Partnership Formation: Two Forms, Two Kinds of Liability
The law on entrepreneurs distinguishes two forms of partnership. A general partnership is an enterprise whose partners jointly, under a single firm name, carry on entrepreneurial activity and are liable to creditors for the company’s obligations directly and without limitation, as joint and several debtors. This form must have at least 2 partners.
The limited partnership is a mixed model: its partners act jointly under a single firm name, but at least 1 partner — the limited partner, or kommanditist — has liability to creditors limited to the amount of a guarantee sum, while the others — the general partners — are liable directly and without limitation, exactly as in the general form. Alongside the general-part rules, the norms on general partnerships apply to a limited partnership.
The Partner’s Liability and Its Boundary
Article 26 writes the boundary precisely: the kommanditist of a limited partnership and the partners of a limited liability company, a joint-stock company or a cooperative are not liable to the creditor for the enterprise’s obligations. By way of exception, such a person is personally liable where they abuse the legal form of limited liability and the enterprise cannot satisfy the creditor’s claim.
This exception is part of the formation decision: being a kommanditist means limited liability only if the form is used in good faith; being a general partner, by contrast, is a signature for full personal risk.
Contributions and the Kommanditist’s Guarantee Sum
Contributions are the lifeblood of a partnership. Where a partner fails, within the period set by the charter, to perform an obligation to make a charter-prescribed contribution, the remaining partners may decide to expel the violating partner from the general partnership, unless the charter provides otherwise or the company has only 2 partners. In a 2-partner company, non-performance may even become a ground for dissolution.
A partner may demand, in the company’s name, performance of another partner’s contribution obligation and represent the company in court for that purpose; the right to sue exists only if the violating partner has been warned in writing and has not performed within 1 month of the warning.
The kommanditist’s guarantee sum toward creditors is determined by the amount indicated in the register, and the kommanditist answers only to that sum; where the guarantee sum is not fully paid in, the kommanditist is also liable up to the unpaid contribution. If the guarantee sum is returned, it is no longer considered paid in, and creditors may rely on an unregistered increase only in defined circumstances.
The Common Charter and Registration
The charter of an enterprise of any form contains the legal form, the object of activity — which may be indicated as general entrepreneurial activity or as the subject of a specific activity — any agreed restriction on ownership of shares and information on a partners’ agreement; standard charters are approved by the Minister of Justice according to the legal form of the enterprise. A later amendment or cancellation of a standard charter does not, however, by itself obligue an already registered company to amend its own charter — that becomes necessary only where the reason for the change is a corresponding amendment of the law itself compelling the charter to conform to imperative requirements. For registration, the founding agreement and the consents of persons authorized to manage and represent are submitted, except where their will is expressed in the founding agreement itself; Georgian legislation may also establish other prerequisites for registration, so before drafting the formation documents it is essential to verify the requirements in force. The founding agreement of a limited partnership additionally states which partner is the kommanditist and the amount of that partner’s contribution.
Frequently Asked Questions
Below are the most frequent questions about forming a partnership.
How many partners does a general partnership need?
At least 2. In a limited partnership there must be at least 1 kommanditist, the rest being general partners.
How far is the kommanditist liable?
Only up to the guarantee sum indicated in the register; if it is not fully paid in, the kommanditist is also liable up to the unpaid contribution.
What happens if a contribution is not made?
The remaining partners may expel the defaulter; a 2-partner company may even be dissolved; before suing, a written warning and a 1-month period are required.
What is the general partner’s liability?
Direct and unlimited — they answer to creditors in the status of joint and several debtors.
Is limited liability ever pierced?
Yes, by exception: where a person abuses the form of limitation and the company cannot satisfy the claim, they answer personally to the creditor.
How We Help on Legal.ge
The lawyers of Legal.ge help you choose and form the partnership type: we assess who should be kommanditist and who general partner, draft the charter with an exact allocation of guarantee sums and contributions, and carry the registration through. Contact us — the right allocation of liability decides how long the cooperation lasts.