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FAQ – Limited Liability Partnership – LLP

Business in Singapore- LLP

LLP FAQ

Difference - LLP & General Partnership

What is an LLP?

Answer: An LLP is another form of doing business in Singapore. This means that instead ofregistering a business or a company in Singapore, interested parties may choose to register an LLP to carry out their business activities. The LLP will give the owners the flexibility of operating as a partnership whilst giving them limited liability. It combines the benefits of a partnership with those of private limited companies. However this comes with safeguards in law to minimize abuse and provide protection to parties who deal with the LLP. The LLP is a body corporate and has legal personality separate from its partners. The LLP has perpetual succession. Any change in the partners of a LLP does not affect its existence, rights or liabilities. An LLP is capable of:

  • Suing and being sued in its name
  • Acquiring and holding property in its name;
  • Having a common seal and
  • Doing such other acts and things in its name, as bodies corporate may lawfully do and suffer.

What is the difference between an LLP and a general partnership?

Answer: A Limited Liability Partnership (“LLP”) allows the partners to retain the flexibility of a partnership agreement but it is not regulated by an identical set of legal principles governing partnerships. In addition, when compared to a partnership, a LLP is required to upkeep its financial records as well as report its financial status of solvency or insolvency annually. Also, as the partners enjoy limited liability, it cannot be terminated as easily as a general partnership. The law provides a comprehensive set of rules to govern winding up of LLPs to ensure protection to the creditors. However as the LLP is a novel concept, we think financial institutions and potential business partners may be more reserved when dealing with it, as compared to a company or general partnership. The law also places restrictions on certain categories of persons (see sections 33 to 37 of the Limited Liability Partnerships Act) who can manage a LLP. There are different advantages and disadvantages of a LLP, as compared to a company and general partnership. Parties concerned should consider the pros and cons of each type of vehicle to decide which suits them the most. The Limited Liability Partnerships Act is available at http://statutes.agc.gov.sg/. We wish you all the best.

Appointment Of Manager

A manager is responsible for online filing transactions. Does it mean that a professional firm, who did the online filing, be named ‘manager’?

Answer:  The law does not mean that the filing agent has to be the manager. The manager is duly defined under the LLP Act. The professional firm is essentially a filing agent who is allowed in law to report on behalf of the LLP.

Are the duties of a nominee manager the same as a manager?

Answer: There is no such position as a “nominee manager” in an LLP. Anyone who is named as the manager will have to perform the duties and carry out the obligations of a manager as set out in the LLP Act

Can a foreigner be appointed as the local manager?

Answer:  Yes provided he has an Employment Pass or a Dependant’s Pass.

Can a manager be an employment pass holder who is employed in another company?

Answer:  The manager may wish to check with MOM on whether this is allowed.

Can there be more than 1 manager?

Answer:  Yes

I am a Singapore PR. Can I be appointed as the manager or partner in an LLP?

Answer:  Yes.

If the LLP has 2 partners and one of them dies/bankrupts, does the sole partner need to appoint another partner? Is there any time frame to do so?

Answer:  Yes, the sole partner will need to appoint another partner and the deadline is 2 years.

Is it mandatory to appoint a manager for the LLP?

Answer:  Yes.

Is there any limit to the number of partners?

Answer:  No, there is no limit. The minimum is 2.

Is there any need for partnership agreement?

Answer:  There is a need for an LLP agreement. In the absence of one, the model agreement enacted under Schedule One to the LLP Act shall apply.

 The LLP must have a ‘resident” manager can there be two managers? Can one manager be based overseas (like a regional manager)?

Answer:  Yes, to both questions.

What are the criteria for being appointed as a manager?

Answer:  At least one manager must be ordinarily resident in Singapore. All managers appointed must be natural persons and above the age of 18. The manager of the LLP must not be:  

  1. an undischarged bankrupt (unless he has obtained Leave of the High Court or the written permission of the Official Assignee);
  2. disqualified as an unfit manager of insolvent LLPs under section 34 of the LLP Act;
  3. disqualified as a manager of a former LLP wound up on grounds of national security or interest and disqualified to act as a manager;
  4. disqualified as a person who was convicted of offences involving fraud or dishonesty, or other offences connected with formation or management of a LLP;
  5. disqualified under Sections 149, 149A or 154 of the Companies Act.

What is the responsibility and liability of being a manager?

Answer:  The duties and responsibilities are set out in the various provisions in the LLP Act.

