Setting Up a Partnership in Singapore is one of the popular company structures amongst investors. A Singapore Limited Liability Partnership (LLP) is a style of company organization in which two or more partners form a partnership entity that protects co-partners from liabilities resulting from the purposeful misconduct or gross negligence of one partner or a group of partners.
The Singaporean government approved Limited Liability Partnerships in 2005 after extensive public consultation and based on the recommendations of the Company Legislative and Regulatory Framework Committee (CLRFC). This was done in response to changing business needs and to keep up with global developments.
A partnership is the best option for a group of 2 to 20 members wishing to launch and run a small business with few regulatory restrictions.
However, setting up a Pte Ltd would be more appropriate if there were more than 20 partners or if the business wanted to buy real estate. To know more about this, refer to Advantages of Incorporating a Singapore Company to Buy Commercial Properties.
OVERVIEW OF A SINGAPORE LLP
- A Singapore LLP is given a separate legal existence (i.e., distinct from its owners), and as a result, it is able to hold property and bring legal actions or be sued.
- A Singapore LLP partner cannot be held personally responsible for the wrongdoings of any other partners.
- In the course of conducting business, a Singapore LLP is equally accountable as the partner if one of the partners becomes liable to any person or firm due to his or her acts of commission or omission. As a result, an LLP can be sued for the whole value of its assets.
- A partner is personally liable during the course of the business for any obligations that result from his act of commission, omission, or negligence. He may be held liable along with his personal belongings. Other innocent partners, on the other hand, and their private property will continue to be protected from such liabilities, and their obligations will only extend to the capital they provided to the LLP.
- The limited liability partnership agreement governs the rights and obligations that the Singapore LLP and its partners have toward one another. The First Schedule of the Limited Liability Partnership Act of 2005 shall apply in the absence of agreement on any topic.
TYPES OF PARTNERSHIPS IN SINGAPORE
General Partnership (GP)
The number of partners must be kept to a maximum of 20 and must be at least 2. If there are more than 20 partners, a corporation must be incorporated. Each partner is personally responsible for the company’s obligations. The responsibility of the partners is still uncapped. Each partner is responsible for the debts and losses incurred by the others. According to the Business Name Registration Act, it is registered with ACRA.
Limited Partnership (LP)
There must be a minimum of one general partner and one limited partner for an LP. The maximum number of partners is unrestricted. The general partners are completely liable. In the case that a claim is filed against the LP, their private property may be seized. The general partners take an active role in running the business. An individual or business can be a general partner.
The responsibility of the limited partners is capped at the amount they contributed to the partnership, and they are not involved in the day-to-day operations of the company. An individual, business, or foreign-registered entity can all be limited partners.
In accordance with the Limited Partnership Act, LP is registered with ACRA. In Singapore, it is a relatively new kind of entity. LPs are subject to the limitations outlined in the Limited Partnership Act, as well as the general legislation applicable to partnerships. The partnership will be suspended and changed into a company incorporated under the Business Names Registration Act if there is no limited partner. The entity will be reinstated as a “live” Limited Partnership once Limited Partners join.
Singapore LLPs are not subject to entity-level taxation; instead, profits are considered to be a portion of each partner’s personal income and are subject to personal income tax rates.
When a partner is an individual, his share of the LLP’s income is taxed at the personal income tax rate of that partner. When one of the partners is a company, the company’s portion of the LLP’s income will be taxed at the corporate rate.
Members & Management
- A minimum of two partners is required. However, there is no maximum limit on the total number of partners in an LLP.
- The partners may be companies or real people.
- Upon his death or dissolution, in line with the limited liability partnership agreement (if any), or, in the absence of such an agreement, by providing the other partners 30 days’ notice, a partner may resign from the partnership.
- All current partners must agree to a proposed new partner. Every partner has one vote, while a majority vote makes other decisions.
- An LLP in Singapore, unlike a private limited company, is owned and operated by its partners rather than having directors, shareholders, or a secretary.
