What is a Fund?

In the past couple of years, funds (investment funds, equity funds, etc.,), have become more common. Legally, the term Fund usually refers to the legal entity known as a Limited Pertnership. 

Limited Partnerships must include at least one General Partner whose liability is unlimited, and at least one partner with limited liability (in most jurisdictions, the General Partner must be a local individual/local company, however, given approval of the local authorities, it can also be a foreign company).

When entering the partnership, the limited liability partner must transfer an agreed sum to the partnership, and henceforth is liable for that sum. The limited partner may not demand that money back until the partnership is dissolved.

The General Partner bares all the partnership's financial responsibilities, meaning, should the partnership be unable to cover its debts, the Generla Partner's liability would be to the entire debt, while the Limited Partner will be liable only to the sum he has transferred to the Partrneship. 

Limited Partnerships are required to register in most states (unlike unlimited partners). Generally, Limited Partners do not have management rights unless expressly mandated in local law and they are restricted in several other ways as well.

In certain conditions there are several advantages to establishing a Limited Partnership, including tax benefits.

Partnerships roles:

  • General Partner 
  • Limited Partner 
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