Jersey offers a choice of partnership type, mostly similar to partnerships found under English or Scottish law, although in some areas, the Jersey law is more up to date. The choice will depend on whether a separate legal identity is required; how the partnership will be treated for tax purposes; the amount of information available to the public; and the client’s attitude to risk and liability. Every partnership must be formed under a contract, have a lawful purpose and be aimed at making a profit, although it is not necessary to carry on business actively – a partnership could be a passive vehicle as long as the aim is to make a profit. Each partner must make a contribution to the partnership, which can be in the form of a cash contribution or in the form of services provided, for example.
Limited Partnerships are currently a popular choice in Jersey as a useful vehicle for a wide variety of financial planning arrangements. They make it possible for a partnership structure to be employed for investment purposes while protecting passive investors against unlimited liability for the partnership’s debts. They are fiscally transparent, so that they are treated as a Jersey tax exempt structure and the partners being treated as having a pro-rata share of each underlying investment and of any income derived from that investment.
If the Limited Partnership is a passive holding structure, it may not be subject to regulation, whereas a more active investment vehicle may be subject to the Collective Investment Funds (Jersey) Law 1998 and the provisions of the Regulation of Undertakings and Development (Jersey) Law 1973 and advice should be taken on this, especially if the client’s tax advice is that a business presence should be established to support the concept of the limited partnership.
Limited Liability Partnerships can offer a vehicle to businesses that do not wish to separate ownership and management of the business. They also offer protection against litigation risk for substantial professional partnerships in preference to the alternative of forming a limited liability company and with less disclosure of confidential information. Although Limited Liability Partnerships have separate legal personality, they are not a body corporate.
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