Advantages and disadvantages of a limited partnership – is it worth setting one up?

Advantages of a limited partnership

1. Limited liability of the limited partner for the partnership’s liabilities

A limited partnership must be formed by at least two partners, one of whom is a general partner and the other a limited partner. A limited partner is liable for the partnership’s obligations to its creditors only up to the amount of the limited partnership capital, i.e. the sum of money specified in the partnership agreement.

2. Low cost of setting up the partnership

The provisions of the Commercial Companies Code do not specify a minimum amount of capital contributions that partners must make to a limited partnership. Consequently, contributions to the partnership may be set as low as PLN 1. A limited partnership can be established online. In the same way, amendments to the partnership agreement can be made, and certain resolutions adopted by its partners.

3. The possibility of paying advances against future profits

Although there is no statutory provision regarding the possibility for partners in a limited partnership to make advance payments against the partnership’s future profits, there are no obstacles to making such payments. No additional requirements need to be met in this regard (as is the case with limited liability companies and public limited companies). The partners may therefore adopt a resolution entitling them to receive advance payments against future profits during the year.

Disadvantages of a limited partnership

1. Conducting the company’s affairs without the participation of limited partners

As a general rule, a limited partner has no right to manage the partnership’s affairs, unless the partnership agreement provides otherwise. A limited partner may also not represent the partnership externally, unless they hold the appropriate power of attorney. Therefore, if such a partner wishes to become involved in the partnership’s activities and have a real influence on its operations, this may be difficult or even impossible from the position of a limited partner.

2. Full liability of the general partner for the company’s obligations

The general partner is liable without limitation for the company’s liabilities with all their personal assets. Furthermore, the general partner’s name should be included in the limited partnership’s name (e.g. Kowalski Limited Partnership/ABC Limited Liability Company Limited Partnership), so that potential creditors know whom to turn to in the event that the partnership fails to meet its obligations.