Laws on Partnerships for Start-Ups: What You Need to Know


When starting up a business, sometimes there is that friend, relative or even simply a colleague that shares the same passion and interests as you, that makes you realize it would be ideal to partner with that individual or all those individuals to startup the business together. 

What is Partnership?

Partnership is the legal relationship between you and that individual or those individuals to come together. 

Types of Partnership

  1. General Partnership and
  2. Limited Liability Partnership

Partnerships may be General Partnership, Limited Partnership or Limited Liability Partnership (Lagos State). 

General Partnership

With regards to the general partnership, partners bear joint liability and the liability of the partners are not limited. This means that one partner is fully liable for the actions, omissions, misconducts, negligence and consequences therein of the other partner. General Partnership cannot consist of more than 20 members.

Limited Liability Partnership

On the other hand, the Limited Liability Partnership (LLP) which is creation of the Partnership Law of Lagos State, is a dynamic creation in that it is a mix of both partnership and limited liability companies and may consist of more than 20 partners. Unlike general partnership the liability of each partner is limited to that which they have subscribed to, just like in a limited company. This means that under the LLP one partner is not to be liable for the actions, omissions and consequences therein of the other partner.

However, under the LLP, there is need for at least one general partner, that is, the liability of at least one of the partners is to remain unlimited. Essentially, the LLP comprises of both general partner(s) and limited partners. The Limited liability Partnership must be registered and where it is not registered will be seen in law as a general partnership.

Laws on Partnership

In Nigeria, Partnership is regulated by;

  1. The rules of common law and equity
  2. Companies and Allied Matters Act and the
  3. Partnership Laws of various states.

Difference between Limited Partnership and Limited Liability Partnership (Lagos State)

The limited partnership and limited liability partnership are both similar concepts, in that both can consist of more than 20 partners where the liability of the partners are limited, with at least one partner having unlimited liability. Both are also to be registered.

The difference therein lies in that under the limited partnership, the rights of the limited partner is restricted, as for instance the limited partner cannot be involved in the management of the business, cannot direct how the business operates or be involved in the overall running of the partnership business. The management of the business is the right of the general partner whose liability is unlimited, the limited partner here is essentially a silent partner. Where a limited partners does otherwise and takes part in management, such partner stops to enjoy limited liability and is seen in law as a general partner whose liability to the partnership is unlimited.

On the other hand, the limited partner in a limited liability can fully take part in the management of the partnership business.Additionally, under the LLP, the partnership itself is a person in law which can sue or be sued, in contrast under the limited partnership, the partnership is not a separate legal entity from the partners themselves.

What Happens in the Event of Death or Bankruptcy of a Partner?

Where the partnership is a general partnership, the death or bankruptcy of a partner would bring the partnership to an immediate end by operation of law. Essentially, general partnership does not survive the death or bankruptcy of a partner. On the other hand, under the Limited Partnership or Limited Liability Partnership (LLP), the partnership survivesdeath or bankruptcy of a partner. 

The Necessity for Partnership Agreements

While the foundation of partnership is trust and confidence in each other, a partnership agreement is what stabilizes the foundation of the partnership and mitigates the risks of conflict and consequent collapse of the foundation. Regardless of the type of partnership being entered into, it is advisable for partners to enter into a partnership agreement stating clearly and unambiguously the rights, obligations, profit and loss sharing and responsibility of each partner.

Post Incorporation matters for SME’s


4 comments on “Laws on Partnerships for Start-Ups: What You Need to Know”

  1. I appreciate this write-up, but it hardly discusses Partnerships in Rivers State. Also, do General Partnerships require registration?

  2. Hey Onyi Been so long. How are you? Just saw this and I remembered when you asked and I agreed to be part of the Street Lawyer team. How’s the project coming? Please get back to me ASAP, okay? Stay safe dear.

    Sent from my iPhone


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