Limited Partnership Law was enacted on July 2, 2014.
It introduces changes intended to simplify, clarify and add flexibility to the establishment and ongoing operation of Cayman-exempted limited partnerships. In all cases, you are advised to contact a specialist to determine the partnership arrangement most suitable for your needs.
In addition to the Exempted Limited Partnership as another innovation, in 2017 the Cayman Islands passed legislation for the introduction of Limited Liability Partnerships (LLP), which is expected to commence in late or early 2018. The LLP is a partnership with a separate legal personality and limited liability for its partners and it is intended as an alternative to ordinary limited partnerships. It is generally the LLP, rather than an individual partner, who is liable for the debts. Moreover, members enjoy limited liability and there are no joint liabilities for acts or omissions of another partner, excepting where there is negligence by the partner. The LLP is designed for the conduct of business domestically, as well as for business overseas. It is anticipated that the LLP will be an attractive vehicle to overseas companies in a variety of international financial service transactions.