Limited partnership

What it means

A limited partnership joins two kinds of partner: the general partner is liable for the debts with all of their assets and runs the business, while the limited partner is liable only up to their unpaid contribution and stays out of management. At least one of each is required.

What separates it from a general partnership is precisely the presence of a limited partner, and from a limited liability company the fact that at least one partner is liable without limit. The Commercial Code governs all of these forms.

Only the general partners form the statutory body; a limited partner can represent the company only under a power of attorney or as a procurator. Their liability narrows with every euro of contribution paid, and once full payment is recorded in the register they are no longer personally liable for the company’s debts.

How it works in practice

The partnership comes into being on entry in the commercial register, based on a partnership agreement that names the general and limited partners and fixes what the limited partner contributes. The law sets the minimum amount of that contribution.

Tax splits the form in two: the tax base of the partnership is reduced by the share attributable to the general partners, who tax it themselves as business income. The remainder is taxed at partnership level and paid out to the limited partners as a share of profit.

In practice we also see structures where the general partner is an s. r. o. Unlimited liability is then carried by a company, not a person. We keep two separate accounting entities, and the general partner’s share of the limited partnership’s profit flows into the s. r. o.’s own tax base.

What to watch out for

A general partner who is an individual pays social and health levies on their share of profit as well, because it counts as business income. A share of profit taken out of a limited liability company carries only a withholding tax and no levies, so the same profit costs more in the partnership form.

The form rests on having both kinds of partner. If the only general partner leaves or dies and nobody replaces them in time, nor is the legal form changed, the company faces dissolution and liquidation - so succession is settled in the partnership agreement in advance, not after the event.