Key Takeaways
- An exempted partnership in Bermuda is governed by specific legislation that shapes its legal characteristics and permitted activities.
- General partners typically bear management responsibility and liability, while limited partners contribute capital with a more restricted role.
- Required officers, a partnership agreement, and capital contributions define how the structure is managed and maintained.
- Taxation and compliance treatment, alongside clear advantages and limitations, help non-resident owners decide if this entity fits their needs.
Understanding the Exempted Partnership in Bermuda
An exempted partnership in Bermuda is the structure foreign investors use to run a partnership from a Bermuda base while conducting their actual business outside the island. The "exempted" label means precisely that: the partnership is exempt from rules reserved for locally owned firms, and in exchange it may not trade with the domestic market. Where at least one partner lacks Bermudian status, this is the route available to you, and the Government of Bermuda treats such partnerships as non-resident for exchange control purposes.
This guide explains how the vehicle works for an owner located abroad: its legal footing, who carries liability, how it is taxed, and what formation and upkeep involve. It is most relevant to non-Bermudian fund sponsors, private equity and joint-venture managers, and international holding structures that need flow-through tax treatment recognised in their home jurisdiction.
Legal Basis and Governing Law
Three statutes frame the vehicle: the Partnership Act 1902, the Limited Partnership Act 1883, and the Exempted Partnerships Act 1992, each as amended. The first largely codified English common law on partnerships, and Bermuda practice continues to track English principles closely.
The Bermuda Monetary Authority (BMA) gives consent to formation under the Exempted Partnerships Act. Foreign partnerships moving in may also register under the Overseas Partnerships Act 1995.
Recent amendments matter for tax-sensitive readers. Definitions were inserted by the Corporate Income Tax Act, effective 28 December 2024, and section 7 of the governing Act was substantively amended by BR 100/2025, effective 3 November 2025.
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Defining Features and Legal Characteristics
A Bermuda partnership is not, by default, a legal person separate from its partners. It is a relationship between them, and any claim against a partnership without separate personality is brought in the first instance against the general partner.
You can change this. A partnership may elect to have legal personality and file a declaration with the Registrar of Companies, with the election noted in its Certificate of Exempted Partnership.
That election carries practical weight. It lets the partnership continue despite a partner's retirement, death, or bankruptcy, and it allows charges over partnership assets to be registered at the Registrar through a process modelled on the company regime.
There are no shares here. Partners hold partnership interests reflecting their capital contributions, and Bermuda imposes no minimum capital requirement.
The partnership agreement stays private; only limited details reach the public Certificates. Two trading restrictions define the perimeter of the vehicle:
- No retail trade in Bermuda, including retail trade with another exempted undertaking.
- No business with any person in Bermuda, except under a contract to be performed wholly outside the island, or with another exempted undertaking in furtherance of business carried on abroad.
Partner Liability and the Role of General and Limited Partners
Liability turns on which type of partner you are. General partners manage the firm, sign for it, and are jointly and severally liable for its debts without limit; limited partners contribute capital and are liable only up to the amount each has agreed to contribute.
The protection given to a limited partner is conditional. A limited partner who takes part in management, or whose surname appears in the partnership name, can be treated as a general partner and lose the benefit of limited liability.
This is the central risk for a foreign founder to weigh. At least one partner always bears unlimited personal exposure, which is why sponsors commonly interpose a Bermuda exempted company or LLC as the corporate general partner rather than serve in that role personally.
For a limited partnership that trades in jurisdictions which may not recognise limited liability, electing legal personality can add a further layer of protection for the limited partners.
Ongoing Compliance in Bermuda
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Capital Contributions and Partnership Structure
No minimum capital contribution applies. A limited partnership needs at least one general partner and one or more limited partners, and there is no ceiling on the number of either.
Partners need not be individuals. A general or limited partner may be a body corporate, or a general or limited partnership formed under Bermuda law or the law of another jurisdiction.
Two registers sit behind the structure. A limited partnership register at the registered office records the names and addresses of all limited partners and is open to inspection by any limited partner, but not to the public.
The public record is narrower. The Certificate of Exempted Partnership and the Certificate of Limited Partnership, both filed with the Registrar, name the general partners and their addresses, never the limited partners.
One distribution rule protects creditors: capital may not be withdrawn, nor profit or other compensation paid to a limited partner, where doing so would push the partnership's capital below a prescribed minimum, subject to the exceptions in the Limited Partnership Act 1883.
