In this article:
- General Characteristics of a Singapore Limited Liability Partnership (LLP)
- Powers of a Limited Liability Partnership (LLP)
- Registration Requirements for a Limited Liability Partnership (LLP)
- Advantages and Disadvantages of Registering a Singapore LLP
- Why hiring Corporate Services Singapore is Beneficial to your Business
A Limited Liability Partnership (LLP) in Singapore pertains to a business entity which fuses the most desirable characteristics of a Company and a Partnership, that is, it has the ease of set up and flexibility of an ordinary partnership and the separate juridical personality and limited liability attribute of a company. Because of these features, a Limited Liability Partnership is often preferred by chartered professionals such as consultants, accountants, lawyers and architects who collaborate with the goal of increasing their service capacity while maximising their strengths and limiting their liabilities.
General Characteristics of a Singapore Limited Liability Partnership (LLP)
Limited Liability of Partners
As its name suggests, in a Limited Liability Partnership, the partners’ liabilities are only to a limited extent. This means that partners are insulated from and cannot be held personally liable for debts or obligations beyond the contributions given by them.
The general rule that the liability of limited partners is only up to the extent of their contribution, however, is subject to the exception that the liabilities incurred are not arising from their own gross negligence or wilful misconduct.
To illustrate, a Limited Liability Partnership indebted by an amount of S$500,000 by virtue of a contracted loan or a legal proceeding, and later on unable to pay due to insufficient assets, may not hold the personal assets of a limited partner accountable for the unpaid debt, except only to the extent of the S$100,000 initial investment/capital given by him to the partnership.
A Limited Liability Partnership (LLP) has its own Juridical Personality
A Limited Liability Partnership has a juridical personality separate and distinct from its partners. This business entity, by legal fiction, is constituted as a body/juridical person endowed with certain rights and obligations upon compliance with certain conditions imposed by the law.
Partners may be a natural person or juridical entity
Unlike a company whose directors must be a natural person, a limited partnership may consist of individuals or corporate entities.
No minimum contribution required
One who desires to be a limited partner is not required to contribute a minimum capital amount but is mandated to disclose to the Registrar the amount of his contributions. He is likewise required to notify the Registrar of his intent to withdraw his capital contributions in the future.
Powers of a Limited Liability Partnership (LLP)
Among the powers of a Limited Liability Partnership are as follows:
It can sue and be sued in its own name
A Singapore LLP has a distinct juridical personality which allows it to engage in litigation and become a plaintiff or a defendant in courts of justice to prosecute its own claims or defend any claims against it.
It can exercise proprietorial rights
A Singapore LLP can purchase movable and immovable properties and register its ownership thereof under its own name.
It enjoys perpetual succession
This means that the existence of a Limited Liability Partnership still continues until it winds up its affairs voluntary or pursuant to court order and is not dependent on the lifespan of its limited partners. It being vested with a separate juridical personality, it perpetuates notwithstanding a partner’s resignation or demise.
Registration Requirements for a Limited Liability Partnership (LLP
Registration of a Limited Liability Partnership is made with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore. To save time and ensure that the process is done in compliance with the relevant statures such as Companies Act and Law on Partnership, both local and foreign entrepreneurs are advised to procure the services of a professional corporate services firm.
Listed below are some of the statutory requirements when registering a Limited Liability Partnership in Singapore:
- There must be at least two partners (if natural person, must be of legal capacity) who shall constitute the partnership.
- There must be a manager whose qualifications are as follows: must be a natural person and an ordinarily resident in Singapore and at least 18 years of age. If a partnership consists of foreign partners unwilling to relocate, then appointment of a local manager is necessary. An LLP manager must not be disqualified under relevant statutes, meaning he must not be:
- Declared by the court as an undischarged bankrupt
- An unfit manager of an insolvent Limited Liability Partnership
- Previously a manager of a former Limited Liability Partnership which has been involuntarily closed/wound up in order to protect national security or interest
- Convicted of offences involving fraud or dishonesty, or other offences in relation to the formation of a Limited Liability Partnership.
- The Limited Liability Partnership must have an actual physical address in Singapore.
