Limited and incorporated limited partnerships in NSW

Understand the difference between limited partnerships and incorporated limited partnerships, and how to register and maintain partnerships in NSW.

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Partnership laws

NSW Fair Trading is responsible for the registration of and the maintaining of a Register of limited and incorporated limited partnerships under the partnership laws.

The laws are:

Partnership Act 1892 (the Act)
Partnership Regulation 2017.

The Act defines a partnership as the relationship which exists between persons carrying on a business in common with a view to profit. It's wise to have a formal written partnership agreement because it:

sets out each partner's responsibilities
reduces the likelihood of disputes.

An agreement can also cover what happens if the structure ends or changes.

The Act allows 3 types of partnerships:

a general partnership
a limited partnership
an incorporated limited partnership.

There are different requirements and features for each of these types.

The Act only requires limited partnerships and incorporated limited partnerships to be registered with NSW Fair Trading.

Partnerships

A general partnership (sometimes called an “ordinary” or “normal” partnership) is the most common type of partnership, however these are not registered with NSW Fair Trading.

General partnerships are a suitable structure when more than one person wants to carry on a business together but use a simpler model than a company structure.

When deciding on a suitable structure you should seek advice from an independent professional.

Limited Partnerships (LP)

A limited partnership must have at least one general and one limited partner for this type of partnership. The duties of these partners 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. The partnership must not have more than 20 general partners.

Limited partners play no role in managing the day-to-day business and their liability for its debts is limited to:

the amount contributed to the partnership, and
as recorded in the Register maintained by NSW Fair Trading.

There is no cap to the number of limited partners in a limited partnership. A person may be admitted as a limited partner without the need to obtain consent of any other limited partner.

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. Essentially, they are passive investors in the limited partnership.

Limited partnerships can be used in most businesses needing to raise capital. Examples where a limited partnership might be a suitable business structure 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 straightforward way.

Registration of a limited partnership

Limited partnerships are formed by and on the registration of the partnership under the Act.

Complete the Application for registration of a limited partnership (form LP1) to register a Limited Partnership in NSW.

All details requested in the form must be provided. A certificate of registration will be issued at the time of registration.

Notifying changes to the Register

You must notify NSW Fair Trading of any changes to registered particulars of a limited partnership within 7 days by completing the Application for changes in registered particulars of a limited partnership (form LP2). A new certificate of registration will be issued following registration of changes to particulars.

Dissolution or cessation of limited partnership

You must notify NSW Fair Trading if a limited partnership is dissolved or ceases to carry on business by completing Notice of dissolution or cessation of a limited partnership (form LP6).

Incorporated Limited Partnerships

Incorporated Limited Partnerships are legal entities that can be set up under most State and Territory partnership legislation.

Incorporated Limited Partnerships appear to be the preferred entities when applying for registration under Commonwealth legislation for venture capital purposes.

Venture capital

Venture capital is an important source of funds for:

start-up companies
expanding businesses, and
restructuring businesses.

Venture capital is high risk as it provides funding to companies at difficult stages in their development where the risk of failure is greatest.

Venture capital programs attempt to prevent this failure by working with the management of investee companies through the growth phase.

Limited partnerships for venture capital

Commonwealth legislation provides for four forms of subclasses for limited partnerships to be used for venture capital investments. These are:

Venture Capital Limited Partnership (VCLP)
VCLPs invest directly in companies.
Early Stage Venture Capital Limited Partnership (ESVCLP)
ESVCLPs invest in entities with total assets of no more than $50 million before the investment is made.
Australian Venture Capital Fund of Funds (AFOF)
AFOFs invest either indirectly through VCLPs or ESVCLPs, or directly. Direct investments by AFOFs must meet specific requirements.
Venture Capital Management Partnership (VCMP)
VCMPs, according to the Income Tax Assessment Act 1936 (Cth), can only be involved in the management of the partnership.

Concessional tax treatment

To obtain concessional tax treatment under the Commonwealth legislation, the venture capital limited partnerships must be registered under the Venture Capital Act 2002 (Cth).

International consistency

The Commonwealth legislation aligns the Australian tax regime that applies to venture capital investment structures with most developed countries.

Registration of an Incorporated Limited Partnership

To register an Incorporated limited partnership in NSW complete the Application for registration of an Incorporated Limited Partnership form (form ILP1) which includes identification of the following subclasses:

Venture Capital Limited Partnership (VCLP)
Early Stage Venture Capital Limited Partnership (ESVCLP)
Australian Venture Capital Fund of Funds (AFOF)
Venture Capital Management Partnership (VCMP).

Relevant lodgement fees are provided on the forms or refer to partnership fees for the current list of fees.

Changes to the register

Incorporated limited partnerships are required to notify changes to registered particulars.

The following forms are available for this purpose:

Winding up an incorporated limited partnership

An incorporated limited partnership may be wound up voluntarily under Schedule 1 of the Partnership Act.

An incorporated limited partnership must notify the Registrar in writing of the commencement of the winding up of the partnership within seven days after commencement.

The Registrar must also be notified in writing of the completion of the winding up within seven days of its completion and the notice must specify the date of completion.

These notices can be provided in one of two ways:

email to: registrylodgements@customerservice.nsw.gov.au with the subject line including the full name of the entity and registration number.
Post to: PO Box 22 Bathurst NSW 2795

Accessing LP/ILP Records

This form should be used to access documents lodged with NSW Fair Trading on the Public Register under section 57 of the Partnerships Act 1892, upon paying the applicable fee.

LP/ILP Search Request Form

More information

Investors, interested persons and professional advisors should make their own inquiries to determine if registering an incorporated limited partnership is applicable to their circumstances.

The following links maybe useful :

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