Key features of limited partnerships

A limited partnership (LP) is a flexible business or investment structure that must have at least one limited partner, at least one general partner and a written partnership agreement. A LP enjoys many of the advantages of a company. It is a separate legal entity in its own right; each of its limited partners (like shareholders of a company) enjoy limited liability capped at the amount of capital they have committed to the LP; and it is managed by one or more general partners (similar to a board of directors managing a company). However, a LP has the added benefits of being taxed as a partnership, greater privacy for limited partners and greater flexibility around governance.

Limited liability

Provided limited partners do not take part in the management of the LP, their liability will be limited, meaning that their maximum exposure is the amount of capital they have committed to invest in the LP. Conversely, general partners, who do take part in the management of the LP, are jointly and severally liable (along with the LP itself) for the debts and obligations of the LP. This risk to general partners can be mitigated by appointing a limited liability company (with no significant assets) as general partner.

Limited partners must be separate from general partners, however, there are no restrictions on a related person of a limited partner being appointed as a general partner. For example, an individual who is a limited partner can be a director and/or shareholder of a company that is a general partner of the same LP.

Tax treatment

The LP itself does not pay income tax. Rather, the LP distributes the income to the limited partners (usually in proportion to the limited partner's investments in the LP, or as otherwise directed in the partnership agreement) and the limited partners are then taxed on that income. New Zealand resident limited partners will pay income tax in New Zealand at the marginal rate applicable to them. Non-resident limited partners may be taxed in their own jurisdictions, depending on the source of the partnership income.


Unlike shareholders of a company, the identity and details of limited partners are not made publicly available, meaning investors can remain anonymous. However, the identity and details of general partners are publicly available and we note that at least one general partner of each LP must be resident in New Zealand or an enforcement country (i.e. Australia). Further privacy is afforded to LPs, as partnership agreements are not made publicly available, allowing the content to remain confidential.


A LP is governed by the Limited Partnerships Act 2008 (Act) and by its own written partnership agreement. The Act provides a broad framework, including setting out minimum content requirements for partnership agreements, however, much of the governance is left up to the LP's partnership agreement. This allows LPs the flexibility to operate in accordance with the size and type of their business, the wants and needs of their partners and their particular projects or goals.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.