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A foreign-invested partnership may be a general or a limited liability partnership with at least one foreign partner.

Characteristics

  • A foreign-invested partnership is established by two or more foreign entities or individuals with or without Chinese partner(s).
  • There are 2 kinds of partnerships: general (every partner shall take joint and several liabilities) or limited liability partnership (consisting of at least one general partner with one or more partners with liability limited to the extent of their capital contributions).
  • Partnerships do not have independent legal person status.
  • Capital contribution by partners may take the form of cash, in-kind benefits, intellectual property rights, land use rights or other forms of property right, or take the form of labor services.
  • Limited liability partnerships may not have more than 50 partners, and shall include at least one general partner.
  • Executive partner (one or more) shall be appointed to conduct partnership affairs. A limited partner shall not act as an executive partner.
  • No minimum capital requirement except otherwise regulated by the PRC laws. Capital can be contributed to foreign currency or RMB.
  • The profits and losses are distributed according to the partnership agreement.
  • A foreign-invested partnership does not issue shares, and therefore cannot be listed.
  • Setting up the process: registration with the SAMR (State Administration for Market Regulation).

Why choosing a partnership?

  • A foreign-invested partnership offers more flexible than an FIE as the partnership agreement sets out the partners’ governance arrangements.
  • Allocation of profits is not required to be in proportion of partners’ capital contributions.
  • The income tax is assessable on each partner and not on the partnership.
  • Regarding partnership transfer: (i) in case of internal transfer all or part of the partnership interest within the existing partners, notification shall be sent to other partners. (ii) in case of transfer all or part of the partnership interest to a third-party, unanimous consent shall be obtained among all other partners, but the partnership  agreement may provide otherwise.

-> This article may also be of interest to you : FICLS in China – Investment Options

To know more, download our legal handbook related to foreign investment in China…

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