Partnerships / Limited Partnerships /
Family Limited Partnerships

Cavendish Trust has substantial in house expertise and practical experience in the establishment and administration of all forms of partnership and with the management of both General and Limited Partners.

Partnerships/Limited Partnerships/Family Limited Partnerships

By definition, a ‘Partnership is the relationship which subsists between persons carrying on a business in common with a view to profit’.  In the Isle of Man, Partnerships are governed by the Partnership Act 1909.

A Limited Partnership must have one or more General Partners with unlimited liability (which is usually a SPV) and one or more Limited Partners.  A Limited Partner’s liability is restricted to the amount of capital contributed by them.  Generally, a Limited Partner may not draw out their contribution during the continuance of the Partnership and may not take part in the day to day management of the Partnership.  Limited Partnerships must be registered with the Isle of Man Financial Services Authority, otherwise the limitation of liability will be lost.

Partnerships have fiscal transparency and, as such, any income of a partnership is taxable on the partners in the proportions determined in the Partnership Agreement.

Family Limited Partnerships

A Family Limited Partnerships is a Limited Partnership established with a view to holding assets on behalf of a family. Ordinarily, the General Partner will be responsible for the management of the partnership and is often first generation, whilst the Limited Partners will be second or subsequent generations. Considerations in respect of FLPs:

• It is likely to be treated as a collective investment scheme for regulatory purposes, therefore, it requires at least one licensed service provider
• For transfer of wealth, the gift of a FLP interest is treated as a potentially exempt transfer and provided the donor survives for seven years after the transfer, no IHT should arise. In contrast, a gift in to a trust would likely give rise to UK IHT implications
• Assets placed into a FLP will not be subject to the ten year IHT charge
• Care is required, as each partnership interests will be included in the estate of that partner for IHT purposes. In this respect, generally, the Limited Partner will be at least second generation so further planning opportunities may later be available for that Limited Partner’s estate planning
• FLPs are suited to capital gains tax planning on assets that qualify for business asset holdover relief
• Stamp Duty Land Tax is not payable on the transfer of land into an FLP as long as the partners are connected for the purposes of the relevant legislation
• when properly structured, FLPs can provide limited liability and enable donors to keep “control” of assets
• Contract law, rather than trust law, will apply to the FLP
• FLP’s must be run with a view to profit and, therefore, they are not suited as mere holding structures.

Please contact the following members of our team with any corporate enquiries:

James Cunningham-Davis – Email: jcd@cavendishtrust.com