Singapore Limited Liability Partnership Registration Guide
In this business structure, two or more partners come together to conduct business operations with each partner’s liability being limited to the amount of his contribution; claims cannot be made against his personal assets for the losses, debts or liabilities that are incurred due to the gross negligence or willful misconduct of other partners. A Limited Liability Partnership (LLP) is governed by the regulations under the Limited Liability Partnership Act 2005. Individuals, companies (another LLP) or both can become partners under this entity. This is a relatively new form of business structure that was instituted after the vehicle gained prominence among other mature jurisdictions such as the USA and the UK. The LLP Act of Singapore borrows heavily from the legislations of both the countries.
It must be noted that it is different from Limited Partnerships (LP) where at least one general partner with unlimited liability is required. Unlike a LP, all partners in the LLP will take active role in managing the business. This structure combines the flexibility of a partnership entity and the limited liability offered by a company. The rights, responsibilities and liabilities of the partners towards the entity, are also determined by the terms of a partnership agreement. Lapse of provision in the partnership agreement regarding any particular matter will have to be addressed with the provision in the LLP Act. It also contains the terms under which a partner can leave the partnership and the terms for dissolving the partnership. Minimums of two partners are required and there is no cap on the maximum number of partners.
Legal Identity: It has a separate legal identity from the partners. It can own property, sue or be sued in its own name.
Partners liability are limited to their contribution to the entity’s asset, they are not personally liable for the debts, losses and liabilities incurred by the negligence, failure or misconduct of other partners. However the partners are personally liable for the losses, debts and liabilities arising out of their own wrongful acts.
Validity/Renewal: The registration is valid perpetually and does not require any renewal periodically.
Eligibility: Any natural person whose age is 18 years and above, can register a partnership. Another Singapore registered company or LLP can also register a partnership.
Singapore citizens and Permanent Residents who are self employed are required to register for CPF and top up their Medisave account in order to register or renew their business registration.
Officer: An LLP must appoint at least one manager who is a natural person of at least 18 years of age and who is ordinarily resident in Singapore, a Singapore Citizen, Permanent Resident, or Employment Pass holder.
Registered Address: A local Singapore physical address is required.
Taxation: Although it has a legal identity of its own, the taxation is not at corporate rate. The individual partners’ taxable incomes are subjected to personal tax rates and corporate partners’ taxable incomes are subjected to corporate tax rates.
Continuity: LLP has perpetual succession because of its separate legal identity. It continues to exist even if any of the partners dies or leaves the partnership.
- Approved name of the Partnership
- Particulars of the LLP partners/managers (foreign passport or Singapore ID)
- Residential address of the partners/managers
- Local business address for the LLP
- Consent to Act as Manager and Declaration of Non Disqualification to Act as Manager
- If partner is a company/LLP, the registration details of the company/LLP
- Declaration of compliance
The registration can be completed in one day, if all the documents are in order. All partners/managers must have endorsed the online application. It may take up to two months in unusual circumstances, where ACRA has to refer the registration application to other government agencies for review. Upon successful registration you will be notified via mail and the LLP will be issued with a registration number. Soft copy of business profile can be retrieved online via Bizfile. The notification email also serves as a Certificate of Registration and a LLP may proceed to opening a bank account or enter lease agreements and contract with a copy of the registration email and a Bizfile extract of the business profile. Hard copies of the same may be obtained from ACRA by lodging a separate application and fee.
Post Registration Compliance
All business communication materials such as, letterheads and invoices must bear the registration number.
Any change in registered details must be promptly notified to ACRA.
Under Section 24(1) of the LLP Act, the manager of every LLP is required to lodge a declaration stating whether the LLP is solvent or insolvent. The first such annual declaration must be made within 15 months of the registration of a LLP and there must not be more than 15 months interval between subsequent annual declaration.
LLPs are exempted from annual audit and are not required to file annual financial statements with ACRA. However a LLP must prepare annual accounts and maintain statements and records of transactions that sufficiently explain its financial position.
It is mandatory to keep records and accounts for a period of five years.
Limited Liability: This structure insulates the personal assets of the partners from the liabilities arising out of the wrongdoings or negligence of other partners. But it must be noted, that a partner’s personal assets are still at risk, if the partner is personally responsible for the business to incur a loss, debt or liability. It does not offer a comprehensive limitation of liability like that of an incorporated company. Therefore the risk of liability still persists in the LLP.
Perpetual Succession: A LLP will continue to exist even in the event of death or departure of a partner. As a separate legal entity, a partner’s death or resignation will not impact the LLP’s existence. A partner may leave the entity as per the provisions prescribed in the partnership agreement. If no such provision is included in the agreement, a partner may leave by serving a 30 days notice.
Compliance: Although a little tedious when compared to a sole proprietorship, it is much less demanding than that of a company. Therefore the associated administrative burden and costs are less.
Disclosure: Unlike a company where the capital must be disclosed, the LLP need not disclose its capital, earning or profits. So there is an element of enhanced confidentiality in the case of LLP.
Taxation: It is not eligible for corporate tax or any incentives available under the corporate tax regime. While the incomes of the corporate partners will be subjected to corporate tax the individual partners may end up incurring more tax expenses, since they are subjected to personal tax rates. It is not a tax efficient structure when compared to a company.
Transfer: unlike a company, where the ownership can be transferred partially or wholly by sale and transfer of shares, an LLP’s transfer of ownership cannot be effected easily.
Consideration for foreigners: If all partners are foreigners who are not relocating to Singapore then they need to appoint a local manager, who is ordinarily resident in Singapore.
This entity is more common among chartered professionals such as lawyers, architect, engineers and lawyers, who prefer the combined advantages of a partnership setup and an incorporated company. These professionals generally setup a business in partnership with professionals in their trade in order to maximize their service capacity and professional expertise. However, they are keen on limiting their liabilities while coalescing their strengths through partnership. It still carries with it the same drawbacks encountered in a partnership such as partnership disputes and poor access to financing. Financial institution and potential partners approach such set up with caution as they still find the concept novel, vague and not well constituted as an incorporated company.