In Singapore, a Limited Liability Partnership (LLP) is an increasingly popular business structure, especially among professionals who wish to benefit from both partnership and corporate structures. An LLP combines the flexibility of a partnership with the advantages of limited liability, making it an attractive option for entrepreneurs and professionals alike. Mastering the intricacies of setting up an LLP in Singapore, encompassing the agreement, registration procedure, essential paperwork, liability concerns, and distinguishing features from a Limited Partnership (LP), can significantly streamline your business venture in Singapore.
What is a Limited Liability Partnership in Singapore?
A Limited Liability Partnership (LLP) in Singapore is a unique business structure that offers its owners, known as partners, protection from personal liability. This means that unlike traditional partnerships, the personal assets of the partners in an LLP are protected against business liabilities. This structure is ideal for professionals such as lawyers, architects, and accountants, who typically work in groups but wish to have individual protection against business risks.
Limited Liability Partnership agreement in Singapore (LLP)
The foundation of an LLP is the LLP agreement. While the Companies Act does not mandate a written agreement, having one is crucial as it outlines the rights, responsibilities, roles, and profit-sharing among partners. An effective LLP agreement should cover aspects such as business nature, capital contributions, decision-making processes, and procedures for entry and exit of partners. It ensures clarity and reduces potential conflicts among partners. Below are main Limited Liability Partnership agreement in Singapore
- Singapore LLP operates as a distinct legal entity, separate from its owners.
- Partners within a Singapore LLP are not personally liable for the actions of other partners.
- In case a partner is held liable for actions during business operations, the LLP is equally liable up to the full extent of its assets.
- Personal liability for partners arises only from their own actions, negligence, or omissions.
- Innocent partners are insulated from personal liability, with their assets safeguarded.
- The rights and responsibilities of the Singapore LLP and its partners are outlined in the limited liability partnership agreement.
- In the absence of specific agreements, regulations stipulated in the First Schedule of the Limited Liability Partnership Act 2005 apply.
How to register Limited Liability Partnership in Singapore (LLP)
Registering a Limited Liability Partnership (LLP) in Singapore involves a straightforward process overseen by the Accounting and Corporate Regulatory Authority (ACRA). By following the 5 steps you can register Limited Liability Partnership in Singapore seamlessly.
Step 1: Choose Your LLP Name
Submit your desired business name for approval via ACRA’s BizFile+ portal. Ensure the name is unique and not similar to existing business entities.
Step 2: Gather Required Information and Documents
Collect identification and residential addresses for all partners. Include corporate details if one of the partners is a company.
- Registered Address: Provide a physical business address in Singapore for official correspondence.
- LLP Agreement: Optionally prepare an internal agreement outlining partner roles and responsibilities, although it’s not required for registration.
Step 3: Register Online
- Application Submission: Complete the registration application on the BizFile+ portal.
- Pay Registration Fee: The fee would fluctuate per year.
Step 4: Receive Registration Confirmation
After submitting your application and fee, ACRA will process and confirm your LLP registration within a few hours to a day, granting your LLP a Unique Entity Number (UEN).
Step 5: Follow-up Steps Post-Registration
- Annual Compliance: File an annual declaration of solvency or insolvency.
- Business Licenses: Obtain any necessary business licenses or permits specific to your sector.
- Bank Account: Open a corporate bank account using your UEN.
- By following these steps, you can quickly establish a Limited Liability Partnership in Singapore, creating a solid foundation for your business activities.
Documents required for Limited Liability Partnership in Singapore (LLP)
Documents required for Limited Liability Partnership in Singapore include:
- Suggested name for the LLP
- Information of LLP partners/managers based on their foreign passport or Singapore ID
- Residential addresses of LLP partners/managers
- Confirmation of compliance
- Particulars of the LLP’s registered address
- Acknowledgment to Serve as Manager and Confirmation of Eligibility to Serve as Manager
- If a partner is a company: Company registration particulars including registration number, jurisdiction, registered address, etc.
