Partnership (China)

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]

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]

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]

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]

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]

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]

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

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

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