Limited Partnership in Panama for Non-Resident Owners

Understanding the Limited Partnership in PanamaCopy link to section

A limited partnership in Panama, known locally as the sociedad en comandita simple, sits between a partnership and a corporation. It joins two classes of partner under one structure: general partners who manage and carry unlimited liability, and limited partners who contribute capital and risk only what they invest.

For a foreign owner, the first fact to absorb is that this vehicle is rarely used in modern Panamanian practice. Most international investors and businesses choose the corporation (Sociedad Anónima) or the limited liability company (Sociedad de Responsabilidad Limitada), both of which extend a liability shield to every owner.

This guide explains how the sociedad en comandita simple works, who bears liability, how it is taxed under Panama's territorial tax system, and where it does and does not serve a foreign founder. It is most relevant to investors structuring a managed venture, where a professional general partner runs operations and passive backers supply capital.

Legal Basis and Governing LawCopy link to section

The Commercial Code of Panama (Código de Comercio) governs the formation and operation of partnership companies, including the sociedad en comandita simple. There is no dedicated modern statute for this form comparable to Law 4 of 2009 for the LLC or Law 32 of 1927 for the corporation; the Code remains the primary source.

The exact article range applicable to the limited partnership is best confirmed with Panamanian counsel before you rely on it, since the Code's partnership provisions span several related sections.

Registration takes place at the Public Registry of Panama (Registro Público de Panamá), the state body where legal entities acquire status. The registry is regarded as one of the more modern and efficient in Latin America.

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Defining Features and Characteristics of a Limited PartnershipCopy link to section

The defining trait of this vehicle is its split structure. Two partner classes coexist: comanditados, the general partners who supply management and bear joint, unlimited liability, and comanditarios, who contribute capital, stay out of management, and risk only their contribution.

The firm's name must signal its form. It has to include "Sociedad en Comandita" or one of the abbreviations "S. en C" or "S.Com.".

Capital is held as quota contributions rather than freely transferable shares. A limited partner's interest moves only as the partnership agreement allows, never on an open market.

Whether the entity holds legal personality fully separate from its partners, in the way a corporation does, is not expressly settled in the sources reviewed and should be verified against the Commercial Code text with local counsel.

General Partners and Limited Partners: Roles and LiabilityCopy link to section

General partners run the business. Only they may transact, sign for, and bind the partnership, and only they participate in management.

That authority comes at a cost. General partners are jointly and severally liable for the firm's debts, exposed to the full extent of their personal assets with no cap.

Limited partners occupy the protected position. So long as they act only as providers of funds and stay out of management, their liability is confined to the amount they have contributed; in a bankruptcy, they lose that contribution and nothing more.

The vehicle requires a minimum of one general partner and one limited partner. No residency or nationality restriction on partners was confirmed for this form specifically, consistent with the absence of such limits across Panamanian corporate law generally.

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Capital Contributions and Partnership StructureCopy link to section

Capital here means each partner's contribution, not equity in a corporate sense. General partners typically bring labour, skill, or management capacity; limited partners bring money.

The partnership contract (contrato de sociedad) must state the capital contributed by each partner, the firm's purpose, its name, and its management structure. That contract becomes effective once registered with the Public Registry.

No mandatory minimum capital figure for the sociedad en comandita simple was confirmed in the sources reviewed. Confirm the position with the Public Registry or Panamanian counsel before committing to a capitalisation plan.

Transfer of a limited partner's interest follows the terms of the partnership agreement. Because no tradable shares exist, exit and entry of partners depend on what the parties have agreed in writing.

Management and Decision-MakingCopy link to section

Management vests in the general partner or partners. There is no board of directors, and the limited partners have no role in running the business.

The partnership agreement sets the internal rules: voting thresholds, how profits and losses are split between the two classes, and the limits on the general partner's authority. No annual general meeting obligation was confirmed for this vehicle in the sources reviewed; any mandatory meeting rule should be checked against the Commercial Code.

Any natural or legal person carrying on commercial activity within the country needs an Operation Permit from the Panamanian government, reported to the public administration with a declaration of compliance. A firm operating only outside Panama is in a different position, addressed in the taxation section below.

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Common Uses and Who Chooses a Limited PartnershipCopy link to section

Where this structure earns its place, it does so for managed ventures. It suits arrangements in which significant capital is needed but the investors prefer to stay out of operations: real estate developments, film production, and investment funds are the standard examples.

The logic is straightforward. A professional manager acts as general partner and controls the venture, while passive backers come in as limited partners, contribute funds, and keep their liability capped.

For an offshore business, the appeal has been that overseas profits escape Panamanian corporation tax and can be moved to bank accounts in Panama. That advantage, however, is shared by other Panamanian vehicles that also protect every owner.

In practice the sociedad en comandita simple is rarely chosen. The corporation dominates the offshore and holding market and the LLC the domestic one, both because they shield all participants. A purely passive foreign investor, and any founder who wants management control without personal exposure, will generally be better served by a corporation or an SRL.

