Forming a Partnership in Singapore
What is a Partnership?
A partnership is a business owned by a minimum of 2, and a maximum of 20 partners. A partnership of more than 20 partners must incorporate as a company under the Companies Act (except for professional partnerships). The partners are the owners of the business, and are involved in the management of the business as well as its day-to-day running.
Why a Partnership?
Similar to a sole-proprietorship, a partnership is also easy and less costly to set-up, administer and manage. Taxes are paid based on the partners’ individual income tax rates rather than corporate tax rates. Partnerships also have less compliance requirements than companies.
However, a partnership and all its partners are also regarded as a single legal entity. This means that partners have unlimited liability and are personally liable for the debts of the partnership and any other legal action taken against it. In addition, partners are also personally liable for the actions of other partners in the business. This necessitates a high degree of trust between partners and the need for a cohesive partnership agreement.
For a group of 2 to 20 partners looking to start and operate a small-scale business with little compliance requirements, a partnership is most appropriate. However should the number of partners exceed 20 or if the business is looking to own property, a company would then be more appropriate.
Similar to a sole-proprietorship, any Singaporean citizen, Permanent Resident (PR) or EntrePass holder who is 18 years old and above is allowed to register for a partnership.
Also, from 1 January 1994, all Singaporean citizens and PRs are required to top up their Medisave account with CPF Board before they register for a partnership.
Registering a Partnership
Once the above requirements have been met, you and your partners can then proceed to the registration process to register your partnership. The process is highly similar to that of a sole-proprietorship. Here are the steps as follows:
1. Choose a name for your partnership
While this may seem like an easy process, there are strict rules governing the usage of names for businesses. For example, offensive or vulgar names are not allowed. In addition, no two businesses are allowed to have similar or identical names due to possible copyright and trademark protection issues. You may wish to read our article on choosing an ACRA-approved name for your business.
2. Choosing the address (place) of your partnership
Applicants are required to notify ACRA of the principal address from which the business will be conducted. Should applicants wish to use their residential address to register their business with, they have to apply for the Home Office Scheme with HDB.
3. Appoint a local authorised representative (only if necessary)
The Business Names Registration Act 2014 states that where an individual proprietor, all the partners of a firm or all the officers of a foreign company does not or do not reside in Singapore, the individual proprietor, firm or foreign company must appoint at least one authorised representative.
Hence, if you and your partners do not reside in Singapore, you are required to appoint a local authorised representative for your business. The local authorised representative must be at least 18 years of age, be ordinarily residing in Singapore and have full legal capacity.
4. Register online through the BizFile+ website
The last step of the registration process is registering online with BizFile+, with a registration fee of $115 (1-year) or $175 (3-year). Once the fee has been paid, the partnership is set up within 15 minutes. Should the application be sent for a review for approval, the set-up process could take from 14 days to 2 months.
Note that approved business names are only reserved for 60 days and an alternate address for the business may be reported to the Registrar for a fee of $40.
Drafting Your Partnership Agreement
In the case of partnerships, one of the most important legal documents you will need to have will be a Partnership Agreement. The Partnership Act is the statute in Singapore which regulates the rights and duties of partners in Singapore, but practically it cannot cater to the specific and individual needs of partners.
The Partnership Agreement is extremely useful and a must-have to ensure transparency and agreement between partners on issues such as company management and profit-sharing. It may also set out what happens if a partner decides to quit, or how to admit a new partner. These are potential points of conflict, which can be mediated and even minimised with a comprehensive Partnership Agreement.
If you require assistance in setting up a partnership, do get in touch with us.
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