First, the basic concept of limited partnership
Limited partnership refers to a partnership enterprise composed of more than one general partner and more than one limited partner. The concept of limited partnership is relative to general partnership, which is a partnership enterprise composed of general partners, and there are no limited partners in the partnership enterprise. 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.
In a partnership in which employees hold shares, the company's senior managers or controlling shareholders are usually general partners, and the incentive object is limited partners.
Under the shareholding mode of limited partnership as the shareholding platform, shareholders no longer hold the company's equity directly, but indirectly through limited partnership.
Second, the benefits of limited partnership
1. Tax advantages
Compared with corporate enterprises, limited partnership enterprises have more advantages in taxation and can avoid double tax burden when transferring or reducing their holdings. Taking a limited liability company as a shareholding platform will involve double tax burden-corporate income tax needs to be paid at the company level and personal income tax needs to be paid at the individual level; However, in the partnership, because the partnership does not have independent legal person status, there is only a single tax, that is, only the partners need to bear the corresponding personal income tax at the individual level.
2. Low cost of ownership
In a limited partnership, the general partner shall represent the partnership externally, and the limited partner shall not represent the limited partnership externally without performing the partnership affairs. So becoming a general partner becomes the controller of the partnership. At the same time, because the limited partner and the general partner are distinguished by whether they bear unlimited joint liability, there is no requirement for the amount of capital contribution to become a general partner, and because the general partner can contribute to provide services, the general partner may not even need to contribute.
It is precisely because the general partner can gain the control right of the partnership through less capital contribution that it becomes a common choice for enterprises to choose the shareholding platform.
3. Convenient operation
The biggest feature of partnership is "humanity". Unlike the establishment of a company, matters in a partnership can be realized through a partnership agreement. As long as it does not violate the mandatory provisions of the law, partners can agree on anything, so the operation of a partnership is more free than that of a limited liability company. The grant of incentive shares can be directly transferred to the incentive object by the general partner of the shareholding platform, and the limited partner status and rights restrictions of the incentive object are specified in the partnership agreement. If there is repurchase demand, the two parties sign an agreement or directly withdraw from the partnership, that is, all of them are carried out within the partnership without corresponding registration and publicity, which is more conducive to the dynamic management of the shares of the incentive object. Moreover, when the company needs shareholders (including the shareholding platform) to make decisions, most of the resolutions only need to be passed by the general partners, which is easier to operate and more grounded.
The advantages of using shareholding platform for equity incentive are obvious, but we should also pay attention to its disadvantages-unlimited joint liability of general partners and uncertainty of policies.
Bao Ledong, director of Lanting (Hangzhou) Law Firm in Shanghai, mentioned in the book "The Steps of Equity Incentive 12" that the company will choose whether to use the carrier and what kind of carrier to motivate employees according to its own needs and internal conditions, so as to achieve various goals.