An unlimited partnership is the choice when the business is to be run together with someone else. In an unlimited partnership all the partners, two persons or more, are responsible for the company´s liabilities. An unlimited partnership is established by articles either orally or in writing. In practice, however, a written document is always applied and it must be attached to the trade register notice.
An unlimited partnership is based on firm mutual trust between the partners, and one should never enter into this kind of partnership with a stranger. The partners are not only responsible for the business with the entire property of their own but share the liability of any contracts made by their copartners as well. Typically, all decisions to be made in the company must be unanimous. A creditor is entitled to claim for remittance from any of the partners. Due to their personal responsibility, the partners can make private withdrawals from the company's funds, yet in a way that does not go against the interest of their creditors.
A partner in the unlimited partnership has no obligation to invest money into the company rather has the right to invest only his or her work force into the company. This is the case, for example, when the business does not require making any investment rather is solely based on exploiting one's own know-how (e.g. Internet service providers, home care companies, etc.).
A partner in an unlimited partnership is first paid interest for the investment that is left at the beginning of the fiscal period. The partners can freely define the interest rate to be applied among themselves. To the sleeping partner, the interest is considered capital income. The remainder is then shared equally between the partners. In case of a loss, the sleeping partner normally does not take part in covering it, unless explicitly specified to do so.
Overview Forms of Company |
Single-member company |
Limited partnership |
Limited company |