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.
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.
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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:
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 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.
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