[ESTABLISHING A BUSINESS ENTITY IN NEW ZEALAND] 365
Tax :
Tax :
LPs are fiscally transparent for tax purposes – each limited partner’s income share is taxed according to its own tax status.
Loss limitation rule applies (i.e., limited partners’ tax deductions are limited to their contribution to the LP).
Tax losses can be passed through, utilised or carried forward.
No RWT/NRWT payable.
The LP can register for GST, and as it is a separate legal entity, the LP is liable for GST.
UNINCORPORATED JOINT VENTURE An unincorporated joint venture (JV) is often described as a “creature of contract”. JV exist when an association of participants come together to achieve a common goal, the terms of which are generally recorded in a joint venture agreement or similar contract. You may find this entity option most suitable in the early stages of a business, when there are still uncertainties as to long-term prospects and commitments. JVs operate without specific statutory governance or obligations, relying instead on a combination of common law and legislation for guidance. International law may also play a part if a participant is non-New Zealand resident or if the business of the JV is to take place (either wholly or partly) outside of New Zealand.
A JV is very similar to a partnership. Some of the differences are however significant, most notably the joint and several liability that exists between partners in a partnership. Care must therefore be taken to ensure that the joint venture agreement is carefully drafted so as to be consistent with the characteristics of a JV and not otherwise deemed to be a partnership. A key characteristic differentiating a JV from a partnership is that participants in a JV maintain their independence. A common reason that a JV may be deemed to be a partnership (where that may not have been the parties ’ intention) is when an element of joint management or liability exists. Notable advantages and disadvantages of JVs are as follows:
Advantages
Disadvantages
Flexibility and freedom in drafting joint venture agreement – no statutory requirements. Subject to the joint venture agreement, no joint liability (as is the case with partnerships). No registration requirements. No statutory ongoing administrative
The JV does not have a separate legal identity. No limited liability protection – participants can be personally sued and held liable (however indemnities can be provided for in the joint venture agreement). There is a very fine line between
ILN Corporate Group – Establishing a Business Entity Series
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