What status is considered locally resident? Is Employment Pass Holder or Work Permit Holder sufficient? What about dependent pass and permanent resident?

Answer: We recognize the followings as “locally resident” – Singapore citizens, Singapore PRs, Employment Pass Holders & Dependant Pass Holders.

Who can be the partners in an LLP?

Answer:  Any individual or body corporate may be a partner in a LLP. This includes a natural person, company, foreign company or another LLP.

Answer: The law does not mean that the filing agent has to be the manager. The manager is duly defined under the LLP Act.The professional firm is essentially a filing agent who is allowed in law to report on behalf of the LLP.

Are the duties of a nominee manager the same as a manager?

Answer: There is no such position as a “nominee manager” in an LLP.

Anyone who is named as the manager will have to perform the duties and carry out the obligations of a manager as set out in the LLP Act Can a foreigner be appointed as the local manager?

Answer: Yes provided he has an Employment Pass or a Dependant’s Pass.

Can a manager be an employment pass holder who is employed in another company?

A manager is responsible for online filing transactions. Does it mean that a professional firm, who did the online filing, be named “manager”?

Answer:  The law does not mean that the filing agent has to be the manager. The manager is duly defined under the LLP Act. The professional firm is essentially a filing agent who is allowed in law to report on behalf of the LLP.

Are the duties of a nominee manager the same as a manager?

Answer: There is no such position as a “nominee manager” in an LLP. Anyone who is named as the manager will have to perform the duties and carry out the obligations of a manager as set out in the LLP Act

Can a foreigner be appointed as the local manager?

Answer:  Yes provided he has an Employment Pass or a Dependant’s Pass.

Can a manager be an employment pass holder who is employed in another company?

Answer:  The manager may wish to check with MOM on whether this is allowed.

Can there be more than 1 manager?

Answer:  Yes

I am a Singapore PR. Can I be appointed as the manager or partner in an LLP?

Answer:  Yes.

If the LLP has 2 partners and one of them dies/bankrupts, does the sole partner need to appoint another partner? Is there any time frame to do so?

Answer:  Yes, the sole partner will need to appoint another partner and the deadline is 2 years.

Is it mandatory to appoint a manager for the LLP?

Answer:  Yes.

Is there any limit to the number of partners?

Answer:  No, there is no limit. The minimum is 2.

Is there any need for partnership agreement?

Answer:  There is a need for an LLP agreement. In the absence of one, the model agreement enacted under Schedule One to the LLP Act shall apply.

 The LLP must have a ‘resident” manager can there be two managers? Can one manager be based overseas (like a regional manager)?

Answer:  Yes, to both questions.

What are the criteria for being appointed as a manager?

Answer:  At least one manager must be ordinarily resident in Singapore. All managers appointed must be natural persons and above the age of 18. The manager of the LLP must not be:  

  1. an undischarged bankrupt (unless he has obtained Leave of the High Court or the written permission of the Official Assignee);
  2. disqualified as an unfit manager of insolvent LLPs under section 34 of the LLP Act;
  3. disqualified as a manager of a former LLP wound up on grounds of national security or interest and disqualified to act as a manager;
  4. disqualified as a person who was convicted of offences involving fraud or dishonesty, or other offences connected with formation or management of a LLP;
  5. disqualified under Sections 149, 149A or 154 of the Companies Act.

What is the responsibility and liability of being a manager?

Answer:  The duties and responsibilities are set out in the various provisions in the LLP Act.

What status is considered locally resident? Is Employment Pass Holder or Work Permit Holder sufficient? What about dependent pass and permanent resident?

Answer: We recognize the followings as “locally resident” – Singapore citizens, Singapore PRs, Employment Pass Holders & Dependant Pass Holders.

Who can be the partners in an LLP?

Answer:  Any individual or body corporate may be a partner in a LLP. This includes a natural person, company, foreign company or another LLP.

