Along your business journey, you might come to a point where two or more individuals realize the need for profit sharing and shared responsibilities of the businesses thus requiring a partnership to be formed between two parties. Since a partnership has its distinct implications, it is important for you to be careful and considerate about forming a partnership in Singapore. It is also important to ensure a partnership that is fair for all the parties involved.
This post is aimed to discuss all you would like to know about formation of partnership in Singapore including the definition of partnership in Singapore, types of partnership in Singapore, tax liabilities involved and other details that are significant for doing business in Singapore as partners.
A partnership in Singapore is a legal relation where both parties carry out a business with the main intention to make profits from a business. The profits generated from the business will then be shared between both parties involved depending on their partnership agreement, responsibility, capital contribution or other factors.
Types of partnership in Singapore
On the legal point of view, a partnership cannot exist on its own without its partners. There are three types of partnership structures in Singapore: partnership, limited partnership, and limited liability partnership.
According to the Partnership Act, a Partnership is “the relation which subsists between persons carrying on a business in common with a view of profit. But the relation between members of any company or association which is registered as a company under the Companies Act [Cap. 50] or under any previous corresponding law; or formed or incorporated by or in pursuance of any other Act of Parliament, is not a partnership within the meaning of this Act.” on this respect, it is worth noting that all partners in the general partnership exercise the same authority in the decision making processes and all of them must come to a consensus and agreement before a company policy can be enacted across the firm’s operations.
As a partnership in Singapore is not an entity in law, it does not pay income tax on the income earned by the partnership. Instead, each partner is taxed on his or its share of the income from the partnership.
According to the Limited Partnership Act, a limited partnership “must consist of one or more general partners; and one or more limited partners. A general partner shall be liable for all debts and obligations of the limited partnership incurred while he is a general partner in the limited partnership.” Unlike a general partnership, a limited partner’s decision and authority in the Limited Partnership can be overwritten by the general partner or partners’ decisions.
Similarly to a partnership, a LP will not be liable to tax at the entity level. Instead, each partner will be taxed on his or its share of the income from the LP.
Limited Liability Partnership (LLP)
According to Limited Liability Partnership Act, an LLP has a separate legal identity like a private limited company yet the company type is flexible in operating like a partnership. In fact, an LLP allows perpetual succession. This means the management can remove or add in more partners and the decisions will not affect the liabilities, rights or existence of the LLP.
IRAS, the taxation authority in Singapore, states that, "for income tax purposes, an LLP is treated as a partnership and not as a separate legal entity. This means that an LLP will not be liable to tax at the entity level. Instead, each partner will be taxed on his or its share of the income from the LLP."
Procedure of forming a partnership in Singapore
For you to form a partnership in Singapore, a partnership name has to be approved and reserved through the Registrar. Upon the approval of the name, a partnership is required to be registered online through the BizFile Portal.
Professional business registration firm can definitely assist you on the needful.
For the registration of the partnership there must be at least two partners.
The following documents and information would be essential to understand more about partnership in Singapore:
- Proposed name of the Partnership
- Particulars of the partners/managers (foreign passport or Singapore ID)
- Residential address of the partners/managers
- Consent to Act as Manager and Statement of Non Disqualification to Act as Manager
- If partner is a company: Registration details of the company
- Singaporean or PR must pay Medisave
An email notification will be sent from ACRA, confirming the registration of Partnership. A business profile containing the registration details can then be obtained as a soft copy via email from ACRA upon successful registration.
Irrespective of the partnership type in Singapore that you choose to form, we at Precursor are keen to answer any of your questions as well as helping you in partnership formation in Singapore. Experts at Precursor have obtained knowledge, experience as well as expertise in order to help you at every step of your business success including partnership formation in Singapore.