Knowledge

Jersey offers a range of partnership structures that are highly flexible and attractive to international investors and investment managers looking to establish flexible, efficient and legally robust arrangements.

This briefing outlines different types of partnerships available in Jersey, explores their key features, and considers the situations in which they are most useful.

Although the different types of partnerships have different features and are used in different ways, they have some basic similarities:

• Confidentiality: Jersey's regulatory environment ensures a high level of confidentiality, particularly for limited partnerships, where only limited details are public.
• Tax neutrality: Partnerships are tax-transparent vehicles, meaning that the partnership itself is not subject to tax, and profits or losses flow through to the partners.  Non-Jersey based partners will not be taxed in Jersey.
• Flexibility: Jersey partnerships offer flexible management, investment and operational structures, allowing partners to define roles, responsibilities and profit-sharing ratios in partnership agreements.
• Regulatory clarity: Jersey has a well-established legal framework for partnerships, which is supported by guidance from the Jersey Financial Services Commission ("JFSC"), ensuring regulatory clarity and certainty.

The features and uses of the different types of Jersey partnership are explored below.

Limited Partnership

Overview:

The Jersey Limited Partnership ("LP") is the longest established and most used type of partnership for investment and fund structures.  The Limited Partnerships (Jersey) Law 1994 (as amended) (the "1994 Law") provides the statutory basis for LPs. 

An LP consists of one or more general partners with unlimited liability (typically, a limited company acts as general partner) and one or more limited partners whose liability is capped at the level of their contribution to the partnership. The general partner is responsible for the management of the partnership, with limited partners typically being passive investors who do not engage in management.

Key features:

• Limited liability: Limited partners are only liable up to the amount they have invested, unlike general partners who have unlimited liability.  The 1994 Law provides both statutory confirmation of limited liability, as well as a set of 'safe harbours' in terms of activity that limited partners can conduct in relation to the partnership without prejudicing their limited liability status.
• No separate legal personality: A limited partnership does not have separate legal personality, making it distinct from the partners themselves, with contracts being entered into and assets being held by the general partner on behalf of the limited partnership.
• Flexibility: Partnerships can be structured flexibly, including as to matters relating to profit distribution and decision-making in the partnership agreement.
• Private arrangement: The limited partnership agreement is private, and only basic details (like the name and general partner) need to be registered.
• Tax transparency: The partnership is tax transparent and is not taxed in Jersey, with profits flowing through to the partners, allowing for tax-efficient structures.

When useful:

• Private equity and venture capital funds: the LP is a common structure for investment funds, especially private equity, venture capital and other alternative investment funds. 
• Real estate and property investments: the LP can be ideal for large-scale real estate investments, where the general partner takes on management, and limited partners are passive investors with capped risk.

Separate Limited Partnership

Overview:

A Separate Limited Partnership ("SLP") functions similarly to an LP, but has separate legal personality by default, although it is not a body corporate.  Like the LP, an SLP it consists of one or more general and limited partners.

Key features:

• Legal personality by default: The key difference from LPs is that an SLP has legal personality. This means that the SLP has the capacity to enter into contracts and hold property in its own name.  That said, the law still allows the general partner to hold property on behalf of the SLP, if desired.
• Limited liability: As with LPs, limited partners have limited liability, with various protections built into the law.
• Flexibility and privacy: SLPs offer similar flexibility and privacy as LPs.
• Tax transparency: Like LPs, SLPs are tax transparent in Jersey.  They may be treated differently for tax purposes in other jurisdictions.

When useful:

• Funds and investment vehicles: Like LPs, SLPs are commonly used for private equity, venture capital, and real estate investments.
• Family office structures: SLPs can be useful for managing family assets across multiple jurisdictions in a tax-efficient and flexible manner.

Incorporated Limited Partnership

Overview:

An Incorporated Limited Partnership ("ILP") is similar to an LP, but has both separate legal personality and is an incorporated entity – that is, an ILP is a body corporate.  Like an LP, it has at least one general partner and one or more limited partners, with limited partners enjoying limited liability.

Key features:

• Legal personality: As it has legal personality, an ILP can hold assets, enter into contracts, and sue or be sued in its own name, making it more akin to a company.  The ILP is also an incorporated entity.
• General partners: Although the ILP is an incorporated entity, it must still be managed by a general partner, as with LPs, and the general partner has unlimited liability, as with other types of partnership.  The general partner acts as agent of the ILP and is subject to certain statutory duties to act in the best interests of the partnership, similar to those imposed on directors of companies.
• Limited liability: As with other types of limited partnership, limited partners have limited liability, with various protections built into the law.
• Flexibility and privacy: ILPs offer similar flexibility and privacy as other types of partnership.
• Tax transparency: Like other types of partnership, ILPs are tax transparent in Jersey, despite their incorporated status.  They may be treated differently from either LPs or SLPs for tax purposes in other jurisdictions.

When useful:

• Private equity or real estate structures: ILPs are useful for fund structures where legal personality and incorporated status is desirable, which can provide flexibility for cross-border deals.
• Cross-border transactions: ILPs can be useful where the partnership needs to own assets or enter into agreements in its own name while limiting the liability of investors.

Limited Liability Partnership

Overview:

A Limited Liability Partnership ("LLP") is a hybrid structure that combines the flexibility of a partnership with the limited liability of a company.  All partners (also known as members) enjoy protection from personal liability.

Key features:

• Limited liability: Members are not personally liable for the debts or obligations of the LLP, beyond their contribution to the partnership, save that they are responsible for any losses of the LLP caused by them personally.  Unlike other forms of partnership, partners in an LLP can participate in the management of the LLP without jeopardising their limited liability status.
• Separate legal entity: An LLP is a separate legal entity from its members, capable of owning property, entering into contracts and being sued in its own name.  Like SLPs, LLPs are not bodies corporate.
• Flexibility: LLPs allow members to determine their roles and responsibilities, typically set out in an LLP agreement.
• Formalities: LLPs must be registered with the Jersey Registrar and an annual return must be filed.  Regulations set out the procedures to be followed in order to wind up an LLP, which are similar to those for companies.
• Tax transparency: Like other types of partnership, LLPs are tax transparent in Jersey. 

When useful:

• Professional service firms: LLPs are popular for law firms, accountants, architects and consultants who want limited liability but the flexible structure of a partnership.
• Joint ventures: LLPs can be used in complex joint ventures where participants wish to manage risks while still maintaining a high degree of operational flexibility. 

Summary

Jersey offers a selection of partnership structures with subtly different features.  The choice of partnership structure in Jersey depends largely on the goals of the partnership and the desired legal status, operational features and tax treatment.  For small businesses and professional services firms, an LLP might be appropriate, while investment funds and real estate ventures typically use LPs, SLPs or ILPs for their flexibility, limited liability and tax neutrality.

For more information or to discuss the best partnership structure for your specific needs, please contact our team.