HOW TO REGISTER A LIMITED PARTNERSHIP AND LIMITED LIABILITY PARTNERSHIP IN NIGERIA.

One of the highlights of the new Companies and Allied Matters Act, which was signed into law in 2020 was the introduction of the Limited Partnership and Unlimited Liability Partnership structure for business organizations. However, since the coming into effect of the Act, members of the public have been unable to take advantage of this new structure on the Company Registration Portal (CRP) of the Corporate Affairs Commission, until recently.

The introduction of the Limited Partnership and Limited Liability Partnership structure to the CRP is a welcome development as these structure enables us enjoy numerous benefits this structure affords us like other advanced countries have done in time past.

This article would be considering the meaning of Limited Liability Partnerships and Limited Partnerships, circumstances where they are applicable as well as the requirements for registering Limited Partnerships and Limited Liability Partnerships in Nigeria.

WHAT IS A LIMITED LIABILITY PARTNERSHIP?

A limited partnership exists when two or more persons (a maximum of 20 persons) go into business together. However, unlike general partnerships, it must consist of a General Partner and a Limited Partner. The General Partner has full management control of the business and unlimited liability in respect to the amount agreed to be contributed to the partnership or what is outstanding. The liability of the limited partner on the other hand, is restricted to the amount of his or her investment except he takes part in the management of the partnership. A registered name of a limited partnership must end with the word “Limited Partnership” or abbreviation “LP”.

Mr A for instance wishes to go into retail oil and gas venture. He invites Mr B and Mrs C to enter into a partnership with him by investing a certain amount into the business. Mr B and Mrs C are satisfied with the business proposal and opts to go into partnership with Mr A under a limited partnership structure with the name “ABC Limited Partnership” . In the event there is a fire outbreak from the retail outlet which results in serious damage on the property of third parties, and the latter claim damages of N50,000,000 (fifty million naira) from “ABC Limited Partnership”, Mr B and Mrs C’s liability would be to extent of the amount invested by them or agreed to be contributed by them respectively, while Mr A’s unlimited liability status on the other hand, may require him to pay up the balance as damages. As general partner, he may be compelled by law to give up his personal assets to pay up the balance of such damages.

REQUIREMENTS FOR REGISTERING A LIMITED PARTNERSHIP IN NIGERIA.

To register a Limited Partnership, it is advisable to seek adequate counsel and information from a business or Corporate Lawyer to ensure that such structure is suitable for your kind of business.

If it is, you would be required to provide the following;

1. Minimum of two names for reservation. The names must end with the word “Limited Partnership” or “LP”.

2. Address of the business.

3. Full name, phone number, email address and residential address of all partners.

4. ID card of all partners.

5. E signature of all partners.

6. A partnership agreement

A properly drafted partnership agreement is a mandatory requirement for registering a Limited Partnership. You may seek the services of your Business/ Corporate Lawyer to assist you with that during the registration process.

Let’s consider Limited Liability Partnership

WHAT IS A LIMITED LIABILITY PARTNERSHIP?

In summary, a Limited Liability Partnership, has the element of both Limited Liability Company and Limited Partnership. When a Limited Liability Partnership is formed, a legal personality which is separate from the individual partners is formed. The liabilities of the partners of are limited to the amount agreed to be contributed on what is outstanding, in the event of winding up or in the amount agreed to be contributed to the partnership by each partner.

A Limited Liability Partnership must have at least two “designated partners” who would be responsible for compliance with the requirement of the Act. The designated partners must be individuals at least one of whom must be resident within Nigeria. Upon registration, the name of a Limited Liability Partnership, must end with the word “Limited Liability Partnership” or abbreviation “LLP”.

HOW LIMITED IS THE LIABILITY OF PARTNERS IN A LIMITED LIABILITY PARTNERSHIP?

When it comes to Limited Liability Partnership, there is no doubt that every partner has a limited liability status. However, the extent of their liability is restricted to their assets or contribution pledged within the partnership business alone. In the event of damages or payment of a debt owed by the Limited Liability Partnership for instance, partners are expected to pay up amounts pledged to be contributed by them or already contributed by them while the partnership as a separate legal person takes up responsibility for what is left. The individual partners cannot under any circumstance be compelled to give up their personal assets in order to offset a liability owed by the Limited Liability Partnership.

This is one of the significant form of benefit of this kind of partnership structure. Partners get to take advantage of the benefits of pooled resources while protecting their personal assets from unexpected liquidation at the same time.

REQUIREMENTS FOR REGISTERING A LIMITED LIABILITY PARTNERSHIP IN NIGERIA.

To register a Limited Liability Partnership, you would be required to provide the following;

1. Minimum of two names for reservation. The names must end with the word “Limited Liability Partnership” or “LLP”.

2. Address of the business.

3. Full name, phone number, email address and residential address of all partners.

4. ID card of all partners.

5. E signature of all partners.

6. Statement of amount contributed by each partner

7. A partnership agreement suitable for a limited liability partnership.

Being a new concept in Nigeria, there is no doubt it may take time for the general public to warm up to this new structure. This however does not take away the fact that there are numerous benefits to these additional legal structure in our corporate ecosystem especially in certain fields of endeavor and the elite are taking advantage of it already. We recommend you seek professional counsel should you decided to register any of these structures.

Would you like to take advantage of these new legal structures? Feel free to reach out to us HERE or you could send an email to us at info@lexpraxisng.com, and we’ll be delighted to guide you on your next steps to achieving an appropriate partnership structure for your business.

Cynthia Tishion
Cynthia is a lawyer and currently serves as Head of Corporate / Commercial Services at LEX – PRAXIS. With her passion for business and entrepreneurship, she is actively engaged in creating awareness on the legal aspect of businesses through various platforms such as writing, public speaking engagements.

Leave a Reply

Your email address will not be published.