: The manager may wish to check with MOM on whether this is allowed. Can there be more than 1 manager? Answer: Yes I am a Singapore PR. Can I be appointed as the manager or partner in an LLP? Answer: Yes. If the LLP has 2 partners and one of them dies/bankrupts, does the sole partner need to appoint another partner? Is there any time frame to do so? Answer: Yes, the sole partner will need to appoint another partner and the deadline is 2 years. Is it mandatory to appoint a manager for the LLP? Answer: Yes. Is there any limit to the number of partners? Answer: No, there is no limit. The minimum is 2. Is there any need for partnership agreement? Answer: There is a need for an LLP agreement. In the absence of one, the model agreement enacted under Schedule One to the LLP Act shall apply. The LLP must have a ‘resident” manager can there be two managers? Can one manager be based overseas (like a regional manager)? Answer: Yes, to both questions. What are the criteria for being appointed as a manager? Answer: At least one manager must be ordinarily resident in Singapore. All managers appointed must be natural persons and above the age of 18. The manager of the LLP must not be:   1. an undischarged bankrupt (unless he has obtained Leave of the High Court or the written permission of the Official Assignee); 2. disqualified as an unfit manager of insolvent LLPs under section 34 of the LLP Act; 3. disqualified as a manager of a former LLP wound up on grounds of national security or interest and disqualified to act as a manager; 4. disqualified as a person who was convicted of offences involving fraud or dishonesty, or other offences connected with formation or management of a LLP; 5. disqualified under Sections 149, 149A or 154 of the Companies Act. What is the responsibility and liability of being a manager? Answer: The duties and responsibilities are set out in the various provisions in the LLP Act. What status is considered locally resident? Is Employment Pass Holder or Work Permit Holder sufficient? What about dependent pass and permanent resident? Answer: We recognize the followings as “locally resident” – Singapore citizens, Singapore PRs, Employment Pass Holders & Dependant Pass Holders. Who can be the partners in an LLP? Answer: Any individual or body corporate may be a partner in a LLP. This includes a natural person, company, foreign company or another LLP.

Medisave Payments

Must the Medisave payments of all the partners be up-to-date when I submit the application to register a new LLP?

Answer:  Yes. To check on the Medisave status of the partners, you may contact the CPF Board at 1800-2271188 or you may log into the CPF website at www.cpf.gov.sg.

Since partners of LLP include a corporate body, does this mean that the corporate body needs to have a medisave account so as to facilitate e-filing of any transactions?

Answer:  We do not check the Medisave status of corporate partners.

Conversion To Company

Can a LLP be converted to a private limited company? If so, then how? Does it have to be closed with the assets and liabilities be taken over by a private limited company? Can the new company retain the same name?

Answer:  An LLP cannot convert to a company. An LLP can be wound up or struck off. As for whether a new company can use the same name as the terminated LLP, the provisions on names under the Companies Act shall apply.

Conversion to LLP – How do you prepare the final sets of accounts?

Answer:  We are not in a position to answer this. Please seek advice from professionals who are preparing the accounts.

For conversion from private limited company to LLP, must the private limited company file its audited/unaudited accounts up to the date of conversion?

Answer:  We would advise the company to fulfill all its outstanding filing obligations before converting into an LLP.

How about conversion of sole-proprietor to LLP, is there a need to find another partner?

Answer:  You need to add the partner to the sole-proprietorship before you can convert it into an LLP.

If a company holds properties and wants to be converted to an LLP. What is the implication in stamp duties?

Answer:  Please check with IRAS.

Is there a requirement to the cessation of company secretaries and auditors before conversion? Conversion to Company

Answer:  No, there is no such requirement.

What will be the status of the business or company after the conversion?

Answer:  The status will show as “converted to LLP” and the date of conversion will be the date of registration of the LLP.

Will I be issued with a new registration number upon conversion?

Answer:  Yes, you will be issued with an LLP Registration Number

Personal Liability Of Partners

How does the public know the amount of liability committed by each partner in a LLP?

Answer:  It is not a legal requirement to report to ACRA the amount committed by the partners as a LLP is a business structure. The public can find out its solvency status as LLPs are required to file annual solvency status.

Partner is personally liable for his own wrongful acts or omissions

Answer:

  • what happens if the wrongful act/omission is due to negligence/careless error rather than fraudulent intent? Must the partner be personally liable in such instance or the LLP as a whole?
  • will the covering partner (in legal/accounting practice) in the absence of the actual partner (who is on leave etc), be held personally liable.

