VWhen the new Companies and Allied Matters Act (CAMA 2020) came out one of the interesting additions was in the area of partnerships. Two new types of partnerships were introduced: Limited Partnership (LP) and the Limted Liability Partnership (LLP).
They broadened the existing scope of partnerships protected by the law under the former CAMA. Previously, partnerships could only be registered under a business name implying that the partnership had no separate legal personality from that of the partners. Infact, if the such partnership were to be sued, it would be stated that it was the partners in their individual capacities trading under the Partnership’s business name that were being sued. Under this type of partnership, each partner pays income tax personally under self assessment, but the business itself is not liable to pay income tax. Also where there are liabilities to be settled, the personal assets of the partners could be used to settle those liabilities. This simple partnership form still exists today under the new CAMA.
The Limited Liability Partnership on the other hand is a totally different kettle of fish. It is a totally separate legal entity from its partners and has a legal personality to the extent that it can own property in its own name, sue and be sued in its own name as well. One major advantage is that all the partners under the LLP have limited liability as in the case of a limited liability company (Ltd.). The implication of this is that the partners can only be liable to the extent of their contributions for any debts or obligations of the firm. In simple terms, their personal assets can be used to meet up the debts and obligations of the partnership only to the level of contribution they made to the partnership. So there is a protection for the personal assets and properties of a partner under the LLP. A limited liability partnership is required to have at least 2 designated partners, one of whom must be resident in Nigeria. The name of an LLP must end with either LLP or Limited Liability Partnership.
For a limited partnership, however the liablity of all the partners is not limited. There must be at least one limited partner and at least one partner with unlimited liability who is called a general partner. The general partner is liable for all the debts and obligations of the firm and in this way the LP shares the same status as a limited liability company.
The limited partner on the other hand must not hold any managerial role in the business nor must he be in a position to make decisions for the partnership else the partnership can lose its limited liability status.
An LP can only consist of a maximum of 20 partners while an LLP has an unlimited amount of partners.
The Corporate Affairs Commission has commenced registration of both the LP and LLP partnerships on their Company Registration Portal.