Forming a Limited Liability Partnership in Singapore has its own rules and regulations. The bureaucracies put in place enable partners to operate well and achieve the company’s goals and targets.
Before entering into a partnership, potential business partners need to understand what they're getting into. They have to understand that a partnership might be best suited for certain industries like professional services, management consultants, accountants, architects, and lawyers.
What is an LLP
A Limited Liability Partnership (LLP) is a business structure in Singapore that enables two or more partners to work together while giving the partnership a separate legal entity from its owners. This will help to shield the partners from financial liabilities that might result from misconduct, wrongful acts, or any other negligence.
Features of a Limited Liability Partnership Singapore
LLP has several unique features according to the Limited Liability Partnership Act overseen by the Accounting and Corporate Regulatory Authority (ARCA). These features help to distinguish LLP from other types of business.
- Partners always have an LLP agreement, which entails that the company is seen as a body corporate, keeping the business, including business debts incurred, a separate legal entity from existing partners.
- Partners have an option to own property.
- Partners can not only be individuals but also corporate bodies, as noted by the Accounting and Corporate Regulatory Authority. This is in line with the separate legal identity of limited liability partnerships.
- An LLP can either sue or sue in its name distinct from business owners and partners. The LLP may also conduct formal business agreements separate from its partners.
- As a separate legal identity, LLP can facilitate its own business structure, operations, income tax formal business agreements, financial statements, and more without bearing the name of its partners.
- A partnership should have two or more partners who are protected under the LLP Act, which states that partners are distinct from limited liability partnerships regardless of financial position, or position in the company business structure.
Limited Liability Partnership Agreement in Singapore
LLP agreement refers to the legally binding document that outlines the rights, responsibilities, and obligations of the partners in the LLP. The LLP agreement includes provisions regarding the management and operation of the LLP, profit-sharing arrangements among partners, decision-making processes, capital contributions, dispute resolution mechanisms, and procedures for admitting or withdrawing partners.
The agreement of LLP formation is important because it provides legal protection to partners by separating their assets from the liabilities of the partnership. This means that partners are not personally liable for the debts or legal obligations of the partnership, shielding their assets from potential risks associated with the business.
Additionally, it also helps to clarify the roles, responsibilities, and rights of each partner, helping to prevent disputes and misunderstandings in the future.
Documents Required for Singapore LLP
The following documents are needed if you’re planning to register an LLP in Singapore:
- Proposed LLP Name
- Registered Address of the LLP
- Partners' Details
- Manager's Details
- Partnership Agreement
- Consent to Act as Manager/Partner: Signed by each partner and manager.
- Declaration of Compliance
Any group of individuals or companies that want to conduct an LLP registration in Singapore needs to have the above documents ready on hand. After all the documents have been gathered, you can proceed to the next stage which is to register your LLP with the Accounting and Corporate Regulatory Authority (ACRA). To register the LLP, you can follow the steps that we have curated in the next section.
LLP Registration Process in Singapore
1. Choose LLP Name
Select a business name that is neither derogatory nor inappropriate, and ensure it does not match any existing Singaporean companies. To make everything easier, when selecting a name for your LLP, it's crucial to ensure it meets certain criteria:
- The name should not be offensive or inappropriate.
- It should not be similar to existing LLPs, businesses, companies, or protected firm names.
- Avoid names that the company registrar has advised against approving for certification.
- Choose a name that distinguishes your LLP from other corporate entities to prevent confusion.
Additionally, the LLP's name must include the words "Limited Liability Partnership" or the acronym LLP. Once chosen, submit the name for a reservation to the appropriate authority. A reserved LLP name is held for 120 days from the approval date.
2. Appoint Managers and Partners
Each LLP must have at least one manager who is a resident of Singapore with the age of at least 18 years old. Additionally, every LLP must also consist of a minimum of two partners, who can be individuals, local businesses, international businesses, or other LLPs.
3. Collect the Necessary Document
Collect all the necessary documents that we have explained in the previous section. These documents will be submitted for the LLP registration.
4. Register the LLP
Register your LLP with the Accounting and Corporate Regulatory Authority (ACRA) using their online platform BizFile+. This platform allows you to submit all the necessary information, such as the LLP's name, business address, details of partners, and manager, with ease digitally. Do keep in mind, before registering your LLP, make sure to decide on your business activities, business structure, and address.
5. Pay the Enrollment Fee
You have to pay S$115 as a registration charge for an LLP online at the BizFile+ website.
6. Get the Approval from ACRA
Once the Singapore LLP registration is complete, ACRA will send an email confirmation. You can obtain a business profile with registration details from ACRA after successfully registering your LLP. These documents are sent digitally via email and are legally sufficient for all purposes in Singapore. If needed, you can request a physical certificate from the ACRA by applying.
The registration procedure takes a short while to complete. The LLP registration in Singapore can take as little as one day.
Advantages of a Limited Liability Partnership
- A separate legal entity means the partnership entity is separate from all its partners.
- It has simple compliance requirements, unlike private limited companies.
- There is no need to file annual results. Online income tax returns can be filed, and there are no corporate tax benefits for LLP.
- Partners are not liable for losses and debts that are incurred by the other partners.
- Comes with perpetual succession.
Disadvantages of a Limited Liability Partnership
- Issues with transferring ownership. This process tends to take a long time hence becoming tiresome.
- No tax exemptions or incentives.
- Partners are liable for their losses and debts. They have to deal with them on their own.
Build Your LLP with Wealthbridge!
Starting a Limited Liability Partnership is not a walk in the park. You need to have onboard professionals who have a common goal like yours and follow the registration process properly. If you're a business owner looking to launch an LLP in Singapore but feel hesitant to do it because of the challenging registration process, there's no need to worry anymore! Our team of professionals at WealthBridge can make registration easy through our professional services firm which assists in LLP registration. Contact us today for more info!
FAQ’s
How does the LLP’s taxation in Singapore work?
In Singapore, LLPs are not taxed at the entity level. Instead, the profits from LLPs are considered part of each partner's income. Individual partners are taxed at personal income tax rates, while corporate partners are taxed at the prevailing corporate tax rate. There are restrictions on the amount of capital allowance and trade loss that partners can offset against other sources of income in a given year. This offset cannot exceed each partner's contributed capital as of the end of the current year.
What are the rules for LLP in Singapore?
The LLP application should include a minimum of 2 partners and a maximum of 20 (individuals or entities). The partners can be a certain individual (at least 18 years old) or corporate bodies (company or LLP). The agreement between partners must be drafted by solicitors before its establishment. Additionally, it also needs to give at least one manager who is a resident of Singapore.
Can a foreigner be a partner in LLP Singapore?
Yes, but the individual should be at least 18 years old.