A limited liability partnership, commonly known as LLP, refers to a partnership entity incorporated with two or more partners. One of Singapore’s most commonly chosen business structures, this type of business offers immense flexibility to owners. This partnership entity protects co-partners from having to bear financial consequences of gross negligence and misconduct of other partners.
For, LLP is considered a body corporate that has a separate legal personality from its partners. As these partnership entities have perpetual succession, the existence, liability, and rights of an LLP will not be affected by any change of partners. Because an LLP has a legal personality, it is capable of the following:
- Acquisition of property and holding it in the LLP’s name
- Getting sued and suing others in its name
- Having a seal in its name, and
- Doing everything else that a corporate entity can do legally do in its name
After a recommendation from the Company Legislative and Regulatory Framework Committee (CLFRC) and public consultation, the Singapore government allowed the establishment of LLPs in the country since 2005. Even though The Limited Liability Partnership Act of 2005 allows all professionals to benefit from the partnership structure, it is most beneficial for chartered professionals such as lawyers and accountants.
Features of LLP Partnerships
Below is a thorough overview of important facts about Limited Liability Partnership in Singapore:
Liabilities of a Singaporean LLP
Being a legal entity separate from its partners, a Singaporean LLP can own properties, sue other entities, and be sued in its name. The structure is such that a partner cannot be held accountable for liabilities incurred by commission or wrongful omission of any other partner(s).
If a partner becomes liable to any person or company through acts of negligence, commission or wrongful omission, the LLP will be held liable to the same extent as the guilty partner. Therefore, claims can be made to the full extent of the partnership’s assets. As every partner is responsible for any liabilities that arise due to his actions, liability claims can also be extended to his personal assets. In such circumstances, the personal assets of other partners will remain protected from the claim. Their maximum loss will be equal to the capital they contributed to the partnership.
The Limited Liability Partnership agreement governs every LLP. This document discusses the duties and mutual rights of the partners and partnership.
Management and Members of an LLP in Singapore
A Singaporean LLP must comprise at least two partners. The partners can be individuals or companies. A new partner can only join the partnership if all the existing partners give their consent. Other important matters can be decided by majority voting where each partner has one vote.
Unlike private limited companies, Singaporeans LLPs do not have any directors, shareholders, or secretaries. Instead, the partners own the business and run it too. Additionally, the LLP is required to hire one or more managers. The manager must be a Singapore ordinary resident, permanent resident, or citizen and at least 18 years old.
A partner may lose his partnership by death, dissolution, or based on the clauses in the limited liability agreement. If no agreement is available, a 30-days notice should be given to the other partners.
Requirements of an LLP Manager
To be eligible for the position, an LLP manager must not be an undischarged bankrupt, be convicted of any fraud and dishonesty-related offences, or be previously disqualified as an insolvent LLP’s unit manager.
Name of the LLP and its Address
The Singaporean LLP’s name must include the words “limited liability partnership” or the acronym “LLP.” Additionally, every LLP partnership must have a registered office in Singapore. All communication and notices will be addressed to this physical office.
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Taxation for LLP Partners
In Singaporean LLPs, profits are considered as personal income for the partners. As each partner is taxed individually based on their profit, Singaporean LLPs do not need to pay tax on an entity level. Individuals must pay tax based on their personal income tax rate while company tax rates will be applicable for companies that are LLP partners.
Compliance
Limited Liability Partnerships based in Singapore must keep their books updated. This helps authenticate transactions and the entity’s financial position. Failure to do so may lead to prosecution and penalties. LLPs need not disclose their capital. They also do not need to audit them or file accounts.
LLPs must make sure all their invoices and correspondences have the registered LLP name on the. The name and the registration number must also be visible on these documents and bills. If there are any changes to the particular of the partnership, the alterations must be updated with the registrar within 14 days.
Advantages and Disadvantages of LLPs in Singapore
An LLP has a separate legal identity so it can own properties, enter contracts, sue and even be sued. Its limited liability clause ensures that partners do not have to wrongfully bear any of the business debt that exceeds their capital invested. What’s more, the existence, liabilities, and rights of an LLP are not affected by partners’ resignation or death because there is perpetual succession. Best of all, the compliance requirements for a Limited Liability Partnership are quite straightforward and easy.
However, there are a few things to consider. An LLP requires at least two members at any given time. The business structure lacks investment and ownership transfer. Individuals can commit the LLP to formal business agreements even if the other partners do not grant consent. LLPs do not enjoy any corporate tax exemptions because these partnerships are treated as tax transparent entities.
Registration Procedure for Singaporean LLPs
LLPs in Singapore are registered with The Accounting and Corporate Regulatory Authority (ACRA). Foreign nationals must employ professional firms to take care of the registration process. Even though hiring professionals is not mandatory for locals, it is recommended as they can make the registration process fast and easy.
Registration of an LLP comprises two simple steps: Registration of the entity and name reservation. These can be completed in as little time as one day.
Documents Needed to Register a Singaporean LLP
To register an LLP in Singapore, the below documents are required:
- A proposed name for the LLP
- Particulars of the LLP managers and partners including foreign passport or Singapore identity card
- Declaration of compliance
- Residential address of managers and partners
- A registered physical address
- For Company Partners: Company registration details such as a registered address, registration number, and jurisdiction
Retrieving Registration Documents
The ACRA will send a confirmation email as soon as the registration is completed. After this, a business profile containing the details of the registration can be obtained. The soft copies of these documents sent through email are very useful for most business purposes in the country. However, LLPs can always request a physical copy from ACRA, if required.
Opening Bank Accounts for LLPs in Singapore
LLPs can open bank accounts as soon as they are registered with ACRA. An LLP can open an account at any local, foreign, or internal bank account within the country. An LLP can open multiple bank accounts of different currencies or a single multi-currency bank account. To open a bank account, the below documents must be provided:
- Bank account application forms
- Certified copies of partners’ passports including authorised signatories
- The partnership agreement
- Partner’s Resolution of a bank account including authorised signatories
- A hard copy of the recent business profile
Find out more about opening a corporate bank account in Singapore.
Requirements for Annual Filing
An LLP is required to consistently update its books to authenticate transactions and the partnership’s financial position. All financial records of the LLP must be maintained for a consecutive period of seven years.
Every year, the manager is expected to submit a declaration of solvency or insolvency for the year to the registrar. This declaration should be lodged no later than the first 15 months of the partnership establishment. Then, a declaration needs to be submitted annually within an interval of a maximum of 15 months.
HeySara is a corporate compliance service provider in Singapore, providing company incorporation, corporate secretarial services and other professional services.