- On-time submission of pertinent documents listed below is also required:
- Proposed name of Limited Liability Partnership which must be approved
- Particulars of limited partners as well as their managers (may present Singapore ID or foreign passport
- Residence of the limited partners and managers
- Registered Office address of the partnership in Singapore
- Declaration of compliance
- Written Consent to Act as Manager
- Statement of Non-Disqualification to Act as Manager
- In case a corporate entity is a partner, company incorporation details are required (registration number and address)
Advantages and Disadvantages of Registering a Singapore LLP
The table below summarises the benefits as well as the drawbacks that come with setting up a Limited Liability Partnership:
Annual Filing Requirements for Singapore LLP
Under Singapore’s Limited Liability Partnerships Act, an LLP is required to maintain proper accounting and other business records that explain its transactions and financial position. The LLP must prepare annual financial statements including a profit and loss account and balance sheet.
However, compared to private limited companies, LLPs are not required to file or submit their financial statements and accounts with ACRA on an annual basis. The financial records only need to be retained by the LLP for five (5) years as per the statutory requirements.
To summarise, the key annual filing requirements for an LLP in Singapore are:
Maintain accounting and other business records
Prepare annual financial statements
Retain accounting records for five years
There is no mandatory filing of the financial statements or accounts with ACRA annually for LLPs. Only the proper maintenance and retention of records is required by the law.
Opening Bank Account for Singapore LLP
After company incorporation, the next step is opening a business bank account. It can be done at any local or international banks operating in Singapore.
The LLP can open bank accounts in multiple currencies or a single multi-currency account based on its business needs. Banks usually require the following documents for opening an LLP bank account in Singapore:
Completed account opening application form
LLP Partners’ Resolution identifying the authorised signatories
Certified true copies of NRIC/passport of all partners and authorised signatories
Copy of LLP Partnership Agreement
Latest profile print-out of the LLP
The partner’s resolution is important to specify who can operate the account on behalf of the LLP. Banks will require identity documents and address proof for all partners and authorised signatories.
The account opening process may take one to four weeks depending on the bank’s due diligence process. Many banks in Singapore offer Internet banking and other services to facilitate easy operations for LLP bank accounts.
Taxation for LLP Partners
LLPs in Singapore are considered tax-transparent entities, unlike private limited companies which are separate legal entities for tax purposes. It means that an LLP itself does not pay taxes on its income and profits. Instead, the profit share of each partner is taxed as part of the partner’s personal income.
If the partner is a lone person, their share of LLP income is taxed at the prevailing personal income tax rates in Singapore based on their tax residence status.
If they are a corporate entity, then its profits share from the limited liability partnership is taxed at the corporate tax rate applicable to that entity.
One disadvantage of this tax treatment for LLPs is that they cannot enjoy the corporate tax exemptions and incentives that are available to private limited companies in Singapore. The partners also do not get the benefit of lower corporate tax rates.
Members and Management of a Singapore LLP
An LLP requires at least two (2) partners, with no maximum limit. They can be individuals or corporate entities. A partner ceases to be such upon events like death, dissolution, or resignation with 30 days’ notice or as specified in the LLP agreement.
Induction of a new partner necessitates consent from all current partners of the LLP. Most other decisions are made based on majority voting rights. Every partner has one vote.
Compared to private limited companies, LLPs do not appoint directors, shareholders, or company secretaries to manage the firm. The partners jointly own and manage the operations of the LLP. However, a minimum of one manager must be appointed for the LLP who meets the eligibility criteria (i.e., Singapore citizenship, permanent resident status or is ordinarily residing in Singapore, and over 18 years old).
Why hiring Corporate Services Singapore is Beneficial to your Business
Before making a crucial business decision to establish a Limited Liability Partnership in Singapore, make sure you seek professional guidance from licensed incorporation experts. If you want to know more about setting up a Limited Liability Partnership in Singapore, and a detailed overview of how it works, including the statutory requirements under Singapore Law, contact Corporate Services Singapore today. We can help you make an informed decision regarding the business structure that best suits your business.
FAQs
Who owns assets in an LLP?
An LLP can own assets and property in the LLP’s name. The assets belong to the LLP as a separate legal entity.
Is it better to have a partnership or LLP?
LLP is generally better than a partnership as it offers limited liability protection to its partners, unlike a traditional partnership where partners have unlimited personal liability.
Who controls an LLP?
The partners jointly control and manage the LLP. There are no directors or shareholders like in a company.
Does an LLP have members or directors?
An LLP has members who are called partners, not directors.
Who cannot be a member of a limited liability partnership?
Undischarged bankrupts cannot be members without approval from the Court of Official Assignee.
Can you have one person in an LLP?
No, an LLP requires a minimum of two partners to be registered.
How many members does an LLP have?
An LLP must have at least two partners/members. There is no maximum limit on the number of partners.
