LIMITED PARTNERSHIP

WHAT IS LIMITED PARTNERSHIP?

Limited Partnership business can avail the benefits from the company rate of tax and capital gain tax of an individual in a trust
Limited Partnership serve following characteristics, if well organised

  • Partners of the limited partnership possess limited liability
  • Assets are protected to a great extent
  • Partners of limited partnership are capable to accumulate income
  • Partner are eligible for capital gains tax concessions
  • Partners of Limited Partnership retains distribution flexibility
  • Income collected through partners is taxed at company tax rate
  • Limited Partnership business is not accountable in Division 7A

PROCEDURE TO EXTABLISH LIMITED PARTNESHIP BUSINESS

Limited Partnership is formed under the partnership (Limited Liability) Act. It is obliged to register and comply limited partnership with legislative requirements before it is been recognized under the Income Tax Assessment Acts. It consists one General Partner and one or more Limited Partners

THE GENERAL PARTNER

  • The liability of General Partner is unlimited
  • The General Partner is not authorized to hold assets other than 1% of partnership interest (as recommended) in the Limited Partnership
  • Shareholders of limited partnership possess limited liability
  • Authorized to regulates and control partnership operations

THE LIMITED PARTNER

  • Not permitted to participate in business management
  • Consolidation of partnership is not compelled
  • Shares of general partner company should be maintained, if applicable
  • The liability of Limited partner is limited
  • Obligations to provide capital contributions in partnership (usually $99.00)
  • Limited partnership should be a Discretionary Trust providing the highest level asset protection and income distribution flexibility

TAXATION

Limited Partnership tax return calculations are similar as company, even it is taxed similarly as company for income tax purposes. Although Limited Partnerships is treated as a company for income tax purposes, the partners are not liable to tax unless distribution is made to partners through Limited Partnership. Distribution to partners (drawings) is classified as dividends which may be ‘franked’. Provisions are not maintained for deem payments, loans to associates or genuine loans to partners to be dividends as in Division

USERS AND COMMENTS

A Limited Partnership can itself act as an operating entity for professionals such as Medical Practitioners, Engineers, Architects, Accountants and other commercial partnerships like Real Estate Agents, Service Entities, and Development Ventures. Limited partnership provides the benefit of limited liability which an ordinary partnership lacks. Limited partnership can be restructured as an ordinary partnership with nominal taxation and stamp duty costs

SUBSTITUTE COPRPOPRTAE BENEFICIARY

The Trust retains flexibility, asset protection and prevent issues associated with section 109UB in division 7A, during limited partnership is used to substitute a corporate beneficiary in trust.

PROTECTION OF RESERVES IN A COMPANY

A Limited Partnership efficiently protect, extract and access tax payment and non-tax payment reserves in a company. It even provides flexibility for distribution purposes.

ADDITIONAL OBSERVATIONS

A worthy consideration is required while maintaining accounts for a Limited Partnership. During distributions are made to partners, limited partnership apply distinct taxation and legal procedure than ordinary partnership

Limited Partnership serve following benefits, if well organized

  • Income variability
  • Minimization of effect of Division 7A
  • Asset protection to a greater extent

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