Differentation between private partnerships

The differentation between the different types of private partnerships

Entrepreneurs cannot decide for themselves which type of private partnership they would like to use. The possibilities are the partnership, the general partnership and the limited partnership. The law is legally binding with regards to the choice between these types of private partnerships.

The difference between the partnership and the general partnership

Whether a corporation must be a partnership or a general partnership depends on its activities. When these activities are occupational, the corporation becomes a partnership. When the activities are businesslike, that corporation becomes a general partnership. The difference is important with regards to liability, because in a partnership every partner is liable for his own contributed part, whereas in a general partnership every partner is personally liable for the whole debt of the corporation.

The difference between occupational and businesslike activities

The difference between activities that are considered occupational and those which are businesslike is not clearly defined. Some could consider some activities occupational, where others could qualify the same activities as businesslike. These qualifications also differ from time to time.

Although the sharp differentiation has ceased to exist for years and the discussion about the criteria and meaning still goes on, there exists a working definition. An occupational corporation acts more idealistic with regards to its activities and the regular and independently societal implication of the activities is central. The activities mostly consist of highly developed personal skills, linked towards certain professions. Mostly that brings us to the more traditional ‘free’ professions of doctor, attorney, notary, accountant, etc. Every corporation which activities are different from those professions, are considered as busineslike.

The difference between the general and the limited partnership

The limited partnership differentiates itself from the general partnership by its silent partners. Those ‘silent’ partners only contribute financially to the corporation, but refrain from all other activities of the partnership. The silent partner cannot represent the limited partnership externally, which is reflected in the public registers of the Chamber of Commerce as well, as the silent partner will not be registered in those. In conclusion the silent partner is a financer which does not receive interest, but profit for its contribution.

More information

Do you want more information about the different private partnerships or do you have any questions with regards to the differentiation between the partnership, the general and the limited partnership? Please contact us.