Liability of partners in a limited partnership

There are many doubts about the liability of the partners in a limited partnership. Despite the fact that anyone can establish one quickly and easily, it is normal. Therefore, here we want to shed light on the matter so that all our readers can understand what it is

What is a limited partnership?

This is the first thing to define. A limited liability company is a type of commercial company. It is regulated in articles 1.2 of the Capital Companies Act and 6.1 of the Companies Act. Its purpose is to unite two or more persons under the same umbrella in order to work together, share the profits and meet the obligations of the business they have undertaken.

The constitution of this legal personality is considered very useful when it comes to protecting the personal assets of each and every one of the partners. The reason? It limits the liability of the partners to the capital they have contributed to the partnership.

The contributed capital

Until a few months ago, the minimum capital to be contributed by the partners was €3,000. However, this has recently changed. Article 4.1 of the Capital Companies Act establishes as the only requirement that it must not be less than one euro. However, with the following rules:

• Until the minimum capital reaches 3,000 euros, the partners are obliged to allocate 20% of the profits to create a legal reserve.
• In the event that the company has to be liquidated, either by force majeure or at the will of the partners, the latter shall be jointly and severally liable for their obligations in respect of the difference between the subscribed capital and the said €3,000.

Therefore, the liability of the partners in the limited partnership is subject to the capital contributed. Although it is possible to contribute less than €3,000 to set it up, when it comes down to it, it is necessary to reach that figure.

But is it obligatory that this capital is conformed by an economic endowment? The answer is no. It is also possible to make the contributions that correspond to each one by means of any economically valuable asset (machinery, real estate, etc.). The greater the contribution of a partner, the more control he/she will have over the company, but also the more responsibility he/she will assume.

How many partners are needed to form a limited partnership?

There is no set limit. In other words, any person who wishes to do so can contribute a certain amount of capital and become a member of the company. However, contrary to what might be expected, there are workers who, on their own, can form a limited liability company. The difference is that, in this case, the legislation calls it a sole proprietorship.

Forming a sole proprietorship has many advantages over working exclusively as a self-employed person. The most important is the protection of the founder's private capital. However, a different taxation is assumed, which in many cases may not be so favorable.

In any case, founding a limited company to start a business offers many other advantages. For example, it is subject to a very flexible legal regime and can be set up quickly and easily. In addition, it offers more security in terms of obtaining financing from banks and other credit institutions.

So, who is liable for debts in a limited partnership?

The company itself from the contributions of its partners. As we said before, this liability is assumed jointly and severally, which means that those who pay a greater amount are also those who have more shares in the company.

What is clear is that, when creating a limited partnership, the objective is that none of them has to face with its own patrimony the payment of these debts. In case it is impossible to face it, the company and the assets in its name will be liquidated.

In short, we already know who pays the debts of a limited liability company. As we have been able to verify, it is a legal figure destined to preserve the private patrimony of the partners, reason why it is a very interesting option for all those who have decided to undertake. It is not surprising that, at the moment, it is the most popular type of company in Spain and the rest of Europe.