Management, Partnership Agreement, and Required Officers
Bermuda does not attempt to regulate the internal affairs of a limited partnership in any detail. Governance is left to the partners, and the partnership agreement may be written, oral, or implied by conduct.
One drafting point is mandatory in practice: the agreement should expressly state that Bermuda law governs the partnership. The document itself is private and is filed with neither the BMA nor the Registrar.
Two local elements are required and cannot be waived. Every exempted partnership must keep a registered office in Bermuda, which cannot be a post office box, and must appoint a resident representative whose name and office address are filed with the Registrar.
The resident representative is a working appointment, not a formality. This person, who may be a Bermuda exempted company or LLC formed to act as general partner, can file documents and make applications on the partnership's behalf.
The BMA's consent is required to change a general partner, after which a supplementary certificate is filed with the Registrar; changing limited partners needs no such consent. Changing the partnership name requires the Registrar's consent.
There is no statutory requirement for a local director or a separate company secretary for this vehicle, distinct from the resident representative.
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Typical Uses and Who Chooses an Exempted Partnership
The limited partnership is the favoured form for closed-ended private equity funds, ahead of the company limited by shares, and is also used for other investment funds. The appeal is fiscal transparency: in most investor jurisdictions, including the United States and the United Kingdom, tax falls at the partner level rather than on the partnership, so one partner's position does not disturb another's.
| User | Typical purpose |
|---|---|
| Fund sponsors and PE managers | Closed-ended funds with a corporate general partner |
| Hedge fund general partners | Carry and management vehicles |
| Joint-venture participants | Shared international ventures |
| International holding groups | Flow-through holding where investors need transparency |
For the "carrying on business" test, investment holding counts as sufficient activity. The vehicle also supports lifecycle change: a partnership with legal personality can convert to an exempted company or exempted LLC, and a foreign partnership can continue into Bermuda without creating a new entity, which suits the re-domiciliation of an existing offshore fund.
Taxation and Compliance Treatment
At the Bermuda level, exempted partnerships and their non-resident partners face no income tax, capital gains tax, capital transfer tax, estate duty, inheritance tax, or stamp duty. The flow-through treatment described above is the reason the vehicle is chosen.
One carve-out changes this for the largest groups. Under the Corporate Income Tax Act, a 15% tax applies from 1 January 2025 to the statutory income of Bermuda businesses, including partnerships that are tax resident or have a permanent establishment in Bermuda, where they belong to a multinational enterprise group with annual revenue of €750 million or more. Excluded entities, including certain Bermuda investment funds, fall outside the charge.
The non-resident exchange control designation lets the partnership operate without exchange control rules, acquiring and holding any currency and foreign securities and paying distributions freely.
Economic substance is the compliance area to plan for. Every Bermuda partnership carrying on a relevant activity must meet substance requirements, regardless of whether it has elected legal personality.
- Relevant activities include banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service centre, intellectual property, and holding entity.
- Partnerships formed or registered on or after 1 July 2021 carrying on a relevant activity are subject immediately.
- An entity that is tax resident outside Bermuda, in a jurisdiction not on Annex 1 to the EU list of non-cooperative jurisdictions, is a non-resident entity and falls outside the substance regime, but must still file an annual declaration of its position and evidence its foreign tax residence.
Two further obligations run annually. A beneficial ownership register naming all partners must be kept at the registered office, unless the partnership is a financial institution under the Bermuda Monetary Authority Act 1969, and where relevant activities are conducted a substance declaration is filed with the Registrar.
On the money: an exempted partnership must, on or before 31 January each year, send the Registrar a signed declaration of the general nature of its business together with the annual government fee. The published annual fee is USD $2,350, but the Government of Bermuda amended regulatory fees effective 18 August 2024 to reflect substance, AML/ATF and beneficial-ownership work, with regulatory fees due alongside the annual fee from 2025. Confirm the current combined figure with the Registrar of Companies before you budget.
Advantages and Limitations
The case for the vehicle is consistent for a non-resident owner. It is open to non-Bermudian founders without any local-ownership requirement, delivers transparency recognised by major investor jurisdictions, and carries no Bermuda income, capital gains, withholding, or inheritance tax for non-resident partners, subject to the large-MNE carve-out.
Other strengths are structural rather than fiscal:
- Free operation outside exchange controls, with no limit on currency, distributions, or foreign securities.
- Light statutory regulation of internal governance, left to the partners' agreement.
- A private partnership agreement, with only minimal data on the public certificates.
- Security registration available where the partnership has legal personality.