Personal liability shall continue to attach to partners under the law of Tort. To understand the implications of the duties and liabilities under the law of Tort, you are encouraged to seek further advice from professionals or locate them legally

What are the fiduciary duties for partners and managers? Personal Liability of Partners

Answer: The LLP Act does not prescribe fiduciary duties for partners and managers. However there is also the issue of whether the concept of “fiduciary duty” which features in a variety of relationships such as those between trustees and beneficiary, guardian and ward, agent and principal, attorney and client, directors and corporations as well as among members of a unlimited liability partnership exist. Such fiduciary obligations, developed by equity are complex by nature. The LLP Act states that otherwise provided by the Act, the law relating to partnership shall not apply to a LLP. The LLP Act already provides specifically for limited liability of partners, personal liabilities in tort in respect of partners as well as powers of partners to bind of LLPs. As time progresses, the development of case laws will give greater definition to this area of law.

Will the partners of the LLP be held personally liable for the debts incurred by the LLP?

Answer: The partners of the LLP will not be held personally liable for any business debts incurred by the LLP. However a partner may be held personally liable for claims from losses resulting from his own wrongful act or omission. But a partner shall not be personally liable for such wrongful acts or omissions of any other partner of the LLP.

Audited Accounts

Is an audit of the accounting required?

Answer: The LLP Act does not mandate audit for LLPs.

Is an LLP required to prepare and submit audited accounts to ACRA?

Answer: No but the LLP is required to keep accounting and other records for 7 years

Must accounts be kept in accordance with FRS?

Answer: The LLP Act does not prescribe the accounting standards to be adopted. But the accounts must still satisfy the “true and fair” view test.

Under what circumstances will the Registrar require the accounts to be audited?

Answer: The LLP Act does not empower the Registrar to require audited accounts as the law does not mandate financial reporting.

When the LLP is asked to prepare accounts, do they need to comply with FRS?

Answer: The LLP Act does not prescribe the accounting standards to be adopted. But the accounts must still satisfy the “true and fair” view test.

Annual Declaration

Annual Declaration – if it is insolvent, is it an offence to continue trading? – does it affect the LLP status of the partners i.e. unlimited liability of partners?

Answer: Like the Companies Act, the LLP Act prohibits one from trading if he is a party in the contracting of a debt and he has no reasonable ground of expectation of being able to pay the debt. It is also an offence to carry on trading if it falls within the scope of fraudulent trading. One may face criminal sanctions as well as personal liability for the debts incurred, if convicted.

When must this Annual Declaration be lodged?

Answer: The first Annual Declaration must be lodged within 15 months from the date of registration. Subsequent declarations must be lodged once in every calendar year but not more than 15 months after the date of the last declaration.

When submitting the annual declaration is there any financial statements e.g. Balance Sheet, profit and loss that need to be signed and scanned to ACRA, regardless whether the LLP is solvent or insolvent.

Answer: The manager has to submit the Annual Declaration via an online transaction. No other documents is needed to be attached to the Annual Declaration.

Commencement Of Business

Can I start my business now that I have registered a limited liability partnership with ACRA?

Answer: You may commence business once the limited liability partnership has been registered with ACRA. This is on condition that you do not require any licences/approvals from other government agencies in order to carry out your business activities. For more information on the types of licences/approvals that you may require, please visit www.business.gov.sg

I have registered a limited liability partnership with ACRA. Can I carry out my business now?

Answer: You may commence business once the limited liability partnership has been registered with ACRA. This is on condition that you do not require any licences/approvals from other government agencies in order to carry out your business activities. For more information on the types of licences/approvals that you may require, please visitwww.business.gov.sg.

When can I commence business?

Answer: You may commence business once the limited liability partnership has been registered with ACRA. This is on condition that you do not require any licences/approvals from other government agencies in order to carry out your business activities. For more information on the types of licences/approvals that you may require, please visitwww.business.gov.sg  

Closing A LLP

Can a LLP be closed in a similar manner as that of a private limited company such as being "struck-off" rather than be wound up (this will reduce business costs)

Answer: Yes. You may submit an online application to strike off the LLP.

Can an LLP be struck off within one month after incorporation?

Answer: Yes, the application can be submitted online

Compulsory winding up of LLP- will the partners be disqualified from being partners if there are 2 or more black marks against them?

Answer: Please refer to Sections 33 to 37 of the LLP Act for the details of disqualifications.

How can I close the LLP?

Answer: You may wind up the affairs of the LLP voluntarily. The LLP may also opt for creditors voluntary winding up. The LLP can also be wound up under an Order of Court. The LLP may apply to strike its name off the register pursuant to Section 28 of the LLP Act.

What are the requirements required to strike off an LLP?

Answer: Please refer to ACRA homepage www.acra.gov.sg for the guidelines.

General Q&A

Can a LLP be converted back to that of a Company?

