In recent years, it has been the talk of the town going on around the blockchain technology, we constantly hear “this Bitcoin”, “that Ethereum”. You would be hard pressed to go to a social gathering or turn on the nightly news without a cryptocurrency discussion. Most all major television channels now have a segment in their finance or business shows on cryptocurrencies and blockchain. Whether we want to believe it or not, the blockchain may become the next version of the Internet – Web 3.0, which may affect our lives more than we imagine today. This is similar to the early years of the Internet or smartphones, and today we cannot live without them.
From a revolutionary mass hobby, this nascent industry has grown into a global industry with cryptoassets valued at more than 400 billion dollars and will grow significantly over the next decade, as many participants believe. Needless to say amidst the hyper growth and volatility, a group of insiders has made millions, even billions in the process.
Currently, the industry is on the rise, and useful products and services are starting to hit the streets, and this will lead to even greater growth. Therefore, investments in cryptoassets are becoming increasingly popular and accessible to the mass market, their ease of management is ensured, and the choice of optimal assets for investment and management becomes possible.
However, before investing your money in cryptoassets, you need to be aware of the associated risks. Some still consider cryptocurrency as the so-called “bubble”. Despite constant conversations about it, the cryptocurrency continues to exist and actively develop. Such a currency is not supported by anything, but as long as the government has not adopted laws on regulation, investment in cryptocurrency is a profitable business.
In many countries, there are no rules governing the circulation of cryptocurrencies. There is no way to pay income taxes. In addition, there are countries where digital money is prohibited.
However, despite some risks, a fairly wide range of entrepreneurs are interested in cryptocurrency investments. This is a great chance to make good money, so one should use it while there is such an opportunity.
One of the attractive financial instruments for managing the business and making joint investments in various types of assets are limited partnerships.
Considering that the Grand Duchy of Luxembourg is characterized as an exceptionally favorable business environment, many businessmen from around the world are interested in the ability to conduct their businesses here. To do this, they join local partnerships or organize independent structures. The most popular partnerships are limited partnerships. Such partnerships are very functional in structuring investments in the private sphere, asset protection, financial planning, ensuring the functioning of real estate projects or closed investment business.
Let’s consider three popular types of partnerships in Luxembourg – SECA (SCA), SECS (SCS) and SCSp.
All these are partnerships with limited liability, of which only SCSp does not have legal personality separately from its partners, that is, it is not a legal entity. SCSp is formed by agreement between the partners, which provides a more flexible structuring compared to SCS and other corporate organizations in Luxembourg.
The primary distinction between a limited partnership company (SECS) and a SECA: the interest shares of SECS are not freely tradable, unlike SECA shares.
All three types of partnerships can be used in practice for all types of businesses. Their establishment requires at least two partners, namely one general partner and one limited partner. The main difference between the partners lies in their obligations: general partners have joint and several liability for the commitments of the company; the limited partners are only liable up to the level of their contributions.
The difference between these 2 types of partners has 2 main advantages, which allows: general partners to increase the capital of the company without diluting their powers; limited partners to support a company (financially) without facing unlimited risks. Therefore, it is particularly interesting for young entrepreneurs with innovative ideas who need financing from other parties, as well as for entrepreneurs that wish to invest in a company whilst limiting their liability. It is also suitable for small and medium-sized family businesses (transfer to a minor heir is possible).
Partnerships in Luxembourg can be both physical and legal entities, and their residency is irrelevant. As for the authorized capital of the Luxembourg partnerships, there are no requirements for it, since it consists of the amounts of deposits of each of the partners (except SECA – here the minimum share capital is 30,000 euros, of which at least 1/4 must be fully subscribed and paid on the date of founding). The capital of the partnership is distributed in the form of shares, and participants do not have the right to transfer their shares to third parties unless there is a corresponding decision of the General Meeting.
When establishing a partnership, a partnership agreement is created, which specifies the issue and compensation of partnership shares, the distribution of profits and losses between partners, the right to vote, the transfer of partnership shares, etc.
The advantage of SCSp is that this type of partnership is not subject to income tax, municipal tax and net wealth tax at the level of partnership in Luxembourg (as a general rule). Revenues can be reclassified as commercial if at least 5% of the capital belongs to a partner with unlimited liability, which is a legal entity.
And finally: whatever type of partnership you choose, remember that it should be entirely voluntary. The criterion of profitability in partnership is the need for partners in each other and the financial performance of the business. A partnership is profitable when it allows for achieving financial goals.