China To Develop The Necessity Of The Limited Partnership Act And Legislative Proposals

In modern business world, personal liability and taxes are considered by investors the most important factors in selecting a business form. The traditional partnership enjoys the conduit tax treatment, however, each partner is under the high risk of unlimited personal liability for the debts of the business. In the form of corporation, investors avoid the risk of unlimited personal liability, but the earnings of a corporation may be taxed at two different levels, at the corporate level on the corporation's "taxable income" and a second time, at the shareholders' level when the corporation distributes assets to the shareholders. Limited partnership (hereinafter referred to as LP) is the combination of the two business forms mentioned above. It's attractive to investors not only because it enjoys partnership tax treatment, but also because it permits limited liability for some of its partners. As a means of investment , LP can satisfy the needs of different investors; as a kind of commercial subjects,it has its own unique merits no other commercial subjects can match .LP has been testified to be the most effective business form of venture investment. In the U.S.A., most venture investment organizations prefer LP and have achieved great success. With the fast development of venture investment in China in recent years, more and more people appeal for enacting a limited partnership act in our country. Actually,in some provinces and cities,the local governments have set some rules to regulate LP. The development of our socialist market economy requires a diverse system of commercial subjects. To establish limited partnership institution as early as possibly will not only meet the needs to strengthen the legal system of commercial subjects but also accelerate the development of our socialist market economy. In Chapter One, the author first of all introduces the origin and development of LP, and analyses its historical function and evolution process as well. The second half of the first chapter illustrates the legislative situation of LP in such western countries as the United States, the UK, France and Germany. The second chapter sums up LP's institutional advantages by comparing LP with several other business forms like general partnership and corporation and so on. On the basis of the characteristics of LP and the present economic situation of our country, Chapter Three demonstrates the necessity and importance of establishing LP system in China. Chapter Four explains the feasibility of the enactment of an LP Act through a thorough analysis of present condition of the construction of LP in china. In the final chapter, the author brings up some concrete suggestions about the legislative principles and framework of the LP Act of our country.