Apparently, partnership is one of the most common types of business entities in Singapore. It is divided into 3 categories: general partnership, limited partnership, and limited liability partnership (LLP).
In this article, BBCIncorp will dig deep into the last one. This type of entity has become more and more well-known since its first introduction in 2005 due to its advanced nature over the other two options.
1. What Is a Limited Liability Partnership?
Limited liability partnership in Singapore, or LLP for short, is a body corporate which is registered under the Limited Liability Partnerships Act, which has the following nature:
An LLP is owned and operated, just like a partnership, by at least two partners who can be either:
- An individual; or
- Body corporate, regardless inside or outside Singapore. However, the Act states that any trade union shall be excluded from the list of qualifying partners of an LLP for the purpose of doubt avoidance.
As for the relationship of partners, the mutual rights and duties of the LLP in Singapore, as well as its partners, are regulated by:
- The limited liability partnership agreement; or
- The First Schedule of the Act on Default Provision if there is an absence of such above agreement.
According to Part II of the Act, a limited liability partnership is deemed as a separate legal entity, which means it has a legal personality separated from its partners. Because of this legal status, a Singapore LLP is capable of:
- Suing and being sued under its name;
- Having a common seal in its name;
- Acquiring, owning, holding, developing and disposing of property; and
- Doing and suffering the same as bodies corporate may lawfully do.
Due to the legal status, liabilities of partners in an LLP are only limited to their contributions to its capital. Thus, the partners of an LLP will not hold personal liability for any business debts incurred by the entity.
However, a partner may be personally liable for their own wrongful act or negligence (but not for other partners’ wrongful act or negligence), hence “limited liability”. In other words, a partner is shielded from other partners’ liabilities caused by their wrongdoings.
Furthermore, in the course of the LLP’s operation in Singapore, if a partner holds any liability for a wrongful act to any person who is not another partner, then the limited liability partnership will also be liable to the same extent as that partner. The liabilities of the LLP can reach the full extent of its property.
2. Advantages and Disadvantages of Limited Liability Partnership in Singapore
Below are the strengths and weaknesses of this type of entity sorted from its nature:
- Separate legal entity status: other forms of partnership do not have this status, which makes limited liability partnership outstanding from them.
- Limited personal liability
- Perpetual succession: the Act states clearly that any change of the partners does not affect the existence, rights or liabilities of the Singapore LLP.
- A fewer number of compliance requirements: an LLP does not have to appoint a company secretary, hold annual general meetings, or fulfill some filing requirements such as tax returns.
- Individual decision-making: an individual partner can solely allow the partnership to enter into business agreements without obtaining other partners’ consent. This may cause conflicts among partners when running business.
- Ownership-transfer difficulty: assets, licenses and permits must be transferred individually, which makes an LLP in Singapore cannot be sold as a whole.
- Lack of tax benefits: Tax exemptions available to a private limited company cannot be applied to a limited liability partnership since the way tax applied to an LLP is quite different, which will be discussed later.
3. Procedure of Registration for Limited Liability Partnership in Singapore
The formation process of an LLP in Singapore is not so complex. But first, let’s have a look at what you need to prepare before registering for an LLP in Singapore:
There are some notices regarding management and administration that you should bear in mind:
- Every limited liability partnership in Singapore requires a minimum of 2 partners
- Every limited liability partnership in Singapore must have at least one manager who will take responsibility for the LLP, including annual declaration, publication of the business name and limited liability and registration of change in particulars. The manager must be:
- A natural person;
- 18 years old and having full legal capacity;
- Ordinarily resident in Singapore
According to Part III of the Limited Liability Partnership Act, the following documents must be lodged with the Registrar:
- Proposed name of the LLP;
- General nature of the proposed business of the LLP;
- Proposed registered office;
- Information of the partners:
- If a partner is an individual person: full name, identification, nationality and residential address.
- If a partner is a body corporate: corporate name, place of incorporation, registration number and registered office.
- Information of the manager and the consent to act as manager;
- Declaration of compliance;
3.2. Registration for a Limited Liability Partnership in Singapore
Application for a new LLP registration must be submitted via BizFile+ with the use of SingPass or CorpPass:
1. The first thing is to reserve the name of the LLP with the application fee of $15. An approved LLP name will be reserved for 120 days from the name-approval date. No extended period is allowed.
2. The next step is to submit all the required documents to ACRA with the registration fee of $100. The process of approval may take around 3 working days after the fee payment is made. However, it could be lengthened from 14 to 60 days if the application needs to be referred to another agency for approval or review.
3. Upon successful registration, if that is the case, a Unique Entity Number (UEN) and an electronic file of Business Profile will be sent to the LLP via email. The UEN is used to transact with government agencies as well as must be shown on all invoices, bills and official correspondence.
3.3. Post Registration
- No later than 15 months after the registration and subsequently once in every calendar year at intervals not exceeding 15 months, a declaration of the solvency must be lodged with ACRA by the manager. Particularly, it declares whether the LLP has the ability to pay off debts.
- Every limited liability partnership must keep and maintain accounting and all other records that explain the transactions and financial position of the LLP for at least 5 years. The LLP also has to enable profits and loss accounts as well as balance sheets to be prepared from time to time for fair view from either its partners or the Registrar.
- No renewal of registration is needed for limited liability partnership in Singapore.
- Any change of in particulars of the LLP has to be informed to the Registrar within 14 days.
Taxation of limited liability partnership in Singapore
- Partners who are individual persons will be taxed on their personal income according to the personal income tax rates
- Partners who are corporates will be taxed on their share of income according to the corporate income tax rate
How to close down limited liability partnership in Singapore
There are two options to close down an LLP in Singapore:
4. Key Takeaways
- Limited liability partnership in Singapore is advantageous mainly because of its separate legal status, limited liability and fewer compliance requirements
- In order to establish one LLP, at least two partners and one manager are required. The formation process is quite simple, including name reservation and then registration.
- Two most important compliance requirements are the declaration of solvency (or insolvency) and keeping accounting records.
- There are 2 ways of closing an LLP: winding up and striking off.
Other than limited liability partnerships, there are many more types of business entities in Singapore that you can consider, for example limited company company. If you are ready to incorporate in Singapore, BBCIncorp can also help as we provide one of the best formation services in the field. Message us now!