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.
A partnership is formed where two or more persons wish to carry on business in common for any lawful purpose, with or without other terms, and that business shall be carried on as a partnership.
One form of partnership 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 and each partner will be personally liable for the debts and obligations of the business.
The Cayman Islands also has structures for limiting the liability of its partners through Limited Liability Partnerships (LLP). The LLP is a partnership with a separate legal personality and limited liability for its partners regarding the debts and obligations of the LLP subject to The Limited Liability Partnership Act. It is intended as an alternative to ’general’ partnerships. The LLP is considered an attractive vehicle to professional services firms that have traditionally taken the form of ‘general’ partnerships since it is designed for the conduct of business domestically, as well as for business overseas.
The Exempted Limited Partnership (ELP) is another form of partnership specially designed to provide more flexibility to suit the needs of the financial industry in the Cayman Islands, and is typically used for carrying on business outside of the Cayman Islands. Limited partners must not participate in the management of the business to protect their limited liability status, and a limited partner’s right to share in the profits or withdraw capital is restricted by the terms of the exempted limited partnership agreement and the Exempted Limited Partnership Act. An ELP is controlled by a general partner (subject to any reserved powers of the limited partners) who can either be an individual or corporate and it is the general partner that has unlimited liability for the debts and obligations of the ELP. In all cases, you are advised to contact a specialist to determine the partnership arrangement most suitable for your needs.