Answer: Currently, there is no provision for the conversion from a LLP back to a Company.

Can a partner of LLP be a partner of another LLP?

Answer: Yes

Can a wholly owned subsidiary of head office be converted to a LLP?

Answer: No, because there is only one shareholder. LLP would need to have at least 2 partners. However, if the number of shareholders in the wholly owned subsidiary is increased to 2 or more shareholders, conversion would then be possible.

Can LLP have sleeping partners?

Answer: Yes.

Can professional practices register as LLP?

Answer: The LLP Act does not restrict any professional practices from registering as a LLP. However professional practices have to check against their legislation regulating their respective professions to ensure that this is allowed.

Does a foreigner-controlled LLP need to pay medisave?

Answer: Only Singapore citizens and PRs are required to meet the minimum medisave paid-up requirement.

For taxation, will losses, capital allowances, investment allowances be carried forward?

Answer: ACRA does not handle taxation issue, please refer to www.iras.gov.sg or seek clarifications with IRAS directly.

How are the accounts of a LLP going to be accounted for after a company has converted to a LLP? How about GST registered co?

Answer: The LLP legislation does not prescribe the accounting standards to be used. The LLP Act mandates proper record keeping of accounts to enable the true and fair view of accounts to be presented. We think LLPs would apply Singapore FRS, unless there are exceptional reasons to rely on a foreign accounting standard.

How is a LLP taxed? How is a company taxed after being converted to a LLP?

Answer: There is no corporate tax rate for LLPs. For further details, we advise members to seek clarifications from IRAS directly.

If a company is a large corporation in terms of paid up capital, is it difficult to convert to LLP?

Answer: It is administratively easy to convert online, but the internal conversion process within the company may be simple or complex depending on the size of the entity that wishes to convert.

If the directors of company refuse to convert into LLP, but Shareholders want to convert the company, is the company still be able to be converted to LLP?

Answer: Yes, the decision lies with the shareholders.

If the Manager files with ACRA that it is unable to pay debts, what will happen after that?

Answer: It is up to the creditors to decide what they want to do with regards to the debts that are owed to them by the LLP.

Is LLP inheritable, that is, pass the business down to the son?

Answer: Under the LLP Act, a partner of a LLP shall cease to be a partner of a LLP upon the death of the said partner. Where this happens, unless otherwise provided in the LLP agreement, his personal representative or liquidator (as the case may be) shall be entitled to receive from the LLP an amount equal to the former partners capital contribution to the LLP and his right to share in the accumulated profits of the LLP after deduction of losses of the LLP and determined at the date the deceased partner ceased to be a partner. The personal representative or liquidator shall have no right to interfere in the management of the LLP.

It is unfair for creditors as the current partnerships can evade liability by just converting to LLP? What is the rationale/remedy for this?

Answer: The current regulation is that as long as there are no outstanding charges, conversion is possible if the relevant requirements are met. Even after the conversion date, the partners continue to be liable for all the liabilities incurred by the partnership before the conversion date. Any liabilities incurred after the conversion shall be borne by the LLP.

Since company allows for

Answer: The LLP introduces a business structure that combines the advantage of the flexibility to run it like a partnership of two or more owners with limited liability accorded to the partners. It is not meant to apply to a sole proprietor. If the concept to a Limited Liability Sole Proprietorship is expanded, it will have far reaching implications on our legal framework for business structures. This is also not consistent with leading jurisdictions currently. A regulatory framework of an one director company differs from that of the LLP too.

What are the benefits of converting from Private Limited companies to LLP?

Answer: Lower cost is one of the benefits, as there is no need to do audited accounts etc. However, there may be disadvantages as well and one may have to think through more carefully whether one should trade or do business with an LLP since it has limited liability.

 What happens to shareholdings of shareholders converted from Private Limited to LLP? If person A holds 10% and person B holds 90% of shares in the company, what will happen when converted to LLP?

Answer: This will depend on the internal agreements between the newly converted partners and would most probably be reflected in the LLP agreement.

What happens to the amount owing to creditors when partnership is converted into LLP?

Answer: All the liabilities will be frozen and retained at the point of conversion into LLP. The creditors can still sue the partners or they can choose to sue the LLP.

What kicks in once a company declares that it is insolvent?

Answer: Our records will be updated to capture this information. It is up to the creditors to decide what they want to do with regards to the debts that are owed to them by the LLP.

 

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