The limited partnership (LP) was introduced in 2009 and is the most recent business form to be introduced to Singapore. An LP is a business organization that consists of one or more general partners and one or more limited partners. LPs are a type of partnership and are created pursuant to an agreement between the partners (the LP agreement). They do not have a legal personality that is separate from their constituent partners. LPs are separate from limited liability partnerships (LLPs). The Partnership Act, as well as the general laws applicable to partnerships, applies to LPs subject to the provisions of the Limited Partnership Act 2008. The matters discussed above in relation to the formation of partnerships and the relations of partners to each other apply to LPs.
Formation of Limited Partnerships
LPs are formed in the same way as partnerships. In Singapore, the first step in the formation of an LP is registration of the LP with the Accounting and Corporate Regulatory Authority (ACRA). It is advised that those who intend to form an LP seek the services of company formation specialists to expedite the process.
Fortunately for those who wish to do so, we at Paul Hype Page & Co do have such specialists among our ranks. We will do our best to help you set up your Singapore company, whether it be an LP, LLP, or any other business entity.
After registration with ACRA, the next step is the reservation of a company name. However, not all company names will be approved. If the name is too similar to that of an existing company, banned by law, or carries negative connotations, the name will not be approved. After approval of the name, the purpose of the LP must be provided. A director who is a resident of Singapore must also be appointed. Once these steps have been taken, as long as there is evidence that the company was formed by a combination of general partners and limited partners, the LP may begin operations.
Termination of Limited Partnerships
The termination of LPs is similar to that of private listed companies. There are, however, some differences relevant to limited partners. For example, limited partners are not entitled to dissolve the LP by notice. Also, an LP is dissolved on the death, dissolution, bankruptcy, or liquidation of a limited partner.
In the event of the termination of an LP, its affairs are to be wound up by the general partners unless there is a court order to the contrary.
Registration and Compliance
An LP may be registered under the Limited Partnership Act, according to which it has limited partners that are registered as such under the Act. An LP is deemed to be a general practitioner unless one or more persons are registered as limited partners of the firm in accordance with the Act.
A partnership can also be converted into an LP after one or more (but not all) of its partners register themselves as limited partners. The resulting LP formed must also register itself as an LP under the Limited Partnership Act. When a person deals with a firm after it becomes an LP, that person is entitled to treat the firm as a general partnership until the person has notice of the registration of that firm as an LP. The person is also entitled to treat any person who was a partner of the firm as a general partner of the LP until the person receives notice of the registration of the other person as a limited partner.
The registration of the LP is done through the lodging of prescribed documents by one of its general partners. Thereafter, the LP must comply with all the requirements set out under the Act such as the filing of changes in particulars of the LP, publication of its name and registration number on invoices, and official documents and the keeping of proper accounts.
LPs registered under the Limited Partnership Act are not subject to the provisions of the Business Registration Act. Should the LP cease to have any person named as its limited partner, its registration under the Limited Partnership Act will be suspended. Under such circumstances, the provisions of the Business Registration Act will apply to the LP.
Where every general partner of an LP is ordinarily resident outside Singapore, the Registrar may require a local manager to be appointed to be responsible for the discharge of all obligations attaching to the LP as prescribed by the Limited Partnership Act.
For income tax purposes, an LP is treated as a partnership and not as a separate legal entity. This means that an LP will not be liable to tax at the entity level. Instead, each partner will be taxed on the partner’s respective share of the income from the LP:
- Tax calculation for a Singapore Resident Partner
- Tax calculation for a Non Resident Singapore Partner
The key difference between LPs and partnerships lies in the fact that LPs have limited partners. A limited partner is defined as any partner who, under the terms of the partnership agreement, shall not be liable for the debts or obligations of the firm beyond the amount of his agreed contribution. This is a form of liability protection. The limited partner is thus said to enjoy limited liability status. Anyone who is not a limited partner of an LP is a general partner. General partners are regarded in exactly the same manner as partners in a partnership. General partners manage an LP’s day-to-day operations. While they are general partners, should they incur debt, they will be personally liable for the business debts of the LP. General partners’ personal liabilities also extend to any invested money and any capital investments, including those in real estate. General partners’ status is said to be that of unlimited liability.
Parties who wish to be limited partners in an LP have to register themselves as such under the Limited Partnership Act. Failure to do so will result in the limited partners being treated as if they were general partners of the LP thereby losing their limited liability status. Also, should a person deal with an LP after a partner becomes a limited partner, that person is entitled to treat that partner as a general partner of the LP until the person has notice of the registration of that partner as a limited partner.
Limited partners should not take part in the management of the LP and should not have the power to bind the LP. Limited partners who take part in the management of the LP are liable for all debts and obligations of the limited partnership incurred while they so take part in the management as though they were general partners.
Subject to the LP agreement, limited partners may increase, reduce or draw out their contributions with the approval of the general partners.
Any distribution of capital or profits to the limited partners must be refunded if the following conditions are fulfilled:
- every general partner of the LP was insolvent at the time of the distribution or became insolvent as a result of the distribution;
- the limited partner knew or ought to have known at the time of the distribution that every general partner was insolvent or would become insolvent as a result of the distribution; and
- every general partner is adjudicated bankrupt or is ordered to be wound up within one year after the date of the distribution.
Common Asked Questions about Limited Partnership:
What are the criteria for being appointed as a manager?
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:
- an undischarged bankrupt (unless the person has obtained Leave of the High Court or the written permission of the Official Assignee);
- disqualified as an unfit manager of insolvent LLPs under Section 34 of the LLP Act;
- disqualified as a manager of a former LLP wound up on grounds of national security or interest and disqualified to act as a manager;
- disqualified as a person who was convicted of offenses involving fraud or dishonesty, or other offenses connected with formation or management of an LLP;
- disqualified under Sections 149, 149A or 154 of the Companies Act.