- Every limited liability partnership must appoint at least one management who is a natural person at least 18 years old, a Singaporean citizen, or a permanent resident, and who resides in Singapore regularly.
A Singapore LLP must have a “limited liability partnership” or the acronym “LLP” in its name. Each limited liability partnership is required to have a registered office in Singapore where all correspondence and notices may be sent.
- LLP must maintain accurate records in order to support all of its transactions and financial standing; otherwise, it risked prosecution and penalties.
- In Singapore, an LLP is exempt from filing its accounts or having them audited. It’s not required to reveal its capital either.
- The manager of an LLP must file an annual declaration of solvency or insolvency with the Registrar within the first 15 months after the date the LLP was registered. Consequently, a declaration must be submitted once every calendar year at intervals of no longer than 15 months.
- Every limited liability partnership must make sure that all of its bills, invoices, and formal correspondence clearly mention that it is registered as an LLP and include the name and registration number of the limited liability partnership.
- Within 14 days of the alteration, the Registrar must receive any revisions to the LLP’s information.
DOCUMENTS REQUIRED FOR SINGAPORE PARTNERSHIP REGISTRATION
- Approved name of the Partnership
- Information about the managers/partners (foreign passport or Singapore ID)
- Residence of the Managers and Partners
- Consent to Act as Manager and Declaration of Non-Disqualification to Act as Manager
- local company address
- the company’s registration information if the partner is a corporation.
- Declaration of compliance
PROCESS OF REGISTERING A PARTNERSHIP IN SINGAPORE
Step 1: Choosing a name for the partnership
The use of names for enterprises is subject to tight regulations, despite the fact that it may look like a straightforward process. For instance, obscene or vulgar names are prohibited. Additionally, due to potential concerns with copyright and trademark protection, no two businesses are permitted to have names that are the same or nearly the same.
Step 2: Choosing the address for the partnership
The applicant must inform Accounting and Corporate Regulatory Authority (ACRA) of the main location from which business will be conducted. Applicants must apply for the Home Office Scheme with HDB if they wish to register their business using their residential address.
Step 3: Appoint a local authorized representative (only if necessary)
The Business Names Registration Act 2014 mandates the appointment of at least one approved representative in cases where an individual proprietor, all of a firm’s partners, or all of a foreign company’s executives do not or are not Singapore residents.
Therefore, the partners need to choose a local approved representative for the company if they do not live in Singapore. The local authorised representative is required to be at least 18 years old, to regularly reside in Singapore, and to be of sound mind.
Step 4: Register online through the BizFile+ website
The last step of registration is to register online with BizFile+, which costs $115 for a one-year subscription or $175 for a lifetime registration. (3-year). Within 15 minutes of receiving payment for the fee, the partnership is established. The application review and approval process could take up to two months, and the setup period could range from 14 days to that amount.
A second address for the business may be reported to the Registrar for a charge of $40, however, authorised business names are only held for 60 days at a time.
An email confirmation of the Singapore LLP registration will be sent by ACRA. After the LLP has been successfully registered, a company profile from ACRA can be received that contains the registration information. These two documents are delivered in a digital format by email, which is acceptable in Singapore for all purposes. A tangible copy of the certificate may always be requested by making the appropriate application at the ACRA office.
POST-REGISTRATION COMPLIANCE IN SINGAPORE
- Letterheads and invoices for all business communications must include the registration number.
- Any change to the recorded information must be immediately reported to ACRA.
- It is illegal to continue operating the business after the registration has expired or the registrar has terminated it.
- Partnerships are not required to submit yearly financial accounts to ACRA or undergo an annual audit.
- In addition to reporting the partnership’s revenue and profits to IRAS, partners are required to file personal income tax returns.
- Records and accounts must be kept for a minimum of five years.
DRAFTING THE PARTNERSHIP AGREEMENT
A Partnership Agreement is one of the most crucial legal agreements you’ll need if you’re in a partnership. The Partnership Act is the law in Singapore that governs the rights and obligations of partners, but in reality, it is unable to meet each partner’s unique demands.
