1, flexible allocation mechanism. The income or profit distribution of a limited partnership enterprise is completely freely agreed by the partners and is not limited by the proportion of capital contribution.
2. Avoid double taxation. After all the profits of the limited partnership are distributed to the partners, they will pay taxes according to their respective applicable marginal tax rates, thus avoiding double taxation under the company system.
3. Flexible and effective incentive mechanism and decision-making mechanism Generally, in a limited partnership agreement, the general partner (GP) will be given more management authority and a more generous profit distribution plan. The limited partnership fully authorizes the general partner to manage the working capital, which makes the interests of the general partner and the limited partner closely combined and greatly improves the enthusiasm of the general partner.
4. Restraint mechanism to strengthen risk management If the limited partner is not satisfied with the management of the general partner, he can choose other general partners after termination. The restraint mechanism of limited partnership enterprises must be conscious in order to effectively restrain the investment behavior of general partners.
5. Investors with high efficiency in the use of funds make "committed capital contribution" without capital verification at the time of registration. When there is investment demand, the general partner shall notify all partners to contribute in batches according to the proportion agreed in the limited partnership agreement. When there are no good investment projects, the subscribed funds may not be in place temporarily, but when there are good investment projects, the funds can be pooled to avoid the backlog of funds and improve the efficiency of use. However, in terms of bank financing, limited partnership has barriers.
Second, the shortcomings of limited partnership:
1. Partner's integrity cannot be guaranteed: at present, China has not established a natural person bankruptcy system, and the partner's integrity cannot be guaranteed, and the responsibility is difficult to trace back. The partner system is largely subject to prior agreement, and it is difficult to realize LP's management and supervision of GP in the later period.
2. Opening a securities account has yet to be implemented: the partnership is not a legal person, and the conditions for opening a securities account according to the relevant provisions of the Securities Law are natural persons, legal persons and social organizations. There is no mention of whether the partnership can open a securities account.
3. The government's policy tends to delay the development of limited partnership: from the policy point of view, it is suspected of "tilting" the company system and "suppressing" the limited partnership.
4. The supporting measures are not perfect, and the standards of different localities and ministries are different: the Ministry of Commerce and the National Development and Reform Commission have adopted the partnership system, but the CSRC still has problems, such as opening securities accounts. Industrial and commercial administrators in some places are not familiar with the registration procedures of limited partnerships.
Legal basis:
People's Republic of China (PRC) partnership enterprise law
Article 2 The term "partnership enterprise" as mentioned in this Law refers to the general partnership enterprise and limited partnership enterprise established in China by natural persons, legal persons and other organizations in accordance with this Law. A general partnership consists of general partners, who are jointly and severally liable for the debts of the partnership. Where this Law has special provisions on the liability form of general partners, such provisions shall prevail. Limited partnership consists of general partner and limited partner. The general partner shall be jointly and severally liable for the debts of the partnership, and the limited partner shall be liable for the debts of the partnership to the extent of the capital contribution subscribed.