A partnership is an option for two or more people who wish to carry on a business together. Before registering it, they should understand who will manage the business, how profits will be shared and who will be responsible for its obligations.
What liability do partners have?
In a general partnership, partners are personally liable for debts and obligations arising while they are partners. Their liability is not limited to the amount they invested and may expose their personal assets.
A limited partnership includes at least one general partner with unlimited liability and one limited partner whose liability is, in principle, limited to their contribution.
An important detail: if a limited partner takes part in management, they become liable as a general partner for debts and obligations arising during that period. They may, however, obtain information and inspect the books. Failure to register a limited partnership as such also results in it being treated as a general partnership.
Who might a partnership suit?
It may be considered for small collaborations with clear roles and manageable risk, such as graphic designers, translators, business consultants or marketing professionals. Regulated professions, including lawyers and accountants, also require a review of the applicable professional rules.
A limited partnership may suit an arrangement where one participant contributes capital and another manages the business.
When is particular caution needed?
For activities involving substantial borrowing, major commitments or a higher risk of claims —such as construction contracting, property development, transport or trading with significant credit exposure— a limited liability company should also be considered. The relevant factor is the business’s actual risk, rather than the profession alone.
How can partners protect themselves legally?
A written agreement should define contributions, the allocation of profits and losses, signing authority, approval of expenditure, a partner’s departure and dispute resolution.
Financial oversight and appropriate insurance are also important. However, an internal agreement does not automatically remove liability towards third parties: a partner’s actions in the ordinary course of business can bind the partnership.
What are the basic tax considerations?
Choosing a partnership does not, by itself, guarantee a tax advantage. Business profits, the participants’ tax residence and their individual circumstances must be assessed, together with any applicable VAT and contribution obligations.
Choosing the appropriate structure and agreeing clear terms at the outset helps partners understand both their rights and the risks they assume.
Legal framework: Cap. 116, particularly sections 8, 11, 12 and 47–49; Income Tax Law 118(I)/2002.