Liability of Limited Liability Partnership in Singapore
The key feature of an LLP is the limited liability protection it offers. Each partner is protected from liabilities incurred by the misdeeds or negligence of other partners. However, all partners are jointly and severally liable for debts and obligations of the LLP if these were incurred while they were partners. Importantly, partners are not shielded from liabilities arising from their own wrongful actions.
Difference between Limited Liability Partnership and Limited Partnership in Singapore
When establishing a business in Singapore, it’s crucial to choose the right structure, as each has distinct implications for management, liability, and taxation. Two common forms are the Limited Liability Partnership (LLP) and the Limited Partnership (LP). Understanding the differences between Limited Liability Partnership and Limited Partnership in Singapore can help you determine the best fit for your business needs.
1. Definition:
- Limited Partnership: A dynamic collaboration involving multiple individuals, comprising at least one general partner and one limited partner, forms the foundation of this partnership.
- Limited Liability Partnership: A partnership in which the personal liability of individual partners is typically restricted.
2. Owned By:
- Limited Partnership: A minimum of two partners is required, comprising one general partner and one limited partner, with no maximum limit specified.
- Limited Liability Partnership: A minimum of two partners is required, with no specified maximum limit.
3. Legal status:
- Limited Partnership
- The partnership doesn’t have its own legal entity; the general partner assumes unlimited liability.
- Limited partners have limited liability.
- Unable to sue or be sued in the LP’s name.
- Unable to own property in the LP’s name.
- General partner is personally liable for LP’s debts and losses.
- Limited partner isn’t personally liable for LP’s debts or obligations beyond their committed contribution.
- Limited Liability Partnership
- Functions as a distinct legal entity from its partners.
- Partners enjoy limited liability.
- Capable of initiating or being subject to legal actions in the LLP’s name.
- Authorized to possess property under the LLP’s name.
- Partners are accountable for debts and losses due to their own misconduct.
- Partners are not held accountable for LLP’s debts or losses caused by other partners
4. Registration Requirements:
- Limited Partnership
- At least one general partner and one limited partner are necessary as a minimum requirement. Both individuals (at least 18 years old) and corporate entities (such as a company or LLP) can fulfill these roles.
- If all general partners do not reside in Singapore, they must designate a local manager who is ordinarily resident in Singapore
- Limited Liability Partnership
- A minimum of two partners is required, who may be individuals (at least 18 years old) or corporate entities (such as a company or LLP).
- Additionally, at least one manager must be ordinarily resident in Singapore and at least 18 years old.
- Individuals who are undischarged bankruptcies cannot manage the business without approval from the Court or the Official Assignee.
5. Taxes:
- Limited Partnership: Profits are subject to taxation at the personal income tax rates of partners (if they are individuals) or the corporate tax rate (if they are corporations).
- Limited Liability Partnership: Profits are taxed based on the personal income tax rates of partners (if they are individuals) or at the corporate tax rate (if they are corporations).
6. Community in law:
- Limited Partnership
- Operates based on the terms outlined in the partnership agreement
- In the absence of a limited partner, the LP registration will be suspended, and general partners are considered registered under the Business Registration Act.
- When a new limited partner is appointed, the LP registration will be reinstated as “active,” and the registration of general partners under the Business Registration Act will end.
- Limited Liability Partnership
The LLP maintains perpetual succession until it is wound up or deregistered.
To conclude
Limited Liability Partnerships (LLPs) are a strategic choice for business practitioners in Singapore, offering a balance of adaptability and protection. They deliver substantial benefits, including operational flexibility and limited liability, essential for managing business uncertainties. Whether you’re a seasoned expert or a fresh entrepreneur, mastering the nuances of LLPs empowers you to make informed decisions that harmonize with your business goals and regulatory obligations in Singapore.
With a thorough understanding of the insights provided in this guide, entrepreneurs and professionals can adeptly maneuver through the intricacies of establishing and managing an LLP in Singapore. This ensures adherence to regulations and enhances the efficiency of business endeavors.
