GMC Limited Partnerships and LLPs for Funds, Family Capital and Professional Firms

Summary

• GMC has two partnership vehicles with statutory backing: the limited partnership under the Limited Partnerships Act 2026 (general partners with unlimited liability, limited partners liable only to their agreed contribution, no separate legal personality) and the limited liability partnership under the LLP Act 2026 (a body corporate with perpetual succession whose partners are not personally liable for its obligations).
• Both are administered by the Gelephu Corporate Registration Office (GCRO), both need a local presence (an LLP manager or, where required, an LP local manager ordinarily resident in GMC), and both are exempt from business name registration.
• Both are tax transparent. Income Tax Act 2025 s. 36 taxes each partner on his or her share; s. 36A applies that treatment to LLPs and s. 36C to limited partnerships, each with a "contributed capital" cap on loss relief for LLP partners and limited partners.
• The dedicated fund exemption for partners of an approved limited partnership whose funds are managed in GMC by a fund manager (s. 13OA) exempts prescribed income of those partners; no approval may be granted after 31 December 2029.
• Outside that exemption, the tax position of a GMC partnership rests on the partner-level rates: 15% for corporate partners (s. 43(1)(a)) and 0% for non-citizen individuals on income derived on or before 31 December 2030 (s. 43(1)(ba)).

Why partnerships matter in GMC

Companies dominate GMC structuring, but three groups regularly need something else. Fund sponsors want passive, liability-capped investors taxed on a look-through basis. Families want a holding structure that keeps control with a few while admitting the next generation passively. Professional firms want limited liability without corporate formalities. The Limited Partnerships Act 2026 (Law No. 3 of 2026) and the Limited Liability Partnerships Act 2026 (Law No. 2 of 2026) supply the vehicles; the Income Tax Act 2025 sets the tax treatment.

Throughout, "$" means United States dollars, which is what every dollar reference in these Acts means (LP Act s. 2A; LLP Act s. 2A).

The limited partnership: LP Act 2026

Structure

A limited partnership consists of one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is capped at their agreed contribution (LP Act s. 3). The Partnership Act 2026 and the common law apply to it unless inconsistent with the LP Act (s. 4). It is not a separate legal person; the general partner contracts and holds assets on its behalf.

The limited partner must stay passive

The price of limited liability is non-participation. A limited partner must not take part in management; if it does, it becomes liable as a general partner (s. 6). The First Schedule lists safe harbours that are not management: contracting with the partnership, acting as its agent or employee, consulting or advising, investigating the accounts, acting as surety, enforcing the partnership agreement, attending meetings, voting on dissolution, asset sales, admission or withdrawal of partners and investments, commencing proceedings if the general partners refuse, and winding up. For a fund, this list is what lets an investor advisory committee function without exposing investors to unlimited liability.

Contributions and withdrawals require general partner approval (s. 7), and the death or bankruptcy of a limited partner does not dissolve the partnership (s. 8).

Registration and local presence

GCRO administers the Act (s. 9). An unregistered limited partnership is treated as a general partnership (s. 10), so registration is what creates the liability cap. A general partner lodges the registration statement giving the name, nature of business, principal place of business, partners and their designation, any local manager and the term (s. 11); GCRO issues a notice of registration and certificate, with validity and renewal set by the Registrar (s. 12). The name must contain "limited partnership" or "LP" (s. 16), and changes, cessation or dissolution must be notified within 14 days (ss. 18–19).

Where every general partner is resident outside GMC without a valid work visa or pass, the Registrar may require a local manager, who bears the general partner's obligations (s. 28). Accounting records must be kept for five years (s. 27). An unregistered or non-compliant LP cannot enforce its contracts, subject to court relief (s. 30). The Business Names Registration Act does not apply to a registered LP (s. 42).

The limited liability partnership: LLP Act 2026

A body corporate with partnership internals

An LLP has separate legal personality and perpetual succession (LLP Act s. 4) and may sue, be sued and hold property in its own name (s. 5). Its obligations are solely its own: a partner is not personally liable for them, save for the partner's own wrongful act (s. 12). Each partner is an agent of the LLP (s. 13). Partnership law does not apply except as provided (s. 10), specified Companies Act 2025 provisions do (s. 9), and partners' rights follow the LLP agreement or the First Schedule defaults (s. 14).

