Limited Liability Partnership

A limited liability partnership, is among the common business structures in Singapore. It is a business structure which gives owners a lot of flexibility. Limited Liability Partnership (also known as LLP), has two or more partners that incorporate the partnership entity.

The partnership entity however protects co-partners from liabilities brought about by gross misconduct or negligence from another partner. This is because the LLP is regarded as a body corporate which has a legal personality separate from its partners. Also, LLPs have perpetual succession, and this means that any change in the partners will not affect the rights, liabilities, or even its existence. Being an entity with a legal personality, below are the things an LLP is capable of:

• Acquisition of, and holding property in its name
• Suing and getting sued in its name
• Having a common seal in its name, as well as
• Doing every other thing, that bodies corporate can do lawfully in its name.

With the growth of the Singaporean economy in recent years, the government of Singapore after much public consultations, and recommendations of the Company Legislative and Regulatory Framework Committee (CLFRC), allowed the establishments of Limited Liability Partnerships in the country since 2005.

Every Limited Liability Partnerships must have two or more partners. The Limited Liability Partnership Act of 2005, allows all professionals the benefit of the structure. However, it works better for chartered professionals such as; accountants and lawyers in practice.

Below are important facts to note about LLP in Singapore:

• A Singaporean LLP is seen as a legal entity; separate from its partners. Therefore it can own property, sue or be sued as every legal entity.
• Based on the structure, a partner of a Singaporean LLP cannot be held for liabilities brought about by wrongful omission or commission of another partner(s).
• If a partner in the course of business of a Singaporean LLP, becomes liable to any company or person through acts of wrongful omission and commission, the LLP in this case is liable to the same extent as the partner. Claims can therefore be made against the LLP to full extent of its assets.
• Every partner is personally responsible for liabilities that arise as a result of his negligence, commission and wrongful omission. As a result, liability claims can be made against him as well as his personal assets. In this case, other partners and their assets are protected from such liabilities. The capital contributed to the LLP is the only liability they incur.
• Every LLP is governed by the limited liability partnership agreement. This covers the mutual rights and duties of the partnership, as well as its partners.

• A Singaporean LLP must have a minimum of two partners.
• Partners in the LLP can be companies as well as natural persons.
• A proposed new partner can join only with the consent of all existing partners. Other pressing matters within the partnership is determined by majority vote, with each partner having one.
• A partner can lose partnership by dissolution, death or in line with the limited liability partnership agreement. In the absence of an agreement, a 30 days notice must be given to other partners.
• Singaporean LLPs, unlike private Limited companies do not have shareholders, directors or secretaries. Instead the business is own and run by the partners.
• A Singaporean LLP must employ at least one manager. The manager must be at least 18 years of age. He must be a Singapore citizen, permanent resident or an ordinary resident.

An LLP manager must not be:

• Previously disqualified as an unfit manager of an insolvent LLP.
• An undischarged bankrupt.
• Convicted of offences involving dishonesty and fraud.

• The partnership name must include the acronym ”LLP” or the words ”limited liability partnership”.
• Every LLP is required to have a registered office within the country, to which all notices and communications can be addressed.

Taxation does not apply to Singaporean LLPs at entity level. This is because profits are regarded as personal income for each partner, and taxed accordingly. For natural persons, each partner’s income is charged at personal income rate. While for companies, income is charged at company tax rates.

• A Singaporean LLP is required to keep its book updated, in order to authenticate all transactions as well as financial position of the entity. Failing to do this attracts penalties and prosecution.
• An LLP is not required to disclose its capital. It is also not required to file its accounts or audit them.
• LLPs must ensure that its official correspondence and invoices bear the name it is registered as. Also the name, as well as registration number of the LLP must be visible on its official correspondence, invoices and bills.
• Changes to the particular of an LLP must be lodged with the registrar, at least 14 days from the date of change.

Before an LLP can be registered in Singapore, the following documents are required:

• The proposed LLP name
• Particulars of the LLP partners and managers including Singapore identity card or foreign passport
• Declaration of compliance
• Residential address of partners and manager
• Registered address of the LLP
• In the case of a company partner; registration details of the company such as registration number, registered address and jurisdiction are required.

Limited liability partnerships are registered with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore. For foreign nationals, it is a must to hire professional service firms to handle the process of registration. Hiring such firms is also recommended for locals, as it makes the registration easier and faster.

LLP registration can be completed in a single day, as it consists of just two steps which are: name reservation and registration of the entity.

As soon as the registration procedure is completed, the Accounting and Corporate Regulatory Authority (ACRA), will send an email of confirmation. Thereafter, a business profile which contains the registration details can be obtained. These documents provided through the email, are useful for all business purposes in Singapore. However, a physical copy can always be requested from ACRA office, if required.

A bank account can be opened for an LLP, as soon as it is registered. It can be opened at any international, foreign or local bank within the country. Multiple accounts of various currencies can be opened, as well as a single multi currency account. A number of documents are required to this end:

• Account application forms;
• Certified copies of passport of all partners along with authorised signatories;
• Partnership agreement;
• Partner’s Resolution of bank account along with authorised signatories;
• Recent print out of the business profile.

An LLP is required to keep its books updated in order to authenticate all its transactions and the financial position of the partnership. All financial records must be maintained for seven consecutive years.

The manager of an LLP is required to submit an annual declaration of solvency or insolvency to the registrar every year. This declaration is to be lodged within the first 15 months of the establishment of the partnership. A declaration must then be submitted, once in every calender year within an interval of not more than 15 months.

• An LLP possesses a separate legal identity allowing it to enter into contracts, own properties, sue and be sued as well.
• It ensures limited liability. Partners of an LLP are not held personally liable for the wrongful acts of other partners or business debts incurred by the LLP. A partner can only be held liable for losses that result from his own misconduct.
• There is perpetual succession in an LLP. Any change in the LLP either through death or resignation of partners does not affect its rights, liabilities and existence.
• The compliance requirements for an LLP (listed above), are quite easy and straightforward.

• At all times, it requires a minimum of two partners.
• Individual partners are allowed to commit the partnership to formal business agreements, without the consent of other partners.
• It lacks ease of ownership and investment transfer.
• Absence of corporate tax benefits. As LLPs are treated as tax transparent, they do not enjoy tax exemptions.

Looking to start a business in Singapore? Timcole can provide assistance in the whole LLP registration process and other administrative burden your business carries.

Timcole is one of the leading company incorporation and accounting firm based in Singapore. Our wide range of professional services serve as a one-stop solution for your business, offering you the most affordable price for services conducted with the highest level of excellency.

Contact us to find out more on how we can help you with your company today.