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Learn more about Limited Partnership in Singapore

A Singapore Limited Liability Partnership (LLP) is a type of business structure in which two or more partners form a partnership entity that protects co-partners from liabilities caused by the purposeful wrongdoing or gross negligence of one or more partners. A Limited Liability Partnership (LLP) must always have two or more participants in order to exist. Although Singapore’s Limited Liability Partnership Act of 2005 does not limit the benefits of LLP structure to specific classes of professionals, in practice, LLP structure makes the most sense for chartered professions (such as lawyers, accountants, and so on) when two or more such professionals decide to collaborate. For other entrepreneurs wishing to start a business, incorporating a private limited company is the best alternative.

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What is a Singapore limited partnership?

A partnership allows for the pooling of resources and cash in order to pursue a profitable business activity. It partially solves the constraint of a Sole Proprietorship, which is limited by the limitations of a single owner. A partnership’s structure permits complementary partners to create company on mutually agreed-upon terms.

Two or more individuals, corporations, or both get together in this structure to conduct business activities for the sake of profit. The relationship and obligations of the partners are governed by a partnership agreement signed by the partners. The rules of the partnership agreement also govern the partners’ rights, responsibilities, and liabilities to the entity. It also specifies the circumstances under which a partner may leave the partnership and the criteria under which the partnership may be dissolved.

Inadequate Legal Identity: The registration of a partnership does not create a separate legal identity. As a result, both the LP and the GP lack legal identity. Although a General Partnership cannot possess property in its own right, it can sue and be sued in its own name. A limited partnership cannot possess property or sue or be sued in its own right.

Registration Validity/Renewal: The registration must be renewed. It can be renewed for a one-year or three-year period. Renewal must be completed before the registration expires.

Eligibility: Any natural person above the age of 18 can form a partnership. Another Singapore-registered firm may also form a partnership.

To register or renew their company registration, Singapore nationals and Permanent Residents must first register for CPF and top up their Medisave account.

A natural person must be nominated as a manager in a General Partnership if none of the owners reside in Singapore. Such a person must be a Singaporean by birth. Ordinarily resident means a Singaporean citizen or permanent resident, or foreigners on an employment or dependent pass.

If none of the general partners are Singapore residents, a manager who is typically resident in Singapore must be chosen. The manager is individually liable for the fulfillment of all LP responsibilities. If the general partner defaults on such responsibility, he is subject to the same responsibilities and penalties as the general partner of the LP.

Registered Location: A physical address in Singapore is essential.

Taxation: Chargeable profits are classified as personal income of the individual partners and are subject to personal income tax rates. Chargeable profits are subject to corporation tax rates in the case of corporate partners.

Limitation: A partnership cannot register another legal entity since it does not form a legal entity.

Continuity: It exists as long as the partners agree to continue the partnership. It will cease to exist if the registration is not renewed and is allowed to lapse. The filing of a cessation notice by the partners or authorized representatives will also result in the partnership’s dissolution.

What are general and limited partnership?

Profits are distributed among the partners, and the assets are owned collectively by the partners, according to the parameters agreed upon in the Partnership Agreement. In the event of a breach of the partnership agreement, the Partnership Act will take precedence. There are two types of partnership structures:

The lowest number of partners is two, while the maximum number of partners is twenty. If there are more than 20 partners, the business must be organized as a corporation. All partners are personally liable for the company’s debts and liabilities. The partners’ responsibility continues to be unlimited. The partners are jointly and severally accountable for the debts or losses incurred by the other partners. The Business Name Registration Act requires it to be registered with ACRA.

There must be at least one general partner and one limited partner in a Limited Partnership. The number of partners has no upper limit. The general partners’ responsibility is unlimited. In the event of a suit against the Limited Partnership, their personal assets may be attached. The general partners actively participate in the company’s management. A general partner can be either an individual or a corporation.

The liability of the limited partners is limited to the amount of their contribution to the partnership, and they do not participate in the active management of the business. A limited partner might be an individual, a corporation, or a foreign corporation.

The Limited Partnership Act requires the Limited Partnership Act to be registered with ACRA. In Singapore, it is a relatively new sort of entity. Subject to the provisions of the Limited Partnership Act, the Partnership Act and general law applicable to Partnerships apply to Limited Partnerships. If there is no limited partner, the partnership is terminated and changed to a firm registered under the Business Names Registration Act. When new Limited Partners join, the entity will be re-established as a ‘live’ Limited Partnership.

Why register a Singapore limited partnership?

Unlimited Liability: The partners’ liabilities in a general partnership remain unlimited. Their personal assets are at risk if claims are brought against the partnerships for debts, losses, or obligations incurred in the course of business. The general partnership’s unlimited liability is a turnoff. Each partner being held liable for the debts or losses suffered by the other partners will cause a schism in the partnership.

Disputes: Partnerships are prone to disagreements. Despite the presence of a partnership agreement, arguments about company management do arise among partners, and this has an influence on the business. In the worst-case situation, it could lead to the collapse of the business and strain the personal relationships of the partners. To avoid this, the partnership agreement must be reviewed on a regular basis and, if necessary, changed following mutual consent. All partners must be informed of their rights, responsibilities, and the dispute resolution procedures outlined in the agreement.

Consensus: Unlike a single proprietorship, where the owner has complete authority over the business, a partnership is administered by consensus. Nobody has a veto and must follow the majority, even if it is detrimental to the firm. Provisions in the partnership agreement may be made to grant specific partners the ability to make crucial decisions or override consensus based on their contribution.

Tax: Another disadvantage is that the partners are taxed personal tax rates on their share of the partnership’s profit. Individuals in partnerships are ineligible for low corporate tax rates, and those with larger consolidated income from other sources may face higher rates.

Capital Pooling: The capacity to pool capital and resources is a significant advantage. In the case of a Limited Partnership, additional capital can be generated from partners who are prepared to contribute but are not ready to actively participate and hence want to restrict their liability exposure.

Shared Liability: Unlike a sole proprietorship, where the one owner has all accountability, this form allows for responsibility to be shared.

Reduced cost: When compared to the cost of incorporating a firm, the cost of setting up is cheap. The continuous compliance requirements are less onerous, saving the administration a significant amount of time and resources.

How to set-up a limited partnership?

The following documents are required to form a Limited Partnership:

➤ The Partnership's approved name.
➤ The partners'/managers' personal information (foreign passport or Singapore ID).
➤ The partners'/managers' residential address.
➤ The partnership's local business address.
➤ Consent to Act as Manager and Declaration of Non-Disqualification to Act as Manager.
➤ If the partner is a corporation, the company's registration details.
➤ Declaration of Compliance.

If all partners/authorized representatives have approved the online application, registration can be completed in one day. It could take up to two months if ACRA has to refer the registration application to other government bodies for assessment. You will be notified by mail if your registration is successful, and the partnership will be assigned a registration number. A soft copy of the business profile is available online.

What to do after register a limited partnership?

The registration number must appear on all business communication documents such as letterheads and invoices. Any changes to registration information must be reported to ACRA as soon as possible.
Carrying on a business after the registration’s validity has expired or the registrar has terminated the registration is illegal.

Partnerships are not required to file yearly financial accounts with ACRA and are excluded from annual audit.

The partners must submit personal income tax returns and report the partnership’s revenue and earnings to the IRAS.

Records and accounts must be kept for a period of five years.

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