- Conversion to an exempted company or LLC, and continuance of a foreign partnership into Bermuda, for restructuring and re-domiciliation.
The limitations are equally concrete:
- No business with any person in Bermuda, save a contract performed wholly abroad, and no retail trade on the island.
- Ministerial permission needed to carry on "restricted business" under the Companies Act 1981.
- Unlimited personal liability for at least one general partner, unless a corporate general partner is used.
- Loss of limited liability for any limited partner who joins management.
- A required Bermuda registered office and resident representative, with the associated service cost.
- Audited financial statements unless the partners waive that in the agreement.
- Economic substance compliance where a relevant activity is conducted, and CIT at 15% for partnerships within a €750 million-plus group from 1 January 2025.
Formation Overview
Formation is a two-stage approval handled through a Bermuda law firm, accountant, or corporate service provider; foreign founders cannot file alone. First the proposed name is cleared and reserved with the Registrar of Companies, then an application for consent goes to the BMA.
The BMA application identifies the general partners and includes a personal declaration for any individual who owns, directly or indirectly, 10% or more of a general partner. Consent normally takes about a week, and a partnership can usually be established within 5 to 10 days of submission.
After consent, signed Certificates of Exempted and Limited Partnership are delivered to the Registrar for registration. Each certificate states the partnership name, the general partners and their addresses, and the registered office; the Certificate of Exempted Partnership also names the resident representative and records any election for legal personality.
You will typically need to prepare:
- The name reservation confirmation.
- The Certificate of Exempted Partnership, and a Certificate of Limited Partnership where applicable.
- The partnership agreement, reviewed at the BMA stage but not filed publicly.
- KYC documents for all general partners and any individual holding 10% or more of a general partner.
- The Form Declaring Type of Activity for economic substance, required of every applicant since 1 January 2019.
Government fees comprise a registration fee at formation under the Government Fees Regulations 1976 and the annual fee thereafter. Because the exact formation fee and the post-August-2024 regulatory amounts are not consistently published, confirm both with the Registrar before you commit. The step-by-step process is covered in our separate incorporation guide.
Conclusion
For a foreign sponsor or investor, the Bermuda exempted partnership offers transparent, lightly regulated structure for activity conducted outside the island, which is why it dominates fund and joint-venture work. The trade-offs are real: someone must carry unlimited liability, so a corporate general partner is the usual answer, and substance and beneficial-ownership obligations now require active management. Confirm whether your group falls within the 15% corporate income tax and whether any relevant activity triggers substance testing before you commit to the form. Used with the right general partner and a clear understanding of the domestic-trading limits, it remains a dependable home for cross-border ventures.
How Expanship Can Help Your Business in Bermuda
Expanship supports the full lifecycle of a Bermuda exempted partnership, from name reservation and BMA consent through certificate filing and the appointment of a resident representative, and extends to the broader needs of any foreign-owned structure on the island.
- Formation of exempted and limited partnerships, including corporate general partner structuring
- Registered office and resident representative services
- Corporate income tax assessment and tax registration where applicable
- Economic substance and beneficial-ownership compliance management
- Accounting, bookkeeping, and audit coordination
- Introductions to banking partners
To discuss your structure, contact Expanship Bermuda.
Frequently Asked Questions
Yes. The exempted partnership exists precisely for partnerships where at least one partner lacks Bermudian status, and there is no local-ownership requirement, unlike a local partnership.
For non-resident partners there is no Bermuda income, capital gains, withholding, stamp, or inheritance tax, and the partnership is treated as fiscally transparent abroad. The exception is the 15% corporate income tax applying from 1 January 2025 to partnerships within a multinational group whose annual revenue reaches €750 million or more.
General partners are jointly and severally liable without limit for partnership debts, while limited partners are liable only up to their agreed contribution. A limited partner who joins management, or whose surname appears in the partnership name, risks being treated as a general partner and losing that protection.
Not by default; it is a relationship between the partners unless it elects legal personality and files a declaration with the Registrar of Companies. The election allows the firm to continue through partner changes and to register charges over its assets.
By 31 January each year the partnership must send the Registrar a signed declaration of its general business activity together with the annual government fee, published at USD $2,350. Where a relevant activity is carried on, an economic substance declaration is also due, and a beneficial-ownership register must be kept at the registered office.
BMA consent normally takes around a week, and a partnership can usually be set up within 5 to 10 days of submitting the application. The work must be filed through a Bermuda law firm, accountant, or corporate service provider.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
