The family limited partnership in Luxembourg
The family limited partnership has been used by families to manage their wealth since a long time. It has the advantage to keep the assets of the family together while maintaining the leadership of the head of the family.
The limited partnership is managed by the general partner that bears the entire responsibility of the management of the partnership. The limited partners are investors and they have no or limited decision power on the management of the partnership. Furthermore, transfers and redemptions of the interests are also limited and authorized by the general partner.
Traditionally, limited partnerships are incorporated in Anglo-Saxon countries: Scotland, U.K., Channel Islands and Delaware are some of the preferred jurisdictions. It is a structure that is commonly used for private equity and venture capital funds.
In 2013, a new country introduced a very special type of limited partnership. The Grand-Duchy of Luxembourg approved the special limited partnership.
The Grand-Duchy of Luxembourg is a very well-known financial centre having a high reputation and is one of the few AAA rated countries. The Luxembourg financial center has a long experience in wealth structuring, fund management and private banking.
The Special Limited Partnership has some features that make it unique in the spectrum of structures existing around the world.
It has no legal personality; it is an agreement between the general partner and the limited partners, but the assets are put in name of the partnership that is the legal owner.
It is fiscally transparent. Upon certain conditions, no tax is levied in Luxembourg giving to the Special Limited Partnership the neutrality needed to manage different type of assets in different countries and for heterogeneous beneficiaries potentially living in several jurisdictions with multiple tax regimes.
As it is an agreement between the concerned parties, very few restrictions exist on the provisions included in the limited partnership agreement, hence, resulting in a high level of freedom in deciding the rules.
The partnership is incorporated at the moment of the signature of the Limited Partnership Agreement. The only formality needed is the registration at the Luxembourg Register of Commerce.
The Limited Partnership Agreement can be drafted in any language and there is no need to call upon a Luxembourg lawyer, except for a compliance check with the Luxembourg legislation. The Limited Partnership Agreement can be drafted by the family lawyer.
The Limited Partnership Agreement is not public and only an extract with essential information is published. None of the provisions included in the Limited Partnership Agreement will become public, except if required by the law.
The limited partners are also kept private, except for the disclosure to the tax and other authorities.
The financial statements of the partnership, if foreseen by the LPA, are also private and, under certain conditions, are not published. The audit of the accounts is optional.
There is no limitation on the assets that can be held by the partnership, nor the strategies that can be employed to manage them. Several classes of units having different rights can be created. Investments are often made through special purpose vehicles in order to ensure the tax neutrality of the entire structure. Taxation occurs at the level of the investors of the partnership, applying their own tax regime.
At a cost level, the Special Limited Partnership is extremely efficient, and can take into account the structures already existing. Depending on the complexity, the size and the quantity of operations, the setup and the running costs are very competitive compared to alternatives. This make the structure affordable early in the making of fortune as well.
Freedom, tax neutrality and confidentiality are the three main ingredients that make the Special Limited Partnership a vehicle of choice for families to create their family office through a limited partnership in a first class jurisdiction.