In setting up a business in Singapore, there are a few entities you can choose from. The most popular would be to set up a private company. Other options include a sole proprietorship, a partnership, or a representative office. In this article, we explore the three common types of partnerships in Singapore:
There are often varying reasons for business owners to decide on each of these partnership types, which will be explained later. To start off, we need to first understand the differences among the three partnerships in Singapore.
What is a Partnership?
A Partnership is formed where two or more partners carry on a business in common with a view to make profit.
What is a Limited Partnership?
A Limited Partnership (LP) is when two or more partners go into business together, with the limited partners only liable up to the amount of their investment.
What is a Limited Liability Partnership(LLP)?
A Limited Liability Partnership (‘LLP’) is a business organization comprising two or more persons associated for carrying on a lawful business with a view to profit.
Types of Partnerships in Singapore Comparison
After understanding the different types of partnerships in Singapore, we can now take a closer look at the deciding factors:
Factors | Partnership | Limited Partnership | Limited Liability Partnership in Singapore |
---|---|---|---|
Legal status | Not a separate legal entity | Not a separate legal entity | A separate legal entity from its partners, i.e. it can sue or be sued or own property in its own name. |
Liabilities | Partners have unlimited liability | General partner has unlimited liability
Limited partner has limited liability |
Partners have limited liability |
Tax | Profits taxed at partners’ personal income tax rates | Profits taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation) | Profits taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation) |
Terminating Partnership | Automatically dissolved if any partner die or leave the firm. | Limited partners are not entitled to dissolve the LP by notice.
Dissolved on the death, dissolution, bankruptcy, or liquidation of a limited partner. |
Winding Up – Voluntarily by members or creditors, compulsorily by the High Court |
With the above factors in mind, we are one step closer to our final decision on the type of partnership for your business. Let us break it down for you:
Why choose a Partnership in Singapore?
Why choose a Limited Partnership (LP)?
Why choose a Limited Liability Partnership (LLP)?
Conclusion
As we have discussed, there are different advantages and disadvantages to the different types of partnerships in Singapore. Before deciding on the type of vehicle your business is embarking on, you should consider the pros and cons of each carefully. While it may seem complicated, Paul Hype Page is here to help you find the best option in setting up your business.
FAQs
Yes. Sleeping partners are allowed for LLP.
No, because a wholly owned subsidiary of head office has only one shareholder. LLP must have at least 2 partners to be formed. However, if the number of shareholders in the wholly owned subsidiary is increased to 2 or more shareholders, conversion to LLP would then be possible.
Those who are interested in starting a Singapore business may select one of several business entities. Among these are the sole proprietorship, limited liability partnership, private limited company, and limited partnership. Foreigners have additional options such as the representative office, foreign branch, and foreign subsidiary.
Historically and even today, Singapore’s government has been known to be extremely pro-business and supportive of corporations. By setting an extremely low corporate tax rate, the government intends to induce business owners from all over the world to conduct business operations in Singapore. It also serves as a means to encourage Singaporeans to start their own businesses.
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 https://statutes.agc.gov.sg/. We wish you all the best.
Any individual or body corporate may be a partner in a LLP. This includes a natural person, company, foreign company, or another LLP.
Yes, a partner of LLP can be a partner of another LLP.
We would recommend that the company fulfill all its outstanding filing obligations before converting into an LLP