Broadly speaking there are two varieties of partnerships: general partnerships and limited partnerships.
A general partnership is an arrangement where the parties agree to cooperate to advance their mutual interests. The general partners face unlimited liability for the debts and obligations of the partnership. The partnership is established by mutual agreement which is usually put into writing. General partnerships do not have to be registered in the BVI.
BVI Limited partnerships
A limited partnership is an arrangement where the general partner or partners run the affairs of the partnership. They face unlimited liability. The limited partners participate in the income and profits of the partnership but have limited liability. Limited partners are passive in that they do not participate in the management of the partnership.
Limited partnerships are governed by the Limited Partnership Act 2017. There must be at least one general partner and one limited partner. The general partner may be a corporation. The partnership is formed by filing an application with the Registrar of Limited Partnerships. The limited partnership must have a registered agent. A limited partnership must have a written limited partnership agreement. In the absence of one, a “default” statutory model agreement will be deemed to have been adopted at formation. Although a limited partnership agreement is needed, it is not filed with the registrar. It is held by the registered agent for the limited partnership and is not open to the public.
Limited partners cannot participate in the management of the limited partnership or risk losing their limited liability protection. The legislation sets out a number of activities that limited partners may undertake in relation to the partnership without sacrificing their limited liability protection.
BVI Tax Treatment
One of the main advantages of operating through a BVI limited partnerships, rather than a company, relates to the peculiar tax treatment of partners. The BVI offers a tax exemption for non-BVI limited partners, the partners are not taxed at all. As limited partners, they enjoy the further advantage of their limited liability.
Uses of Limited Partnerships as Mutual Funds
Limited Partnerships are attractive vehicles for use as mutual funds or other arrangements traditionally housed in a corporate structure. There are no company law rules governing matters such as maintenance and return of capital, meetings, dividends, and duties of directors, and these rules can be established in the Articles of the Limited Partnership.
If a limited partnership is used to be a mutual fund, the appropriate registrations under the Securities and Investment Business Act 2010 as amended (“SIBA”) will be required. Please refer to our discussion of Mutual Funds to learn what is involved in establishing a mutual fund.
What Coverdale can do for you
Coverdale provides incorporation and maintenance services in relation to general and limited partnerships, as well as the International Business Companies (and its successor, the BVI Business Company), which can be used as the corporate entity to act as the general partner of the member partners. We are also able to provide all registered agent and registered office services for all forms of partnerships, as well as full administration services, including banking and accounting services.
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