Small partnership (MB)
A small partnership is a private legal entity with limited liability. This means that members are not liable for their assets for the unfulfilled obligations of the small partnership. A small partnership may be established by no more than 10 natural persons (there may be one founder). A small partnership may engage in any activity not prohibited by law.
Although the small partnership does not require a minimum share capital. The members of the small partnership pay contributions (their amount and payment procedure are determined by the members’ meeting) and the small partnership’s profits are distributed in proportion to the member’s contribution (other profit distribution arrangements may be provided).
A small partnership can be established electronically using model founding documents through the self-service system of State Enterprise Centre of Registers (just for electronic signature holders).
- Limited liability of members, in case of business failure, members risk only with their contribution, thus protecting their personal property (for comparison – the owner is liable for unfulfilled obligations of the IP with his personal property);
- The minimum authorized capital requirement does not apply (for comparison – the authorized capital of Limited liability company (UAB) is 1 000 EUR);
- Opportunity to voluntarily leave the business – a member of a small partnership may leave the partnership by withdrawing his contribution, and may also sell or otherwise transfer the membership rights to other persons.
- The profits of a small partnership may be distributed to its members before the end of the financial year. However, if at the end of the financial year the share of the profits of the member is less than the number of benefits received by him, the member of the small partnership must repay the amount in excess of his share of the profits of the year.
- A small partnership can also be established by one person. If necessary, more members can be involved in the process.
- Only a natural person may be a founder/member, in total no more than 10 (for comparison – a shareholder of Limited liability company (UAB) may be both a natural person and a legal person, and the number of shareholders is limited to 249);
- In the absence of clear voting and profit-sharing arrangements, it may be more difficult to resolve disputes between members of a small partnership;
- The accounting of a small partnership is simpler than that of a UAB only in some cases (for example, when the small partnership has no employees or when it is not a VAT payer).