Singapore's business environment is always changing and improving. As a response to this dynamism, the government implements policies and measures that help individuals and businesses, alike, to explore new ways to grow and develop. This and many more factors present Singapore as a great platform to position your business in the Southeast Asia region.
If we do some research about the ways a business can be established in Singapore, we can find that the Accounting and Corporate Regulatory Authority (ACRA), which is the authority that oversees companies and businesses in Singapore, makes mention of four main business structures these are the Sole Proprietorship, that with the General Partnership, conforms the most basic way of conducting business in Singapore, then we have the Limited Partnership, the Companies such as the Private Limited Company and, one of the most recent way of conducting business, the Limited Liability Partnership.
In this article, we will be focusing on the Limited Liability Partnership business structure, which is often referred to as a Singapore LLP, and we will include topics such as what it is, what is required to establish one in Singapore, and, illustrate in a general way the steps to take for the application process, as well as some other considerations and outputs.
What is a Limited Liability Partnership (LLP)?
So let's begin with a summary to introduce the figure of the Limited Liability Partnership, and why we refer to this type of business structure as one of the most recent ways of conducting business in Singapore. If you have read some of our other articles, you probably have heard about the Companies Act of 1967, which is the legislation that regulates the processes and conducts of the companies registered in Singapore, and as the name implies, it dates back to the late 60s when the country was experiencing its economic boom era. Nevertheless, it has had its revision and amends to respond to the current times and international business practices.
As part of these revisions, a separate legislation was approved in 2005, called the Limited Liability Partnerships 2005, which gave the green light to this kind of business structure. Compared to other business entities, the Limited Liability Partnership has special features that position it as a middle point between a Partnership and a Company. So we will begin by using this comparison to explain what it is.
Since a Partnership is composed of Partners with different levels of liability or exposure, it is not a separate legal entity. A company, in contrast, offers its owner's protection by being a different entity from them, reducing the risk of being personally liable for the business debts incurred by formal business agreements.
Now, the Accounting and Corporate Regulatory Authority (ACRA) mentions that it gives the flexibility to the owners to operate as a Partnership while having the identity of a Private Limited Company, which means that it has a separate legal entity. Nevertheless, an LLP will not have shareholders, the owners, which can be individuals or corporations, will be known as partners. The partners will run the business and take the key decisions, and their liability is always limited.
Now with a better understanding of the elements that make a Limited Liability Partnership, we can move on to the next section on the considerations before the registration process.
What is required before registering for a Limited Liability Partnership?
Currently, there are no limitations or requisites to fulfill beforehand to register a Limited Liability Partnership. Nevertheless, here we will enlist some of our considerations for you:
- Shareholders vs Partners: unlike Private Limited Companies that need to have 1 shareholder, LLPs don’t have shareholders and need a minimum of 2 partners, with no apparent maximum limit by the regulations. If a partner is an individual, he or she must be of the majority of age and each has one vote. The majority of votes will pass the resolutions of the LLP.
- Liability: all the partners in an LLP will be considered limited partners, therefore they will have limited personal liability.
- Documents required: since this business structure will register partners, the identification documents and their residential address proof of the partners and the manager are needed. In the case of having corporate partners, the document of their establishment, such as the Certificate of Incorporation, needs to be presented.
- Registered address: a physical address needs to be used to be the registered office address for an LLP.
- Internal documents: in contrast to the memorandum and articles of association that rules in a Private Limited Company, the LLP has the Limited Liability Partnership Agreement which establishes the partners and their corresponding rights and duties.
- Key roles: similar to the role of a director in a Private Limited Company, an LLP should designate a person as the manager, and this person should be at least 18 years old and a resident of Singapore. For this type of entity, it is not mandatory to have a Company Secretary but is recommended to have one to help with compliance and local regulations.
- Continuity: this means that other partners can be added or changed according to the needs of the business without affecting the operations and the existence of the LLP.
- Taxation: to tax the profit generated, if the partners are individuals they will be taxed on their income, while partners that are companies, will be subject to the Corporate Tax in Singapore.
Having read our recommendations, we can continue to the next section, which will discuss the steps to take for the application process of a Limited Liability Partnership.
What are the steps you need to take to register an LLP in Singapore?
The application process of a Partnership has some elements in common with the registration of a Limited Liability Partnership. Here we will enlist the steps to have a successful registration of an LLP:
- Name verification for registration (it must include Limited Liability Partnership).
- Submission of the application through the Bizfile+ platform.
- Payment of the application fee.
Other points to consider:
- Foreigners registering an LLP: as it is not possible for a foreigner or a foreign company to access the platform to start the application by themselves, engaging with a professional service provider in Singapore is the best way to carry out the process.
- Drafting of the agreement: as a complement to the previous point, since the Partnership agreement is a crucial step that will define the entity, it is important to have legal assistance in drafting the agreement.
- Timeframe for the process: after the application has been submitted and the fee has been paid, the approval process may take one or two business days.
- Business account: as it happens, with the Partnerships either being General Partnerships or Limited Partnerships, they can be formed with individuals. However, they cannot cooperate under the personal accounts of their partners, they need their business accounts.
At Statrys, we understand the issues that SMEs and entrepreneurs are facing with opening business accounts. Currently, businesses incorporated in Singapore, Hong Kong and the BVI are eligible to apply for a business account with Statrys. If you are looking for an alternative solution, please submit your application online on our signup page and our onboarding team will get back to you within 24-48 hours.
Conclusion
A Limited Liability Partnership offers an interesting mix of flexibility to individuals and corporations alike, with a middle point that offers protection and also allows a different way of taxation on profit. For example, by choosing to register this business structure, a partner who is an individual will be subject to personal income tax on the profits, which depending on their business can be more beneficial to them than having a company that will be subject to corporate tax.
Additionally, there is the aspect of having limited liability, that a normal Partnership doesn't have. Without a doubt, it is an evolution and an improvement to the figure of the Partnership.
FAQs
What is the main difference between the Limited Liability Partnership (LLP) and other kinds of Partnerships in Singapore?
While the LLP includes the word Partnership, it is not the same as the other Partnership forms. For example, Partnerships do not have an independent identity from their forming partners. It increases the risk to the individuals and their pockets. So, even though an LLP is formed by partners, they enjoy a hybrid structure, where they are not completely exposed. They have limited liability.
What kind of partner can form a LLP?
