The Overlooked Case for Partnerships in Cambodia

When businesses consider entity setup in Cambodia, the default is almost always a private limited company. In most cases, that's appropriate. But both general and limited partnerships are overlooked, even in contexts where they might be a better fit.

Under the Law on Commercial Enterprises (promulgated 2005, amended 2022), Cambodia recognises both general partnerships and limited partnerships as legal structures alongside private and public limited companies. The framework is there. But in practice, the market defaults almost exclusively to the limited company.

That reflects familiarity, investor expectations, and banking requirements — all valid considerations. But it also reflects habit.

When partnerships make sense

I was discussing this recently with a UK-based contractor expanding into Cambodia. In England, he operates through a partnership because it's leaner and offers more flexibility than a traditional limited company. This wasn't always the case, and it’s no secret that UK company law has become more burdensome over time.

For certain types of ventures, relationship-driven businesses, professional services, family-run operations, or closely held joint ventures, a partnership can offer advantages that a company structure cannot easily replicate. These include but are not limited to:

  • Flexible governance. Partnership agreements allow for tailored decision-making frameworks that aren't constrained by company law formalities.
  • Profit-sharing independent of capital contribution. Partners can agree to distribute profits based on contribution, effort, or other commercial criteria — not just ownership percentage.
  • Reduced administrative formalities. Fewer statutory filings, no requirement for board meetings or shareholder resolutions in the same way.
  • Separation of capital and control. Particularly relevant in limited partnerships, where passive investors can contribute capital without taking on management responsibility or unlimited liability.

As of today, Cambodia does not have a limited liability partnership (LLP) equivalent as exists in England and Wales. But I feel that limited partnerships, when carefully structured, can achieve sophisticated commercial outcomes.

The critical point

A company importantly provides statutory predictability and the law prescribes what happens in most situations. However, a partnership can provide structural precision, and the governing partnership agreement can be designed flexibly around the commercial reality of the business.

That precision and flexibility, without the heavy compliance burden, is particularly relevant in Cambodia, where many businesses remain founder-led and relationship-based rather than institutionally managed.

Not a replacement, but an option

While private limited companies will remain the appropriate structure in the majority of situations, external investment, banking requirements, and regulatory expectations often make a company the only viable option.

But partnerships should not be dismissed as outdated or secondary structures without proper consideration. In the right context and with the right drafting, they can be effective commercial tools.

The better question is not "What structure do most people use?" but "What structure best aligns risk allocation, control, tax treatment, governance requirements, and the commercial reality of this particular business?"

This post is for general information and does not constitute legal advice. Specific structures should be assessed based on individual circumstances.