General and limited partnerships: when a partnership makes sense instead of an s.r.o.

When the legal form is under consideration, attention tends to focus on the sole trade and the s.r.o. Yet the Commercial Code also offers two so-called partnerships: the general partnership and the limited partnership. They rest on the personal involvement and liability of their partners rather than on capital, which makes them riskier for ordinary business. For certain relationships between partners, however, they fit better than an s.r.o., which would have to be laboriously adapted for the purpose.

Liability: the difference that decides

A general partnership is a company in which at least two persons carry on business under a common business name and are jointly and severally liable for its obligations with all their property (Sections 76 and 86). A limited partnership has two groups: general partners are liable with all their property, while limited partners are liable only up to the amount of their unpaid contribution entered in the Commercial Register (Section 93(1)). In an s.r.o., each member is liable only up to the amount of their unpaid contribution (Section 106). The liability of partners is governed mutatis mutandis by the rules on suretyship (Section 56(6)), so a creditor will as a rule first address the company in writing (Section 306(1)). If the company does not pay, however, a partner in a general partnership or a general partner in a limited partnership answers with their private property as well.

Unlimited liability comes with a restriction that is easily overlooked:

A natural or legal person may be a partner with unlimited liability in one company only.

— Section 56(5) of Act No. 513/1991 Coll. (unofficial English translation)

Anyone who is already a partner in a general partnership, or a general partner in a limited partnership, cannot take that position in another one. In group structures this applies to legal entities too.

Capital and formation

Share capital must be created only in an s.r.o., a joint-stock company and a simple joint-stock company (Section 58(2)). A general partnership therefore needs no minimum capital, and in a limited partnership the Act requires only a contribution from each limited partner of at least the statutory amount (Section 93(3)). Here creditors are protected by the partners’ personal liability rather than by share capital.

The form of the partnership agreement is the same as for an s.r.o. formed in the ordinary way. Since 17 August 2026, the partnership agreement has been drawn up in the form of a notarial deed recording a legal act or a document authorised by a lawyer, and it must be signed by all founders (Section 57(1)). The business name must carry the designation of the form: ‘verejná obchodná spoločnosť’ or ‘v. o. s.’ (Section 77), and for a limited partnership ‘komanditná spoločnosť’ or ‘k. s.’, with the effect that a limited partner whose name appears in the business name is liable as a general partner (Section 95).

Management and the non-competition rule

In a general partnership each partner is the statutory body unless the partnership agreement provides otherwise, and we examine the division of powers in our answer on who acts for a general partnership. In a limited partnership, business management belongs to the general partners alone and only they are the statutory body (Sections 97(1) and 101(1)). A limited partner is not entitled to take part in business management and votes together with the general partners only on other matters (Section 97(2)).

The Act attaches a non-competition rule to this. A partner in a general partnership may not, without the permission of the others, carry on business in the partnership’s field of business, whether for themselves or for other persons, unless the partnership agreement provides otherwise (Section 84). The non-competition rule does not apply to a limited partner unless the agreement expressly introduces it (Section 99).

Taxation at partner level

Partnerships have their own tax regime. For a general partnership the rule is:

The tax base (partial tax base) of a partner of a general partnership is the part of the tax base of the general partnership determined under Sections 17 to 29, unless Section 17j(1) provides otherwise.

— Section 6(7) of Act No. 595/2003 Coll. (unofficial English translation)

That part of the tax base is divided among the partners in the profit-sharing ratio set by the partnership agreement, and otherwise in equal shares, and for partners who are natural persons it is taxed as income from business (Section 6(1)(d)). In a limited partnership only the part attributable to the general partners is taxed in this way (Section 6(8)). Special rules apply where a foreign partner, alone or with related persons, holds at least a one-half interest in the company and the state of its residence treats the company as a separate taxpayer (Sections 17j(1) and (3)). Whether this regime is worthwhile for you is a matter for your tax adviser; how the profit is divided between the groups of partners is explained in our answer on dividing profit in a limited partnership.

A partner’s departure and the stability of the company

An interest in an s.r.o. may be transferred to another person if the memorandum of association permits it and, since 17 August 2026, in the form of a notarial deed or an agreement authorised by a lawyer (Sections 115(2) and (4)). Partnerships are more sensitive. A general partnership is dissolved by operation of law on, for example, the death of a partner where their heir does not become a partner under the partnership agreement, and likewise on bankruptcy of the partner’s property or on delivery of an enforcement order affecting their interest (Section 88(1)); the remaining partners may agree within three months that it continues without them (Section 88(2)). We examine the solutions in the article on departure, death or enforcement against a partner and in our answer on what happens when only one partner is left. A limited partner is more stable: their interest is transferred much as in an s.r.o., as our answer on transferring a limited partner’s interest shows.

Who partnerships are for

A general partnership suits a small team of partners with complete mutual trust who want simple rules without capital and are prepared to bear the risk personally. A limited partnership is built for a relationship in which one partner manages the business and bears liability while the other puts in money and wants the risk contained, including family businesses in the course of succession. Where the general partner is not to be an individual but an s.r.o., a particular structure arises, described in the article on a limited partnership with an s.r.o. as general partner. For most other purposes the s.r.o. remains the more practical option.

We will prepare a comparison for your particular plans as part of our choice of legal form service. If you decide on a partnership, we will draw up the partnership agreement and file the application for entry in the Commercial Register as part of our forming a limited partnership and forming a general partnership services.