New Zealand Limited Partnership vs Scottish Limited Partnership
Not all Limited Partnerships (LPs) are created equal
A Limited Partnership (LP) is a hybrid structure that enjoys many benefits due to its flexibility to be used in many forms and for virtually any purpose, that become popular over the last thirty years due to its tax transparency, separate legal personality, and its ability in taking on limited partners.
Out of the many jurisdictions that offer LP’s – the New Zealand Partnership (NZLP) and the Scottish Limited Partnership (SLP) are two such structures that deserve special attention.
The NZLP is a relatively new structure taking form in 2008 through the New Zealand (NZ) Limited Partnership Act; though it is often viewed as having more restrictions and requirements than many ‘traditional’ offshore structures it makes up for it in its respectability and reputation.
The SLP on the other hand, has a long-standing history that goes back over a hundred years to the Partnership Act of 1890. It has both minimal reporting and financial requirements, as well as being apart of the European Union (EU)—making it a particular favourite.
Both NZLP and a SLP structures can be used for tax planning, as a main fund vehicle or as a ‘participant’ - that is a ‘carried interest partner’. They also share a number of other commonalities, which include:
- Both LP’s operate and act just like traditional offshore companies
- Tax-free entities in a traditionally high-tax jurisdiction
- Separate legal entities - that is separate from its partners
- Corporate entities such as LLC or LLP can be used as a general partner
- Requires two or more partners/members
- Partners may leave without the need for dissolution of the entity
- Limited Liability is given to all partners considered ‘limited’ – that is those that are not affiliated with the management and running of the LP
- The OECD does not perceive Scotland or New Zealand as being an unlawful tax jurisdiction, is not normally associated with a tax haven, and has never been blacklisted by any financial authority
- They both do not have shares and are thus private companies and are not allowed to raise capital through public offerings
- And lastly; there is no double taxation, which normally occurs in private companies through the taxation of its corporate income and then after the profits distributed to its shareholders, they again would be made to pay income tax.
Though both NZLP’s and SLP’s seem to share a number of similarities, which they do in terms of structure and uses, they differ in a number of respects. A NZLP has a several more requirements than a SLP, some of which were recently instituted as a means to build local and international confidence in its financial system.
A NZLP requires: that a general partner be a local NZ resident and must submit details of its general partner to the Company Registry; whereas a SLP has no local resident member requirements and does not need to submit details of its beneficial owner. Furthermore, a NZLP must file accounts, generally takes a bit longer to form a company and comes with a heavier price tag, while a SLP has no requirements to submit financial accounts, can be registered in a few days and is quite cheap in comparison. The only downside to a SLP is that upon registration it requires that the principal place of business must be in Scotland, though it can be changed soon after formation.
Even though a NZLP comes with more requirements and generally with a few more hurdles to jump through, it does so to ensure consumer confidence in a way to affirm the high standards espoused by the government. Consequently, a NZLP is quite a rare vehicle that has given it an air of respect and exclusivity. Nonetheless, there is a reason why a SLP’s popularity has tripled over the last decade, and by the looks of which it will continue to draw an increasingly larger share of the pie as it continues to entice investors through its lax and open requirements.
Please feel free to contact us whether a Scottish Limited Partnership (SLP) or a New Zealand Limited Partnership (NZLP) may be right for your unique circumstances.