Do you want to know what is a simple limited partnership because you are starting a new business and you need to know the different legal structures and you think that this may be a good option.
But before making a decision, you should read below what it is about and what its characteristics are.
What is a simple limited partnership
- With a personalistic character, the simple limited partnership It is made up of general partners and limited partners. While the general partners commit to the contribution of work, the limited partners are those who contribute the capital to the company.
- The legal form allows that it does not need a minimum contribution and, on the other hand, the general partners who are the ones who contribute work to the company have the right to participate in the benefits.
- Although it is a type of beneficial partnership, in the case of limited partners they lack the right to vote and limited partners lack administrative and management rights.
- It is also a type of company that requires compliance with a series of requirements and procedures but is inexpensive and easy to set up.
- Its existence is based on a company name that includes the abbreviation S. en C, Sociedad en Comandita or S Com.
- The limited partners are liable for the debts of the company jointly, indefinitely and subsidiary. In the case of cessation of payment, they respond personally and individually.
- Limited partners do not have indefinite or joint liability for the obligations of the company, since their liability is limited by the value of the contributions they have made.
- It is an obligation that the bylaws of the company show the amount of the contributions of the partners individually and globally based on the settlement bonds and the distribution of benefits.
Simple limited partnership characteristics
Turn the simple limited partnership It has several features such as:
- They are companies that can be created easily and are also inexpensive.
- It is an association that requires a prior agreement to settle the property, how the benefits are distributed and what is the managerial responsibility.
- It is managed from a manager who has unlimited liability and who has the support of limited partners.
- The partnership can have the name of a managing partner or more managing partners or a special name without it being the name of a limited partner.
- It is a company without shareholders.
- Each of the limited partners is entitled to a percentage of the company’s income.
- The managing partner is responsible for the total assets and liabilities of the company.
- The managing partner functions as the project operation manager.
- The limited partner as an investor is the one who contributes the money to the partnership and receives a return on the income caused by the completed project. He is a passive investor.
- It requires the publication of general financial information but not of financial reports.
- Nor does it require the filing of the company’s tax return because it is each partner who pays personal taxes.
- It can only be dedicated to industrial or commercial activities.
- The retirement of one of its partners or a death puts an end to the partnership.
Example of a simple limited partnership
- A practical example of a simple limited partnership is a shopping center or a housing complex.
- Assuming that partner A, B and C open a business called by Three Partners S. in C. They agreed that A and B are the limited partners because they are the ones who contribute capital and therefore are the investors and establish the store with an amount of $ 100,000.
Partner C is the expert in the field so they agreed that he would be the managing partner and director of the store. Contribute $ 50,000.
Over time, the store begins to lose customers due to competition, therefore when the income is reduced, the arrears in payments begin and in total the store has a debt of $ 150,000 in addition to receiving demands for its collection.
Creditors can appear before any of the partners to request payment of the debt, but A and B as they are limited partners have no responsibility beyond the amount of money they invested.
C is the managing partner and his personal liability is unlimited for the debts. Although he only contributed $ 50,000, he can be sued for the total debt.
Creditors can collect from partner A and B. And partner C, being individually and personally liable, must face the remaining value that he will face with his personal assets either with his house, his car and ultimately from the seizure of the assets personal will pay the debt to creditors.
It is constituted as follows before a public notary or the commercial public registry:
Objective: Constitution of a limited partnership
Company name: The name S. en C.
Capital: total amount of invested capital
In the city of … on the … day of the month of … of (year) before me, a notary public appear: all the names and surnames of the partners, who identify themselves with an identity document :, who claim to be of legal age.
The general partners are: Name and surname of the managers or general partners, who are identified with an identity document:
The capital is contributed in the following proportion:….
Name of the partner together with the capital contributed.
The limited partners are entitled to a monthly remuneration set at a percentage of… on the share capital.
The balance sheet, inventory and income statement will be made on the day… of the…. of all years subject to the corresponding approval of all partners within a maximum period of… days from the close of the financial year.
Then clauses are added on the possible death of one of the partners, on the dissolution of the company, possible divergence of the partners and the issues that are settled by judicial means in the courts….