A general partnership in Cyprus is two or more people (or companies) carrying on a business together for profit, registered with the Registrar of Companies under the General and Limited Partnership and Business Names Law, Cap. 116. It is cheap to set up, at €120 to register plus €10 for the name, and the profits are taxed in the partners' hands rather than in the firm's. The catch is liability: every general partner answers for the partnership's debts with their own assets, without limit.
A limited partnership softens that for some members, but at least one partner must still carry full liability.
What counts as a partnership
Section 5 of Cap. 116 defines a partnership as the relationship between persons carrying on business in common with a view of profit. That is a factual test, and it can catch people who never meant to form one. Two friends who run a holiday-letting business together, split the profit and present themselves as a team may already be partners in law, written agreement or not.
Section 6 sets the limits of the test. Owning property jointly does not by itself create a partnership, even if the owners share the rent. Sharing gross receipts does not either. Receiving a share of the profits is evidence that you are a partner, but it is not conclusive: an employee paid a bonus out of profits, or a lender paid interest that varies with profits, does not become a partner for that reason alone.
How many partners, and who can be one
The Registrar's guidance says a partnership must have at least two and no more than 100 partners. A partnership formed to carry on banking business is capped at 10. Partners can be individuals or companies, and a partnership whose general partners are all companies picks up extra filing duties (see below).
Liability: the reason most people hesitate
In a general partnership every partner is a general partner. Each one can bind the firm when acting in the ordinary course of its business, and section 12 makes each partner liable jointly with the others for all the firm's debts and obligations incurred while they are a partner. If a partner dies, their estate remains liable for debts left unpaid, after their personal debts have been settled.
For wrongs, the exposure is wider. Under sections 13 to 15, if one partner causes loss to a third party while acting in the ordinary course of the firm's business, the firm is liable, and each partner is liable jointly and also severally. A client can pursue any one partner for the whole amount. The same applies where a partner misapplies money the firm received from a client.
In practice, your house and savings are within reach if the business fails or your partner gets something badly wrong.
Limited partnerships
A limited partnership, governed by Part II of Cap. 116, has two classes of member. Section 47 requires one or more general partners, liable for all the firm's debts, and one or more limited partners, who contribute a fixed sum of money or property and are liable only up to that amount. A company can be a limited partner. A limited partnership can also have share capital, which makes it a partnership limited by shares.
The protection comes with conditions:
- A limited partner may not take part in managing the business and has no power to bind the firm (section 49). One who does join in management becomes liable as a general partner for debts arising while they do.
- A limited partner cannot withdraw any part of their contribution while the partnership continues. Take money back and you are liable up to the amount withdrawn.
- The limited partnership must be registered as one. Under section 48, an unregistered limited partnership is treated as a general partnership and every limited partner as a general partner.
Section 47(6) states that a limited partnership, with or without share capital, is not a legal person with a separate personality. That is the core difference from a company: the firm's obligations are ultimately the partners' obligations.
Registering a partnership
Section 51 of Cap. 116 gives you one month from the date the partnership is established to register it. The process at the Department of Registrar of Companies and Intellectual Property runs in two stages.
- 1Approve the name. Search the business register (and the trade mark register, since the Registrar rejects names that trade on well-known foreign brands), then apply for approval. The fee is €10 per proposed name, or €30 with the €20 fast-track fee. Restricted words need consent from the relevant authority.
- 2File form Σ1. All partners sign a declaration giving the firm's name, the general nature of the business, the principal place of business, and each partner's full name, nationality and usual residence. Filing can be done through the Registrar's e-filing system (which needs a solemn declaration of signature witness) or by hand or post. The fee is €120, with an optional €40 for faster processing.
Once satisfied, the Registrar publishes the registration in the Official Gazette and issues a certificate of incorporation with the partnership's registration number. Partners' details appear on the public electronic register, so there is no anonymity.
Tax registration, and VAT registration if turnover passes the threshold, is handled separately with the Tax Department.
Keeping the register up to date
Changes to the registered particulars, such as a new partner, a partner leaving or a move of premises, must be notified on form Σ2 within seven days under section 54. Late filing of these changes attracts an administrative charge of up to €50 plus €1 a day, capped at €250 per breach, under section 61A. Failing to file a required return without reasonable excuse is also a criminal offence carrying a fine of up to €50 for each day it continues.
The sharper penalty is in section 62. A partnership that has not registered, or has not filed a required change, cannot enforce its contracts through the courts while the default continues. If a customer refuses to pay, you cannot sue until the position is corrected and the court grants relief. The court can grant it where the failure was accidental, usually at the defaulter's cost.
Every partnership must also keep proper books of account under section 64. Failing to do so is an offence punishable by a fine and up to a year in prison.
Where the sole or all general partners are companies or partnerships, section 64A applies parts of the Companies Law: the partnership files an annual return (form Σ5) with financial statements prepared under IFRS within six months of its year end. An ordinary partnership of individuals does not file accounts with the Registrar.
How partnership profits are taxed
A Cyprus partnership is tax-transparent. It does not pay income tax as an entity. Each partner reports their share of the profit and pays tax on it personally, and partners must show that share on their own tax return.
For individuals, that means the normal personal scale for 2026: nothing on the first €22,000, then bands of 20%, 25% and 30%, with 35% above €72,000. A corporate partner pays corporation tax at 15% on its share. Our income tax calculator gives a rough figure for an individual partner. Partners are generally treated as self-employed for social insurance and GHS contributions, so check the current rates with an accountant before agreeing how profits are drawn.
A company, by contrast, pays 15% on its profit and the owners may pay again on dividends. Which is cheaper depends on the profit level and how much you draw.
What the law fills in if you have no agreement
Cap. 116 supplies default rules where the partners have not agreed otherwise. Section 26 says partners share capital and profits equally and contribute equally to losses, whatever each put in. Every partner may take part in management, and no partner is entitled to a salary. Nobody can be admitted as a new partner without everyone's consent. Ordinary disagreements are settled by majority, but changing the nature of the business needs unanimity.
Dissolution defaults matter just as much. Unless the agreement says otherwise, a partnership for an indefinite term ends when any partner gives notice (section 34), and it dissolves automatically on the death or bankruptcy of any partner (section 35). Under section 37 a partner can ask the court to dissolve the firm for persistent breach of the agreement, conduct that damages the business, or where the business can only be run at a loss.
Most of these defaults suit nobody. A written partnership deed should deal with profit shares, drawings, capital, decision-making, what happens when a partner leaves or dies, and restrictions on competing afterwards (our piece on non-compete clauses covers what a court will enforce).
Partnership or company?
A partnership suits professionals and small family businesses that want low running costs and straightforward tax. A limited company under Cap. 113 costs more to run, with an annual levy, audited accounts and annual returns, but it is a separate legal person and shareholders' liability stops at their shares. If the business takes on staff, premises or significant contracts, that protection is usually worth the extra cost. Our guide to setting up a company in Cyprus covers that route.
Setting up a business with a partner? Browse corporate and company lawyers in our directory to have a partnership deed drafted, or compare options with advocates in Nicosia or Limassol. Confirm the current registration and tax position with a qualified Cyprus lawyer before you sign.