Limited Partnership (LP)
Limited Partnership Set-up
Looking to establish a company in China? Our expert guide covers steps, benefits, limitations, and costs.
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What is Limited Partnership?
A Limited Partnership (LP) is a business form established under the Partnership Enterprise Law of the People’s Republic of China. It is composed of at least one General Partner (GP) and one or more Limited Partners (LPs).
General partners assume unlimited liability, while limited partners are liable only up to their capital contributions. This structure is widely used for venture capital, private equity, and investment funds, due to its flexibility and favorable tax treatment.
Flexible liability structure
Pass-through taxation
Ease of fundraising
No minimum capital requirement
WFOE? Not Anymore!
With the implementation of the Foreign Investment Law of the PRC, all foreign-invested enterprises are now governed by the unified Partnership Enterprise Law, meaning that traditional structures such as WFOE (Wholly Foreign-Owned Enterprise) and JV (Joint Venture) have been integrated into the new framework:
A former WFOE is now legally a Limited Liability Company with 100% foreign ownership.
A former JV (equity or cooperative) is now either an LLC or JSC, depending on its shareholding structure.
Why Choose Limited Partnership?
Choosing a Limited Partnership offers strong flexibility in management and capital structuring — making it the preferred vehicle for funds and joint ventures.
Flexible liability structure
Combines risk-taking GPs and protected LPs
Pass-through taxation
Profits taxed at the partner level
No minimum capital requirement
Contribution can be cash, property, or IP
Ease of fundraising
Ideal for pooling capital from multiple investors
Confidential ownership
LPs need not be publicly listed in some filings
Widely used for investment funds
Compliant with local fund registration practices.
Who Should Consider Limited Partnership?
A Limited Partnership is suitable for entities and investors who seek investment flexibility, clear risk boundaries, and tax efficiency.
Investment Funds
Best for venture capital and private equity firms pooling multiple limited investors under one management structure
Project-Based Businesses
Useful for real estate, media, or R&D projects requiring capital contributions from multiple investors with varying roles.
Joint Ventures
Ideal for foreign and domestic investors seeking structured collaboration with shared returns but defined responsibilities.
Professional Partnerships
Common for law, finance, or consultancy firms combining professional management (GPs) with passive backers (LPs).
China Limited Partnership Registration Procedure
1. Preparation
Define partnership roles, responsibilities, and capital structure.
- At least one general partner (GP) and one limited partner (LP)
- Determine capital ratio and contribution type
- Confirm business name and address
2. Partnership Agreement
Draft the Partnership Agreement to govern relations between GPs and LPs.
- Specify contribution methods, management rights, and profit distribution
- Define liability, withdrawal, and transfer conditions
- Include dispute resolution clauses
3. Registration
Submit the registration to the AMR and obtain your Business License.
- File agreement and application
- Obtain Business License
- Register seals
4. Post-Registration Filings
Complete post-filing procedures to enable business operation.
- Tax and banking registration
- Accounting record setup
- Investment fund or SAFE filing (if foreign capital involved)
Timeline
Planning & Structuring
Determine the roles of general and limited partners, capital contributions, and profit allocation.
- Estimated time: 1–2 weeks
Registration & Filing
Apply with the Administration for Market Regulation (AMR) and complete registration filings.
- Estimated time: 2–3 weeks
Post-Registration Setup
Open bank and tax accounts, and prepare to commence operations or investment activity.
- Estimated time: 2–3 weeks
Basic Documents required for LP
1. Foundational Records
- Partnership name approval notice
- Registered address certificate
- Partner ID / license copies
2. Governance Records
- Partnership Agreement
- GP and LP appointment documentation
- Capital contribution confirmation
3. Financial Records
- Tax registration certificate
- Bank account documentation
- Accounting and compliance records
WHAT DO YOU GET
Business License
Proof of legal entity status issued by the AMR
Bank Account Setup
Allows capital inflow and partnership transactions.
Compliance Records
Post-registration filings and ongoing reporting documentation.
Tax Registration Certificate
Authorizes tax filing and income reporting.
Partnership Agreement
Defines partner roles, responsibilities, and profit allocation
Registered Partner List
Official record of general and limited partners.
All-In-One LP Entry Package
Our LP Incorporation Package helps foreign investors establish a fully independent legal entity in China.
Under the 2023 Company Law, a LP enables shareholding, capital raising, and long-term operations with transparent governance and full regulatory compliance.
LP Registration
LP registration securing your business certificate, registered address and bank accounts.
Tax & Accounting Compliance
China accounting system setup. Monthly, quarterly & yearly reporting. Corporate annual tax return.
Employer of Record
We take care of contracts, payroll, benefits, and HR administration.
LP FAQs
What is a Limited Partnership (LP) in China?
A Limited Partnership is formed by at least one General Partner (GP) and one or more Limited Partners (LPs).
GPs assume unlimited liability, while LPs are liable only up to their capital contributions.
What law governs Limited Partnerships in China?
LPs are regulated by the Partnership Enterprise Law of the People’s Republic of China (2017 Revision), overseen by the Administration for Market Regulation (AMR).
What is the difference between a Limited Partnership and a General Partnership?
In a General Partnership, all partners share unlimited liability.
In a Limited Partnership, only the general partner bears unlimited liability, and limited partners’ risk is capped by their investment.
Can foreigners establish a Limited Partnership in China?
Yes. Foreign individuals and entities can form LPs under the Administrative Measures for the Establishment of Partnerships by Foreign Enterprises or Individuals (2010).
They can act as either GPs or LPs.
Can foreign investors own 100% of a Limited Partnership?
Yes, full foreign ownership is allowed unless the business operates in a restricted sector listed in China’s Negative List for Foreign Investment.
What is the main advantage of a Limited Partnership?
- Combines flexibility with clear liability separation
- Allows multiple investors to pool capital
- Pass-through taxation at partner level
- Simplified setup compared with a company structure
What is the main disadvantage of a Limited Partnership?
- General Partners bear unlimited liability
- GPs must manage the business, while LPs cannot engage in daily operations
How is a Limited Partnership taxed in China?
An LP is not taxed at the entity level.
Profits are distributed to partners, who pay Individual Income Tax (IIT) or Enterprise Income Tax (EIT) according to their type.
Is a Limited Partnership a separate legal entity?
No. It is not a legal person but enjoys independent accounting and tax status.
What are the required documents to register an LP in China?
- Signed partnership agreement
- Partner ID / business license copies
- Registered address certificate
- AMR registration form
- Bank account and tax registration proof
What is the minimum capital for a Limited Partnership?
There is no statutory minimum capital. Contributions can be made in cash, property, IP, or land-use rights as agreed in the partnership contract.
What type of companies use the LP structure in China?
Commonly used by venture capital funds, private equity firms, real estate funds, consulting firms, and joint investment projects.
Can a Limited Partnership hire employees?
Yes. Once registered for tax and social insurance, the partnership can hire employees under its name.
How are profits distributed in a Limited Partnership?
Profit allocation follows the Partnership Agreement, which can be flexible and not strictly proportional to capital contributions.
Can a Limited Partnership be converted into a company?
Yes. By unanimous partner consent, the LP can be restructured into a Limited Liability Company (LLC) through re-registration with the AMR.
What’s the difference between an LP and an LLC in China?
- LP: partnership model, pass-through taxation, GP/LP liability split.
- LLC: corporate model, independent legal person, limited shareholder liability.
What is the “6-year rule” in China, and does it affect LPs?
The “6-year rule” primarily applies to determining tax residency — not directly to LP formation.
Foreign partners residing in China for 6 consecutive years may become Chinese tax residents for global income purposes.