To ensure openness and agreement between partners on matters like business administration and profit-sharing, the Partnership Agreement is very helpful and essential. It might also specify how to admit a new partner or what happens if one partner wishes to leave. These are potential areas of contention that a thorough Partnership Agreement might resolve or perhaps lessen.
BANK ACCOUNT OPENING FOR SINGAPORE LLP
A bank account can be opened at any of the numerous international, foreign, and local banks in Singapore after the LLP has been registered. LLP is permitted to open either a single multi-currency account or numerous accounts in different currencies.
Refer to Singapore corporate bank account opening for more information.
Banks frequently need the following documents:
- Account application form(s)
- Certified true copies of each partner’s NRIC or passport
- Partner’s resolution of the bank account and authorized signatories
- Latest printout of the LLP’s corporate profile,
- Partnership Agreement
ADVANTAGES OF SINGAPORE PARTNERSHIP
- Easy to set up – A partnership is relatively easy to set up compared to other business structures, such as a corporation or a limited liability company (LLC).
- Shared workload – Partners can divide the workload among themselves, which can lead to a more efficient and effective business operation.
- Shared liability – Partners in a partnership share the risks and liabilities of the business. This means that if the business runs into financial difficulties, the partners will share the losses.
- Tax benefits – Partnerships are not taxed at the entity level. Instead, the profits and losses of the partnership flow through to the partners, who report them on their individual tax returns. This can result in significant tax savings for the partners.
DISADVANTAGES OF SINGAPORE PARTNERSHIP
- Unlimited liability – Partners in a partnership have unlimited liability for the debts and obligations of the business. This means that if the business runs into financial difficulties, the partners’ personal assets may be used to pay off the business’s debts.
- Shared profits – Profits are shared among partners according to the partnership agreement. This can create conflicts if partners have different expectations regarding the distribution of profits.
- Limited funding – Partnerships may find it harder to raise capital compared to other business structures such as corporations. This is because lenders and investors may prefer to invest in more established and well-known corporate structures.
- Partnership disputes – Disagreements among partners can lead to disputes that can affect the business. If the disputes are not resolved, they can result in the dissolution of the partnership.
Reach out to us at Relin Consultants for further assistance.
What is a Singapore partnership company?
A Singapore partnership company is a type of business structure in which two or more individuals, known as partners, come together to run a business.
What are the types of partnership companies in Singapore?
There are two types of partnership companies in Singapore: general partnerships and limited partnerships. In a general partnership, all partners are personally liable for the debts and obligations of the business. In a limited partnership, there are both general partners (who have unlimited liability) and limited partners (who have limited liability).
How is a partnership company taxed in Singapore?
Partnerships are not taxed at the entity level. Instead, the profits and losses of the partnership flow through to the partners, who report them on their individual tax returns.
What are the requirements to set up a partnership company in Singapore?
To set up a partnership company in Singapore, you must have at least two partners who are at least 18 years old and are not bankrupt or disqualified from being a company director. You must also have a registered office in Singapore and appoint at least one local manager who is a Singapore citizen, permanent resident, or Employment Pass holder.
Can a foreigner set up a partnership company in Singapore?
Yes, foreigners can set up a partnership company in Singapore, but they must appoint at least one local manager who is a Singapore citizen, permanent resident, or Employment Pass holder.
What are the compliance requirements for a partnership company in Singapore?
Partnership companies in Singapore must comply with various regulatory requirements, such as filing annual tax returns and maintaining proper accounting records. They must also renew their registration with the Accounting and Corporate Regulatory Authority (ACRA) annually.
Can a partnership company convert to another type of business structure?
Yes, a partnership company can be converted to a private limited company, limited liability partnership, or sole proprietorship. However, the conversion process may have legal and tax implications, and it is recommended to seek professional advice before proceeding.
How can I dissolve a partnership company in Singapore?
A partnership company can be dissolved by mutual agreement among the partners or through a court order. The partners must settle all debts and obligations of the business before the dissolution can be completed.