There are several business structures available for entrepreneurs to set up in Singapore. Singapore also recognizes Limited Liability Partnerships (LLP) as a tool to conduct business. Business models like LLP are generally preferred by individuals engaged in professional services such as lawyers, architects, accountants and management consultants.
As we are aware that an LLP is a perfect conjunction of features of both partnership and a private limited company, it is implied that it shall have lesser compliance requirement in comparison to a private limited company. Before we move into these compliance requirements lets discuss in brief the features, partners and managers, registration requirements, taxation aspects of an LLP in Singapore.
- LLP also has a separate legal identity like a private limited company distinct from partner.
- LLP can sue and be sued in its own name.
- LLP has a right to acquire and hold property in its name other than its Partner.
- LLPs in Singapore has perpetual succession, i.e changes in the partners of the LLP does not hinder its existence, rights or liabilities.
- Singapore also facilitates that a body corporate can be a partner as well.
- Private limited company and partnership firms can be converted into an LLP.
PARTNERS AND MANAGERS:
- Any person i.e an individual, a local company, a foreign company or another LLP can be admitted as partners in LLP.
- Minimum requirement of at least 2 partners and there is no limit for maximum number of partners.
- LLP must also have a manager. Managers are responsible for management of LLP.
- Manager must be an ordinary resident in Singapore, a natural person of full age (i.e. at least 18 years old) and of capacity.
- Manager shall be personally liable to all penalties imposed on the limited liability partnership for any contravention as mentioned in the LLP Act unless he satisfies the court hearing that he should not be so liable.
- Foreigners are also allowed to be partner and they can continue to reside in their country but manager must be a Singapore resident.
- Partners are generally not liable for any debts incurred by the LLP. However, the personal liability of a partner in regard to his for his own wrongful act or omission shall remain intact, but a partner shall not be personally liable for the wrongful act or omission of any other partner of the limited liability partnership.
- A partner if liable to any person (other than another partner of the limited liability partnership) as a result of a wrongful act or omission of his in the course of the business of the limited liability partnership or with its authority, the limited liability partnership is liable to the same extent as the partner.
- Minimum 2 partners and a manager (Singapore resident) and their related information.
- Consent of the manager to act as Manager and Statement for Non-Disqualification to act as Manager.
- Registered office of LLP necessarily in Singapore.
- Details of the LLP to be registered i.e proposed name, general nature of business etc.
- Foreigners who wish to set up an LLP and be present in Singapore to manage its operations are must take approval from the Ministry of Manpower (MOM) before registration.
On receipt of such details and information, The registrar shall take note of it and if satisfied, grant letter a notice of registration signifying the incorporation of the LLP.
- For taxation purpose, an LLP will not be treated as a separate legal entity and hence will not be liable to tax at the entity level. Instead, each partner will be taxed on his or its share of the income from the LLP.
- If the partner is an individual, his income from the LLP will be taxed based on his personal income tax rate and if a partner is a company, its income from the LLP will be taxed at the tax rate for companies.
- Annual Compliance:
- Every LLP shall lodge with the Registrar a declaration by one of its managers that in that manager’s opinion, the LLP is solvent i.e the LLP is able to pay its debt or any other declaration as may be prescribed.
- The declaration has to be registered within 15 months from the date of registration of the LLP and subsequently once in every calendar year at intervals of not more than 15 months.
- The LLP act also mention penalties in case of failure of this annual declaration.
- LLPs do not need to file annual returns to ACRA.
- LLP should maintain its proper books and records that shall give a fair view of the state of affairs of the LLP for a period of at least 5 years.
- The registrar may require at any time to produce the records.
- The LLP act also mention penalties in case of failure of maintenance of records
To conclude, operating a business via LLP structure is simple and less compliant. However, the manager’s responsibility is immense in his individual capacity for regulation of LLP. Hence, this mode is feasible for Singapore residents only.
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