A limited partnership is more flexible than a normal partnership, in that it has two types of partners – ‘general partners’ and ‘limited partners’ whose duties and liabilities vary.
General partners are responsible for the day to day management of the limited partnership and their liability for its debt is unlimited. There must be at least one and up to 20 general partners in a limited partnership.
Limited partners play no role in managing the limited partnership and their liability for its debts is limited to the amount of money contributed to that partnership, as recorded in the Register maintained by NSW Fair Trading. The upper number of limited partners for a limited partnership is not restricted, but there must be at least one such partner per partnership.
A person may be admitted as a partner of the limited partnership without the need to obtain consent of any other limited partner (s.69 of PA).
Raising funds with a limited partnership is more flexible. The limited partners can contribute funds for the operation of the partnership in return for a share of its profits, without having to be involved with the running of this partnership. In effect, they are ‘passive’ investors in the limited partnership.
Limited partnerships can be used in most businesses needing to raise capital and where the additional formalities and complexities of a company registered under the Corporations Act 2001 (Cth) are not required. Examples where a limited partnership might be a suitable business structure could include:
industrial or real estate developments,
agricultural schemes,
mining projects,
arts, theatrical and film ventures or
other small to medium businesses needing to raise funds in a relatively straight forward way.