A '''partnership''' in the People's Republic of China is a business entity governed by the Partnership Enterprise Law<ref>{{Cite web |title=Order of the President of the People's Republic of China |url=http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |archive-url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |archive-date=10 September 2008}}</ref> 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.
==History== From 1368 to 1911, partnerships with distributive shares were the principal form of a business entity that investors ran coal mines.<ref>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.</ref>
In the modern era, most enterprises were partnerships in the form of general partnerships levying unlimited liability on the partners.<ref name="Fang Liufang 1989 pp. 43-67">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.</ref> In 1933, 41% of factories were run by partnerships and 20% were sole proprietorships.<ref name="Fang Liufang 1989 pp. 43-67"/> After the end of the 1950s centralization of the economy caused the partnership form to vanish for nearly 30 years.<ref>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.</ref> In the 1980s partnerships returned with different names to avoid the sensitive label of private ownership.<ref>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.</ref>
On 1 June 2007, the Partnership Enterprise Law came into force and established partnerships as a legal business entity.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
==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.<ref name="fdi.gov.cn">[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter 1, article2] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref> 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.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter 1, article 3] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
===General partnership=== A general partnership ({{lang-zh|普通合伙}}) may be formed by general partners, who bear unlimited joint and several liability for the debts of the partnership.<ref name="fdi.gov.cn"/>
===Limited partnership=== A limited partnership ({{lang-zh|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.<ref name="fdi.gov.cn"/>
===Special general partnership=== {{See also|Limited Liability Partnership}} A special general partnership ({{lang-zh|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 unlimited liabilities due to the willful misconduct or gross negligence of one partner or a group of partners.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 6, article 55] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref> It is intended as the preferred form of organization for law and accounting firms.<ref>{{Cite journal |last=Lin |first=Lin |date=7 May 2013 |title=Limited Liability Partnership in China - A Long Way Forward |url=https://www.researchgate.net/publication/256062073 |journal=International Company and Commercial Law Review |volume=7 |pages=259-270 |ssrn=2261414}}</ref>
==Establishment== A partnership requires a written agreement between the partners.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter 1, article 4] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref> This written agreement must be submitted to the business registration government body along with the identity of the partners.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter 1, article 9] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
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.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 1, article 14] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
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.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter III, article 61] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
==Liabilities== A partnership must pay all its debts with property contributed to the partnership by the partners.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 4, article 38] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
If the partnership is a general partnership then the partners bear joint and several liability.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 4, article 39] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
A limited partner may not conclude partnership operations nor may such a partner represent the partnership to 3rd parties.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter III, article 68] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
==Capital contributions== A partner may contribute capital to the partnership to garner a share of the partnership's profits or losses.<ref>{{Cite web |title=Law of the People's Republic of China on Partnerships |url=http://english.www.gov.cn/services/doingbusiness/202102/24/content_WS6035f00ac6d0719374af97ae.html |access-date=2022-04-07 |website=english.www.gov.cn}}</ref> 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.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 1, article 16] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
If the partnership is a limited partnership, then the limited partners may not make capital contributions with labor services.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter III, article 64] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
==Distributions== The default distribution scheme of profits or losses follows the proportion to capital contributions made by the partners.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 3, article 33] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref> However, the distribution scheme may follow an informal negotiated agreement or abide by scheme adopted in the partnership agreement.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 3, article 33] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref> If the proportions of capital contributions cannot be discerned, then the profits or losses will be distributed equally by the partners.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 3, article 33] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
The partnership agreement may not distribute all losses or all profits to just one or a group of partners within the partnership.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter II, section 3, article 33] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
==Taxation== The partners shall pay tax on their respective share of the partnership income.<ref>[http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf Partnership Enterprise Law, Chapter 1, article 6] {{webarchive|url=https://web.archive.org/web/20080910000549/http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/BasicLaws/P020061018643910006967.pdf |date=2008-09-10 }}</ref>
==Procedures== The required documents and procedures of partnership enterprise in China<ref>{{Cite web |title=China FIPE: Partnership Enterprise Formation: Shanghai {{!}} Beijing {{!}} Shenzhen {{!}} Hangzhou |url=http://www.pathtochina.com/reg_pe.htm |access-date=2022-04-07 |website=www.pathtochina.com}}</ref>
== References == {{reflist}}
==See also== *Partnership *Partnership taxation *Law of the People's Republic of China
Category:Chinese business law Category:Types of business entity Category:Partnerships