A Singapore Limited Liability Partnership (LLP) is a type of business structure where two or more partners incorporate a partnership entity that shields co-partners from liabilities due to the willful misconduct or gross negligence of one partner or a group of partners.
In line with the changing business needs and to be in tandem with the international developments, the government of Singapore after extensive public consultation and based on the recommendations of the Company Legislative and Regulatory Framework Committee (CLRFC), gave the green signal for Limited Liability Partnerships in 2005.
For a Limited Liability Partnership (LLP) to exist, there must always be two or more partners. Although Singapore’s Limited Liability Partnership Act of 2005 does not restrict the benefit of LLP structure to certain classes of professionals only, in practice, LLP structure makes the most sense for chartered professions only (such as lawyers, accountants, etc.) when two or more such professionals decide to work together. Whereas for other entrepreneurs looking to set up a company, incorporating a private limited company is the preferred option.
Quick Facts about a Singapore LLP
- A Singapore LLP is rendered a separate legal identity (i.e. separate from its owners) and therefore, a LLP can own property, sue or be sued.
- A partner of the Singapore LLP cannot be held personally liable for the wrongful commission or omission of any other partners.
- In the course of business of a Singapore LLP, if a partner becomes liable to any person or company through his acts of commission or omission, the LLP is liable to the same extent as the partner. Therefore claims can be made against an LLP to the full extent of its assets.
- A partner, during the course of the business, is personally responsible for liabilities that arise due to his act of commission, omission, or negligence. Liability claims can be made against him and his personal assets. However other innocent partners and their personal assets will remain insulated from such liabilities and their liabilities will be limited only to the capital contributed by them to the LLP.
- The mutual rights and duties of the Singapore LLP and its partners are governed by the limited liability partnership agreement. In the absence of agreement as to any matter, the First Schedule of the Limited Liability Partnership Act 2005 shall apply.
- From a tax perspective, Singapore LLPs are not taxed at the entity level and profits are treated as part of each partners’ personal income and are taxed at personal income tax rates. Where the partner is an individual, his share of income from the LLP will be taxed based on his personal income tax rate. Where a partner is a company, its share of income from the LLP will be taxed on the tax rate for companies.
Members & Management:
- There must be a minimum of two partners. However there is no cap on the maximum number of partners in a LLP.
- The partners can be natural persons or companies
- A partner may cease to be a partner upon his death or dissolution or in accordance with the limited liability partnership agreement (if any) or, in the absence of such agreement, by giving 30 days’ notice to the other partners.
- A proposed new partner requires the consent of all existing partners. Other matters are decided by majority vote, with each partner having one vote.
- Unlike private limited companies, an LLP in Singapore does not have directors, shareholder or secretary, instead the partners own and run the business.
- Every limited liability partnership must appoint at least one manager who is a natural person of at least 18 years of age and who is ordinarily resident in Singapore, a Singapore Citizen or a Permanent Resident.
Name & Address:
- A Singapore LLP’s name must include the words “limited liability partnership” or the acronym “LLP”.
- Every limited liability partnership shall have a registered office within Singapore to which all communications and notices may be addressed.
- LLP is required to keep its books up-to-date so as to substantiate all the transactions and financial position of the LLP, failure to do so may lead to prosecution and penalties.
- An LLP in Singapore is not required to file its accounts or have them audited. Nor does it need to disclose its capital.
- The manager of an LLP must submit to the Registrar an annual declaration of solvency or insolvency; such declaration must be lodged within the first 15 months from the date of the registration of the LLP. Subsequently a declaration once in every calendar year must be submitted at intervals of not more than 15 months.
- Every limited liability partnership must ensure that its invoices and official correspondence bear the statement that it is registered as an LLP, and the name and registration number of the limited liability partnership must be visibly printed on all its bills, invoices and official correspondence.
- Any changes to the particulars of the LLP must be lodged with the Registrar within 14 days from the date of change.
Documents Required for Singapore LLP
In order to register an LLP in Singapore, the following information/documents are needed:
- Proposed LLP name
- Particulars of the LLP partners/managers as per the foreign passport or Singapore identity card
- Residential address of the LLP partners/managers
- Declaration of compliance
- Details of the registered address for the LLP
- Consent to Act as Manager and Statement of Non Disqualification to Act as Manager
- In case the partner is a company: Registration details of the company such as registration number, jurisdiction, registered address, etc.
Registration Procedure for Singapore LLP
A limited liability partnership is registered with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore. Foreign individuals must appoint a professional services firm to handle the registration process. Even for locals, it is recommended that they engage a professional services firm for the LLP registration process, which includes the drafting of the partnership agreement.
The LLP registration process consists of two steps: a) name reservation; and b) registration of the entity. In normal circumstances, an LLP registration can be completed in a single day.
Corporate Documents Issued to Singapore LLPs
ACRA will send an email notification confirming the Singapore LLP registration. A business profile containing the registration details can be obtained from ACRA upon successful registration of the LLP. Both of these documents are provided in a digital format via email which is sufficient to all purposes in Singapore. If required, a physical copy of the certificate can always be requested from ACRA office by filing an application accordingly.
Bank Account Opening for Singapore LLP
After registering the LLP, a bank account can be opened at any of the several international, foreign and local banks in Singapore. LLP may open a multiple account of various currencies or can also open a single multi currency account. Typically, the banks will require the following documents:
- Account application form(s)
- Partners’ Resolution of bank account and authorised signatories
- Certified True Copies of NRIC/Passport of all partners and authorised signatories
- Partnership Agreement
- Latest print out of the LLP’s business profile
Annual Filing Requirements for Singapore LLP
A Singapore LLP is required to keep an up-to-date books of accounts so as to substantiate all the transactions and financial position of the LLP. Accounting and other financial records need to be maintained for 7 consecutive years.
The manager of an LLP must submit to the Registrar an annual declaration of solvency or insolvency; such declaration must be lodged within the first 15 months from the date of the registration of the LLP. Subsequently a declaration once in every calendar year must be submitted at intervals of not more than 15 months.
Advantages of Singapore LLP
- Separate Legal Identity: An LLP has a separate legal identity and is allowed to own property, enter into contracts, sue or be sued in its own name.
- Limited personal liability: 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.
- Perpetual succession: Any changes in the LLP (e.g. resignation or death of partners) do not affect its existence, rights or liabilities.
- Ease of compliance: Compliance requirements are more complex than sole proprietorship but simpler than a private limited company.
Disadvantages of Singapore LLP
- Requires a minimum of 2 partners at all times.
- Individual partners can commit the partnership to formal business agreements without the consent of the other partners.
- LLPs lack the ease of ownership transfer and investment that a company structure provides.
- No corporate tax benefits: Tax exemptions available to private limited companies are not available to LLPs. LLP is treated as tax transparent which means an 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.