Taxation and Compliance TreatmentCopy link to section

Panama taxes on a territorial basis. Residents and non-residents alike pay tax only on income arising in Panama; income earned outside the country is not taxed there.

For a partnership trading abroad, this is the central feature: foreign-source income falls outside the Panamanian tax net. Income from Panamanian sources is a different matter and is subject to corporate income tax at the standard rate of 25 percent, as Panama treats business entities other than sole proprietorships as taxable.

Several registrations and ongoing duties apply where the firm has a Panamanian footprint:

• A tax identification number, the Registro Único de Contribuyente (RUC), obtained from the General Directorate of Income (DGI)
• VAT (ITBMS) registration at 7 percent, required once monthly turnover exceeds USD 3,000 or annual turnover exceeds USD 36,000
• Identification of ultimate beneficial owners, mandatory under Law 23 of 2015
• Retention of accounting records for at least five years, a duty the registered agent shares
• Payment of the annual government franchise tax (tasa única)

Dividends and capital gains are taxed separately, largely through a withholding regime. The precise annual franchise-tax amount for this partnership form was not confirmed apart from the corporation and SRL rate, so verify the current figure with the Public Registry before budgeting.

A specific Panama economic-substance regime aimed at partnerships was not identified in the sources reviewed; confirm current OECD and FATF-driven substance expectations with a specialist adviser.

Advantages and LimitationsCopy link to section

The case for the structure rests on a handful of points. Foreign-source income is untaxed, roles divide cleanly between an active manager and passive investors, the partnership agreement can be tailored freely, and Panama's dollar-based economy and territorial regime remain attractive for international structures.

The drawbacks weigh heavily for most foreign founders, however.

• The general partner carries unlimited personal liability for every partnership debt
• A limited partner who steps into management can lose the liability shield entirely
• The form is rarely used, so professional templates and familiarity are thinner than for the corporation or SRL
• Partner names and contributions appear on the public record, offering less privacy than a Sociedad Anónima
• Overall liability protection is weaker than a corporation or LLC provides
• Some Panamanian banks are less familiar with partnership structures, which can complicate account opening

Taken together, these limitations explain why passive foreign investors and most operating businesses look elsewhere.

Formation OverviewCopy link to section

Setting up the entity is a relatively short process built around one document and one registration. The detailed step-by-step is covered separately; what follows is the outline a foreign founder needs.

1. Draft and notarise the partnership contract (contrato de sociedad) before a Panamanian notary, stating the name, purpose, capital per partner, and management structure
2. Appoint a licensed Panamanian attorney or law firm as registered agent, since foreign founders cannot file directly
3. Register the contract with the Public Registry of Panama to acquire legal status
4. Obtain the tax identification number (RUC) online from the General Directorate of Income
5. Secure an Operations Notice (Aviso de Operación) from the relevant municipality if you intend to trade in the Panamanian market

A government registration fee is payable on filing. A figure of USD 250 is associated with the limited liability company; no separate amount for the sociedad en comandita simple was confirmed, so obtain the current schedule from the Public Registry or the Ministry of Commerce and Industry before you proceed.

Timelines vary with complexity. Straightforward Panamanian company registration commonly completes within roughly two to five business days once documents are submitted, while more involved structures can run longer after know-your-customer approval; treat these as ranges rather than guarantees.

Expect to provide standard due-diligence material for each partner and beneficial owner: a certified passport or national ID copy, proof of address, source-of-funds documentation under Law 23 of 2015, and, for corporate partners, the certificate of incorporation and certificate of legal representation. Ongoing upkeep means renewing the registered agent annually, paying the franchise tax, and keeping accounting records for five years.

ConclusionCopy link to section

The sociedad en comandita simple offers a clean division between a managing general partner and capital-contributing limited partners, with territorial taxation that leaves foreign income untaxed. Its weak point is liability: the general partner is fully exposed, and a limited partner who oversteps into management loses protection. For most foreign owners seeking a shield over all participants, the Panamanian corporation or SRL is the more practical route, and the limited partnership earns its place only in specific managed-investment arrangements. Confirm the unsettled details, capital rules, governing articles, and current fees, with qualified Panamanian counsel before you commit.

How Expanship Can Help Your Business in PanamaCopy link to section

Expanship guides foreign owners through the choice and setup of the right Panamanian vehicle, including the limited partnership where it genuinely fits, and handles the wider work of running a foreign-owned entity in the country.

• Entity formation and selection of the appropriate structure
• Registered agent and registered office services
• Tax registration with the DGI and ongoing filings
• Management of annual compliance and franchise tax obligations
• Accounting and bookkeeping, including the five-year records duty
• Introductions to banks for account opening

To discuss your structure and next steps, contact Expanship Panama.

Frequently Asked QuestionsCopy link to section