Formation and management

Two or more persons, individuals or bodies corporate (s. 11), may register an LLP for any lawful business with a view to profit (s. 18). The name must end with "limited liability partnership" or "LLP" (s. 22). An LLP must keep at least two partners; trading with fewer for more than two years makes the sole partner personally liable (s. 28). It must have at least one manager who is a natural person aged 18 or over and ordinarily resident in GMC, meaning resident or holding a valid work visa or pass (s. 29), and a registered office in GMC (s. 32). It must file a declaration of solvency within 15 months of registration and every 15 months thereafter (s. 30), keep accounting records for five years (s. 31), notify changes within 14 days (s. 34) and keep a non-public register of controllers (Part 6A, ss. 42–57). An existing firm or private company may convert into an LLP (ss. 26–27).

Tax: transparency under ss. 36, 36A and 36C

The general rule

Section 36(1) of the Income Tax Act 2025 provides that where a trade or business is carried on by two or more persons jointly, "the income of any partner from the partnership for any period is deemed to be the share to which the partner was entitled during that period in the income of the partnership", included in the partner's own return (s. 36(1)(a)) and computed as though it were the partner's own trade (s. 36(1)(b)). The partnership is a computation vehicle, not a taxpayer.

LLPs: s. 36A

Section 36A applies the same treatment to an LLP: all its activities "are treated as carried on in partnership by its partners (and not by the partnership as such)" and its property is partnership property (s. 36A(1)). References to a "company" in the Act do not include an LLP (s. 36A(2)), although an LLP making investments is treated as a company for s. 10D purposes (s. 36A(3)).

The important limitation is the cap on loss relief: the relevant deductions a partner may claim or transfer must not exceed the partner's "contributed capital" less past relevant deductions (s. 36A(4)), and if contributed capital later falls below deductions already taken, the excess is deemed income (s. 36A(5)). The precedent partner files a return of each partner's contributed capital (s. 36A(8)).

Limited partnerships: s. 36C

Section 36C brings limited partnerships within the partnership provisions (s. 36C(1)) and applies s. 10D to an LP making investments as if it were a company (s. 36C(2)). The contributed-capital cap applies to limited partners only (s. 36C(3)–(4)); general partners are not capped. "Contributed capital" means capital actually contributed in cash or kind, excluding loans, and not drawn out, plus undistributed past profits (s. 36C(8)). The precedent partner files a return of contributed capital (s. 36C(6)).

What rate does each partner pay?

Because the partnership is transparent, the rate is the partner's own rate under s. 43. A corporate partner, resident or not, pays 15% on every dollar of its share (s. 43(1)(a), (c)). An individual partner who is not a citizen of Bhutan, whether resident in GMC or not, pays 0% on chargeable income derived on or before 31 December 2030 (s. 43(1)(ba)). For a family limited partnership with foreign individual partners, that time-limited rate is currently the operative result.

The fund exemption in s. 13OA

Section 13OA is the provision written for GMC fund partnerships. Subject to prescribed or specified conditions, it exempts "such income as the designated officer may by regulations prescribe of a partner of a limited partnership" registered under the LP Act and approved by the designated officer or an authorised body, "arising from funds managed in GMC by a fund manager" or by an approved person (s. 13OA(1)). A "fund manager" is a company licensed for fund management under the financial services laws, or exempted from licensing (s. 2). No approval may be granted after 31 December 2029 (s. 13OA(5)). A partner that, with its associates, owns more than a prescribed percentage of the partnership pays a penalty computed by reference to its share, the partnership's income and the 15% corporate rate, unless the Comptroller allows it to reduce its holding within three months (s. 13OA(6)–(7)).

Section 13OA sits alongside its companions, s. 13O (approved companies incorporated and resident in GMC) and s. 13U (approved persons and master-feeder structures, including partnerships). A sponsor can design for them now, and the s. 13OA approval window closes on 31 December 2029.

Regulatory overlay for fund partnerships

Managing a collective investment fund or managing assets is a regulated activity (Financial Services Act 2025, Schedule 1, paras. 59 and 56), and it is the manager, not the fund vehicle, that needs the Financial Services Permission (see our guide to setting up a fund in GMC). GEN 4.5.1(2) requires a Licensed Firm that is a partnership to have its head office in GMC, and GEN 5.5.1(3) relieves a venture capital fund manager from appointing a Finance Officer while retaining the other mandatory appointments.

