10 PARTNERSHIPS
10.1 Policy
As an international finance centre the Island provides a range of structures and vehicles, including partnerships, which would be expected to be found in such jurisdictions.
10.2 Types of partnership
Limited Partnerships and Limited Liability Partnerships are recognised on the Island. At the end of May 1998 there were 107 Limited Partnerships registered. The registration of Limited Liability Partnerships is not due to commence until 9 September, 1998, the date on which the Law will come into effect.
10.3 Limited partnerships
From 1995 the Limited Partnerships (Jersey) Law permitted the registration of limited partnerships in Jersey. Prior to that limited partnerships based in the Island were registered abroad, mainly in Delaware.
A limited partnership is defined as "a partnership consisting of one or more persons who are general partners and one or more persons who are limited partners." The limited partnership itself is not subject to tax, resident partners are subject to tax at 20% and non-resident partners are only liable to income tax on Jersey-source income (except bank deposit interest).
A limited partnership is suitable for venture capital business and as part of the structure for funds with a small number of investors. In such cases the limited partners would be the investors putting up the money and the general partner could be the fund manager or investment firm concerned.
There is no ongoing regulatory regime for limited partnerships although some will fall to be regulated under the Collective Investment Funds Law because of their nature. The general partner may in certain circumstances need to be licensed under the new Investment Business Law. There is registration discretion for Limited Partnerships in the hands of the Commission authorities under the Control of Borrowing legislation and the Commission may have regard to the integrity of the Island in commercial and financial matters when deciding whether to grant consent leading to registration. The registration particulars of Limited Partnerships can be inspected at the Commission Registry.
10.4 Limited liability partnerships
The Limited Liability Partnerships (Jersey) Law 1997 will come into effect on 9 September 1998. Registration in Jersey will be required and unlike a limited partnership a limited liability partnership ("LLP") will have a legal personality of its own and be subject to income tax assessment on the profits from trading activities carried on in Jersey, if any.
All LLP's will be required to register a £5 million bond to be used solely for the benefit of creditors on the insolvency of an LLP. LLP's will be required to maintain proper accounts but an audit will not be required nor will it be necessary to publish accounts. This is the same as for Jersey private companies.
LLP's, because of the £5 million bond will only be attractive to large partnerships. Nearly all US States now have LLP legislation.
There will be registration discretion for LLP's in the hands of the Commission under the Control of Borrowing legislation and the Commission will be able to have regard to the integrity of the Island in commercial and financial matters and to the size and stature of the partnership when deciding whether to grant consent leading to registration.
10.5 Taxation
Partnerships, including Limited Liability Partnerships, are charged to tax in the partnership name. Where the partnership is controlled abroad, liability to tax is limited to profits from trading operations, if any, carried on in the Island.
In the case of Limited Partnerships, the partners are taxed individually. Resident partners are taxed on the whole of their share of the income. The liability of non-resident partners is limited to income arising in Jersey, excluding deport interest, and excluding trading profits unless the trading operations are carried on in the Island.
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