Out of the various businesses entity types in Singapore, only Singapore limited liability partnership (LLP) and private limited company in Singapore can be considered to be separate legal entities. This post is a collection of frequently asked questions about Singapore LLP to help those who are looking to understand more about this business entity type.
What is a Singapore LLP?
According to the Limited Liability Partnership Act, a Singapore limited liability partnership (LLP) is a type of business structure “where the individual partner’s own liability is generally limited.” This clause protects the various co-partners from liabilities due to misconduct of other partners. This is affirmed by the Limited Liability Partnership Act Section 163A that “the mutual rights and duties of the Singapore LLP and its partners are governed by the limited liability partnership agreement.”
Who should register for a Singapore LLP ?
While the Singapore Limited Liability Partnership Act 2005 does not restrict the benefit of LLP to any specific classes/groups, the LLP structure is more suitable for chartered professions such as lawyers, accountants or, when two or more such professionals decide to work together. Entrepreneurs looking to incorporate a company in Singapore might find private limited company incorporation more appropriate.
In the event that my partner commits something wrong, would I be liable for that wrong doing as well?
As a major advantage of this entity, according to ACRA website, Singapore LLP offers “limited personal liability which means that the partners of the LLP will not be held personally liable for any business debts incurred by the LLP or the wrongful acts of another partner. A partner may, however be held personally liable for claims from losses resulting from his own wrongful act or omission.”
How many partners are required for a Singapore LLP?
A minimum of two partners are required for the formation of Singapore LLP. There is no cap on the maximum number of partners.
Who can become partners in LLP?
The partners can be either natural persons or companies. In both cases, liability structure remains the same and the respective persons/companies will be liable in proportion to capital contributed by them to the LLP.
How are the rights and duties of partners determined in a Singapore LLP?
The mutual rights and duties of the Singapore LLP and its partners are governed by the limited liability partnership agreement that the respective partners have signed and agreed upon. In the absence of agreement as to any matter, the First Schedule of the Limited Liability Partnership Act 2005 shall apply.
How can a partner be removed from LLP?
According to the Singapore Limited Liability Partnership Act, a person may cease to be a partner upon his death or dissolution or in accordance with the limited liability partnership agreement (if any). In the absence of such an agreement, they can be removed by giving 30 days notice to the other partners.
Are the rights and liabilities of the other partners affected in the case of death or resignation of a partner?
Any changes in the LLP (e.g. resignation or death of partners) will not affect its existence, rights or liabilities. The LLP can continue functioning and be liable in accordance with its agreement or LLP act which ever is applicable.
What information is needed for a Singapore LLP registration?
The following information will be required for a Singapore LLP registration:
- LLP’s proposed and approved name
- LLP’s partners’ particulars in accordance to the identification documents of the partners
- LLP partners’ residential address
- LLP’s compliance declaration
- LLP’s registered address details
- LLP’s Consent to Act as Manager and Statement of Non-Disqualification Act as Manager if any
- LLP’s registration number, jurisdiction and registered address if the partner is a partner
How are the taxes calculated for Singapore LLP?
According to the IRAS website, as “a partnership is not an entity in Singapore law, the partnership does not pay income tax on the income earned by the partnership. Instead, each partner will be taxed on his or its share of the income from the partnership. Where the partner is an individual, his share of income from the partnership will be taxed based on his personal income tax rate where a partner is a company, its share of income from the partnership will be taxed at the tax rate for companies.”
For instance, if Mr Teo is a partner, and Mr Teo is a local Singaporean, he will be taxed at a progressive tax rates. This means if Mr Teo is a higher income earner, he will be paying a higher tax rate with the existing highest personal income tax rate at 22%. For more information about individual income tax rate, click onto this IRAS link to find out more.
What tax benefits are available to an LLP?
Adding on to the information from the IRAS Website, “a LLP does not have any corporate tax benefits available. The tax exemptions available to private limited companies are not available to LLPs. LLP is treated as tax transparent which means that a LLP is not taxed as an entity. Instead each partner is taxed on their share of the profits as per the personal income tax rates.” In short, there are no tax incentives for you to set up a LLP in Singapore.
Before you plan to register a LLP in Singapore, one consideration that you have to make is the choice between incorporating a LLP or a private limited company. As a private limited company has the provision of having partners and offers better tax benefits, having a conscious decision on the type of Singapore company you would like to incorporate is imperative.
Here at Precursor, we will be happy to assist if you want to incorporate a Singapore LLP or a private limited company and if you are still unsure, we can offer our advice too. With years of hands-on experience and award winning team of local experts, we will be glad to answer any of your questions pertaining to the establishing and operating of your business in Singapore!