INTRODUCTION

A partnership is a legally binding agreement between two or more persons with the intention to manage and operate a business and share profits. General partnerships, limited partnerships, and limited liability partnerships are the types of partnerships recognised under Companies and Allied Matters Act (CAMA) 2020.

The establishment of Limited Partnerships and Limited Liability Partnerships was one of the many innovations brought about by the Companies and Allied Matters Act (CAMA) 2020. In this article, we will outline the guidelines and important factors to note before and when registering your partnership in Nigeria.

LIMITED LIABILITY PARTNERSHIP (LLP)

An LLP is an entity formed and incorporated as a separate legal entity from the partners.

It combines two types of structures:

1. A partnership and
2. A limited liability company.

An LLP may sue and be sued in its own name, as well as acquire, own, hold, and dispose of property. A corporate entity may be a partner in an LLP.  Every LLP must have at least two individuals as authorized partners, one of whom must be a Nigerian citizen. LLPs have no share capital and it is governed by a membership agreement or a partnership agreement.

The partners’ liability is restricted to the amount of money they invested, creditors are not allowed to pursue partners’ personal income or assets. The LLP itself is not subject to tax but the personal income of partners is taxed. Lawyers, accountants, and consultants are the most common users of this business form.

To register an LLP with the Corporate Affairs Commission (CAC), the promoters would be required to provide information not limited to:

1. Two proposed names for the LLP
2. A business address and email address for the Firm
3. The personal information of the partners such as phone numbers, email addresses, date of birth etc
4. A valid form of identification for all partners
5. An executed Partnership agreement.

The timeline for registration is usually one week to a month.

LIMITED PARTNERSHIPS

A limited partnership (LP) is a type of partnership with at least one general and one limited partner. A general partner’s liabilities are unlimited meaning the general partner bears personal liability to the partnership, whereas a limited partner’s liabilities are limited unless he participates in the partnership’s management.

A limited partnership cannot have more than 20 partners and may have a corporate entity as a partner. The general partner is in charge of the day-to-day operations of the company. The other partners normally contribute capital in exchange for a share of the earnings and do not participate in the partnership’s management. Where a limited partner participates in the management, his liability is no longer limited and he would bear personal liability to the partnership. Limited partners do not have the authority to bind the partnership, but they are authorised to have access to the partnership’s books.

At the time of the partnership’s formation, each partner must invest or agree to contribute capital. The partners are only liable in the partnership’s debts and obligations only to the amount contributed. Limited partners may not withdraw or receive any part of their contribution during the partnership’s continuation unless otherwise agreed in writing.

LPs are not taxed as separate entities, but their partners are taxed on their personal income. Real estate investors, hedge funds, investment partnerships, and other businesses commonly employ this company structure.

The requirements to register an LP are similar to that of the LLP. To register an LP with the Corporate Affairs Commission (CAC), the promoters would be required to provide information not limited to:

1. Two proposed names for the LP which must include the words ‘Limited Partnership’ or the abbreviation ‘LP’ at the end
2. A business address and email address for the Firm
3. The personal information of the partners such as phone numbers, email addresses, date of birth etc,
4. Contributions of the partners
5. A valid form of identification for all partners and
6. An executed Partnership agreement.

The timeline for registration is usually one week to a month.

GENERAL PARTNERSHIP

A general partnership is a business arrangement in which two or more people agree to share all of a company’s assets, profits, and financial and legal liabilities. Partners in a general partnership consent to bear unlimited liability, which means they can be sued for business obligations. Each partner has a right to participate in the management of the company, and each partner must disclose their portion of the company’s revenues and losses on their personal tax return.

The corporate entity is not separate from the partners in general partnerships, and the partners are responsible for each other’s conduct. Personal assets of the partners are unprotected, and the partnership may be terminated if one of the partners dies or withdraws from the partnership.

To register a general partnership with the CAC, the promoters would be required to provide information not limited to:

1. Two proposed names for the partnership,
2. A business address and email address for the partnership,
3. The personal information of the partners such as phone numbers, email addresses, date of birth etc,
4. A valid form of identification for all partners and
5. Passport Photographs of the partners

The timeline for registration is usually one week to a month.

CONCLUSION

The choice of the preferred form of partnership largely depends on the purpose for which the partnership is constituted, the nature of relationship that exists between the proposed partners and the extent to which each partner may want to bear liability for the business. We encourage individuals or corporate entities seeking to register any kind of partnership in Nigeria to seek proper legal advice on the preferred kind of partnership for their business needs.