Using the vehicles

• Fund. GMC LP as the fund, with a GFSO-licensed GMC company as general partner or manager. Investors are limited partners protected by the s. 6 safe harbours. Tax follows each investor's status under s. 43, with s. 13OA available to an approved partnership.
• Family capital. GMC LP with a family-controlled general partner and the next generation as limited partners; contributions and withdrawals need GP approval (s. 7) and a limited partner's death does not dissolve (s. 8). A corporate holding alternative is the s. 13T family-owned investment holding company (see our guide to setting up a family office in GMC).
• Professional firm. GMC LLP: separate personality, no partner liability for firm obligations (s. 12), one resident manager (s. 29), a solvency declaration every 15 months (s. 30), and transparency with the contributed-capital cap (s. 36A).

Practical checklist / Next steps

1. Choose between LP (passive investors, no personality) and LLP (personality, all partners may manage) according to who needs limited liability and who needs to act.
2. For an LP, draft the partnership agreement so that limited partner rights track the First Schedule safe harbours and never stray into management (s. 6).
3. Identify the resident manager (LLP s. 29) or assess whether a local manager will be required (LP s. 28).
4. Register with GCRO before trading; an unregistered LP is a general partnership (s. 10) and a non-compliant one cannot enforce contracts (s. 30).
5. Set up records of each partner's contributed capital from the start, because ss. 36A(4) and 36C(3) cap loss relief by reference to it.
6. If the vehicle is a fund, obtain the manager's GFSO permission first and structure for s. 13OA approval before the 31 December 2029 window closes.
7. Diarise the LLP solvency declaration (every 15 months) and the LP renewal period set by the Registrar.

Frequently asked questions

Is a GMC limited partnership a separate legal entity?

No. The LP Act 2026 creates a partnership of general and limited partners (s. 3) governed by the Partnership Act 2026 and the common law where not inconsistent (s. 4). An LLP, by contrast, is a body corporate with perpetual succession (LLP Act s. 4).

How is a GMC partnership taxed?

The answer is that partnerships are taxed transparently. Each partner is taxed on his or her share of partnership income under Income Tax Act 2025 s. 36, extended to LLPs by s. 36A and to limited partnerships by s. 36C. Corporate partners pay 15%; non-citizen individuals pay 0% on income derived on or before 31 December 2030.

Can our fund LP claim the s. 13OA exemption?

Section 13OA exempts prescribed income of a partner of an approved limited partnership whose funds are managed in GMC by a fund manager, subject to approval by the designated officer or an authorised body. No approval may be granted after 31 December 2029, so structures should be designed for it early.

Can a limited partner sit on an advisory committee?

Yes, if the activities stay within the First Schedule safe harbours, which include consulting with or advising the general partner, attending meetings and voting on specified matters. Taking part in management removes the liability cap (s. 6).

Key takeaways

• The LP Act 2026 gives GMC a passive-investor vehicle with a statutory safe-harbour list; the LLP Act 2026 gives it a body corporate with partnership internals and limited liability.
• Both are transparent for tax, with loss relief capped at contributed capital for LLP partners and limited partners.
• The partner-level rates, 15% for companies and 0% for non-citizen individuals until 31 December 2030, determine the current tax outcome.
• The s. 13OA fund exemption, like ss. 13O and 13U, is approval based; its approval window closes on 31 December 2029.
• Basnet Law can draft LP and LLP agreements and advise on the GCRO registration and GFSO licensing requirements for the manager.

This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.

You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.

References

• Limited Partnerships Act 2026, ss. 2A, 3, 4, 6, 7, 8, 9, 10, 11, 12, 16, 17, 18, 19, 26, 27, 28, 30, 42, First Schedule
• Limited Liability Partnerships Act 2026, ss. 2A, 4, 5, 9, 10, 11, 12, 13, 14, 17, 18, 19, 20, 22, 23, 26, 27, 28, 29, 30, 31, 32, 34, 42–57, 58–62
• Business Names Registration Act 2026, s. 4
• Income Tax Act 2025, ss. 2 ("fund manager"), 10D, 13O, 13OA, 13T, 13U, 36, 36A, 36C, 43(1)
• Financial Services Act 2025, Schedule 1, paras. 56, 59
• GEN Rulebook 2026, rules 4.5.1(2), 5.5.1(3)