Partnership (China)

A partnership in the China is a business entity governed by the Partnership Enterprise Law[1] passed by the Standing Committee of the National People's Congress to authorize and govern partnership enterprises. A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested.

## Contents

* 1 History
* 2 Partnership enterprise
* 2.1 General partnership
* 2.2 Limited partnership
* 2.3 Special general partnership
* 3 Establishment
* 4 Liabilities
* 5 Capital contributions
* 6 Distributions
* 7 Taxation
* 8 Procedures
* 9 References
* 10 See also

## History

From 1368 to 1911, partnerships with distributive shares were the principal form of a business entity that investors ran coal mines.[2]

In the modern era, most enterprises were partnerships in the form of general partnerships levying unlimited liability on the partners.[3] In 1933, 41% of factories were run by partnerships and 20% were sole proprietorships.[4] After the end of the 1950s centralization of the economy caused the partnership form to vanish for nearly 30 years.[5] In the 1980s partnerships returned with different names to avoid the sensitive label of private ownership.[6]

On 1 June 2007, the Partnership Enterprise Law came into force and established partnerships as a legal business entity.[7]

## Partnership enterprise

The term partnership enterprise refers to general partnerships and limited partnerships which may be established within China by natural persons, legal persons and other organizations.[8] A state-funded company, state-owned company, listed company, public welfare-oriented public institution or social organization may not become a general partner of a limited partnership.[9]

### General partnership

A general partnership (普通合伙) may be formed by general partners who bear unlimited joint and several liability for the debts of the partnership.[8] the general partners share unlimited liabilities for the debt of the partnership.

### Limited partnership

A limited partnership (有限合伙) is formed by a combination of general partners and limited partners where the limited partners bear the liabilities for the partnership's debts to the extent of their capital contributions.[8]

### Special general partnership

A special general partnership (特殊普通合伙) resembles a general partnership except that it must be a professional service institution offering services requiring professional knowledge and special skills. The structure shields co-partners from liabilities due to the willful misconduct or gross negligence of one partner or a group of partners.[10] It is intended as the preferred form of organization for law and accounting firms.[11]

## Establishment

A partnership requires a written agreement between the partners.[12] This written agreement must be submitted to the business registration government body along with the identity of the partners.[13]

A partnership must abide by the following requirements:

* Have 2 or more partners
* Have a written partnership agreement;
* Have capital contributions subscribed to or actually paid by the partners;
* Have a name and a place of business for the partnership enterprise; and
* Abide by any other conditions as provided for the law;

Should it be a general partnership or limited partnership then that shall be in its name.[14]

A limited partnership may not have less than 2 partners where one of them is a general partner nor may it have more than fifty partners.[15]

## Liabilities

A partnership must pay all its debts with property contributed to the partnership by the partners.[16]

If the partnership is a general partnership then the partners bear joint and several liability.[17]

A limited partner may not conclude partnership operations nor may such a partner represent the partnership to 3rd parties.[18]

## Capital contributions

A partner may contribute capital to the partnership to garner a share of the partnership's profits or losses.[19] A capital contribution may include money, intellectual property right, land use right or other properties, or labor services at a valuation determined by agreement among the partners.[20]

If the partnership is a limited partnership, then the limited partners may not make capital contributions with labor services.[21]

## Distributions

The default distribution scheme of profits or losses follows the proportion to capital contributions made by the partners.[22] However, the distribution scheme may follow an informal negotiated agreement or abide by scheme adopted in the partnership agreement.[23] If the proportions of capital contributions cannot be discerned, then the profits or losses will be distributed equally by the partners.[24]

The partnership agreement may not distribute all losses or all profits to just one or a group of partners within the partnership.[25]

## Taxation

The partners shall pay tax on their respective share of the partnership income.[26]

## Procedures

The required documents and procedures of partnership enterprise in China[27]

## References

1. ↑ "Order of the President of the People's Republic of China". http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf.
2. ↑ Fang Liufang; Xia Yuantao; Sang Binxue; Danian Zhang, Law and Contemporary Problems, Vol. 52, No. 3, The Emerging Framework of Chinese Civil Law: [Part 2]. (Summer, 1989), pp. 43-67, 44.
3. ↑ Fang Liufang; Xia Yuantao; Sang Binxue; Danian Zhang Law and Contemporary Problems, Vol. 52, No. 3, The Emerging Framework of Chinese Civil Law: [Part 2]. (Summer, 1989), pp. 43-67, 46.
4. ↑ Fang Liufang; Xia Yuantao; Sang Binxue; Danian Zhang Law and Contemporary Problems, Vol. 52, No. 3, The Emerging Framework of Chinese Civil Law: [Part 2]. (Summer, 1989), pp. 43-67, 46.
5. ↑ Fang Liufang; Xia Yuantao; Sang Binxue; Danian Zhang Law and Contemporary Problems, Vol. 52, No. 3, The Emerging Framework of Chinese Civil Law: [Part 2]. (Summer, 1989), pp. 43-67, 47.
6. ↑ Fang Liufang; Xia Yuantao; Sang Binxue; Danian Zhang, Law and Contemporary Problems, Vol. 52, No. 3, The Emerging Framework of Chinese Civil Law: [Part 2]. (Summer, 1989), pp. 43-67, 47.
7. ↑ Partnership Enterprise Law
8. ↑ 8.0 8.1 8.2 Partnership Enterprise Law, Chapter 1, article2
9. ↑ Partnership Enterprise Law, Chapter 1, article 3
10. ↑ Partnership Enterprise Law, Chapter II, section 6, article 55
11. ↑ "Limited Liability Partnership in China - A Long Way Forward" (in en). https://www.researchgate.net/publication/256062073.
12. ↑ Partnership Enterprise Law,Chapter 1, article 4
13. ↑ Partnership Enterprise Law,Chapter 1, article 9
14. ↑ Partnership Enterprise Law,Chapter II, section 1, article 14
15. ↑ Partnership Enterprise Law, Chapter III, article 61
16. ↑ Partnership Enterprise Law, Chapter II, section 4, article 38
17. ↑ Partnership Enterprise Law, Chapter II, section 4, article 39
18. ↑ Partnership Enterprise Law, Chapter III, article 68
19. ↑ "Law of the People's Republic of China on Partnerships". http://english.www.gov.cn/services/doingbusiness/202102/24/content_WS6035f00ac6d0719374af97ae.html.
20. ↑ Partnership Enterprise Law,Chapter II, section 1, article 16
21. ↑ Partnership Enterprise Law, Chapter III, article 64
22. ↑ Partnership Enterprise Law,Chapter II, section 3, article 33
23. ↑ Partnership Enterprise Law,Chapter II, section 3, article 33
24. ↑ Partnership Enterprise Law,Chapter II, section 3, article 33
25. ↑ Partnership Enterprise Law,Chapter II, section 3, article 33
26. ↑ Partnership Enterprise Law,Chapter 1, article 6
27. ↑ "China FIPE: Partnership Enterprise Formation: Shanghai | Beijing | Shenzhen | Hangzhou". http://www.pathtochina.com/reg_pe.htm.

## See also

* Partnership
* Partnership taxation
* Law of the People's Republic of China

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