LLP is a partnership where the individual partner’s own liability is generally limited. It consists of at least two partners and there is no limit on the number of partners. The mutual rights and duties of LLP and its partners are generally governed by a limited liability partnership agreement. 

 

The partners of a LLP own and run the business. Unlike private limited companies, an LLP does not have directors, shareholders or secretary.

 

LLP must appoint at least one manager who is a natural person of at least 18 years of age and who is residing in Singapore and is either a Singapore citizen or a permanent resident.

 

Legal Status of a LLP

• LLP is a separate legal entity from its partners

• Partners have limited liability

• LLP can sue or be sued in LLP’s name

• LLP can own property in LLP’s name

• Partners personally liable for debts and losses resulting from their own wrongful actions

• Partners not personally liable for debts and losses of LLP incurred by other partners

 

Yearly Statutory Obligations

• Annual declaration of solvency/insolvency must be lodged by one of the managers stating whether the LLP is able or not able to pay its debts during the normal course of business

• No statutory requirement for general meetings, directors, company secretary, share allotments etc

 

Registration requirements for a LLP

• At least two partners, who can be individuals (at least 18 years old) or body corporate (company or LLP)

• At least one manager residing in Singapore and at least 18 years old

• Undischarged bankrupts cannot manage the business without approval from the Court or the Official Assignee

 

Taxation of a LLP

For income tax purposes, LLP will be treated as a partnership and not as a separate legal entity. This means profits are taxed at partners' personal income tax rates (if individual) and corporate tax rates (if corporation).

 

Continuity of business

The LLP has perpetual succession until wound up or struck off.

 

Closing the Business

• The LLP may decide to wind up if its affairs voluntarily if the partners are of the opinion that the LLP will be able to pay its debts in full within 12 months after the commencement of the winding up. It must appoint a liquidator and file the notifications required under the LLP Act. If the partners are of the opinion that the LLP cannot by reason of its liabilities continue its business, an LLP may decide to opt for creditors’ voluntary winding up

• The LLP may also be wound up under an order of the Court under certain circumstances

• The LLP may apply to ACRA to strike its name off the register. ACRA may approve the application if there is reasonable cause to believe that the LLP is not carrying on business and it can satisfy the criteria for striking off

 

Our Opinion

LLP is more suitable for professionals like accountants, architects, and lawyers. It gives owners the flexibility of operating as a partnership (limited liability) while enjoying many of the benefits that come with a corporate body like a private limited company.