Guide to Registering a Limited Liability Partnership (LLP) in Singapore
You might be wondering – which business entity suits your business model the most? To answer this question, you will have to give due consideration to the various business entity options available in Singapore.
In this article, Limited Liability Partnerships (LLPs) will be explained in further detail.
What is an LLP?
As its name suggests, an LLP is a formal “partnership.” In other words, it is a business that is owned by at least 2 partners.
Apart from individuals, a body corporate like a local or foreign company, and/or another LLP can be a partner as well.
An LLP is a separate legal entity. Essentially, this means that the law regards an LLP as a separate “person” from its partners. Thus, an LLP can sue and be sued, and own property in its own name. This also means that partners of an LLP will not be held liable for any debts incurred by the LLP.
Further, individual partners in an LLP are shielded from the liabilities of other partners in the same LLP that arise during the course of business, hence the label “limited liability.” This means that while individual partners remain personally liable for losses incurred from their own wrongful actions (e.g. omission or negligence), other partners will not be liable for such losses.
Benefits and Disadvantages of Registering an LLP
Just as there is always two sides to a coin, there are benefits and disadvantages to be weighed when deciding whether to register an LLP.
Separate legal entity
As mentioned earlier, an LLP is seen as a separate legal entity from its partners. Thus, partners’ liabilities are only limited to the capital they contributed to the LLP, and their own assets would be protected from any legal actions against the LLP.
This provides protection to partners, in the sense that they are not personally liable for the business’ debts and any other legal action taken against the business.
An LLP will continue to exist until it is wound up or struck off the register. This is advantageous as this means that even under extreme circumstances where, for instance, all partners resign or die, the LLP’s existence, rights or liabilities are not affected.
This is more attractive to investors since the business of the LLP will not be disrupted, thus promising a more secure and stable long-term outlook.
However, the same benefit is not present for other business entities such as sole-proprietorships, partnerships and limited partnerships.
Simpler compliance requirements
Compared to a company, an LLP is subject to less stringent compliance requirements.
Specifically, an LLP does not have the statutory obligation to appoint a company secretary, hold annual general meetings, or fulfil complex filing requirements including annual accounts and tax returns. Thus, in terms of legal formalities and compliance procedures, an LLP is simpler and likely incurs less compliance costs.
The only compliance requirement for an LLP is the lodging of an annual declaration of solvency or insolvency (see below).
Consensus and consent
There might be a concern on decision-making when it comes to entering into contracts.
Individual partners can, without obtaining consent from other partners, enter into formal business agreements. This may impede on the partners’ ability to run the business with a shared consensus at times.
Transfer of ownership
Notwithstanding the fact that LLPs have perpetual succession, an LLP faces less fluidity in the transfer of ownership compared to a company.
There are greater difficulties in transferring ownership in an LLP because the assets, licences and permits must be transferred individually. This means that the LLP cannot be sold as a whole, which may translate to greater hurdles when continuing the business.
In contrast, for a company, ownership can easily be transferred with little or no disruption to the operation of the company, as it can be done through the sale of shares.
How to Register an LLP
To register an LLP, a minimum of 2 partners (individuals or corporations) is required. Further, there must also be at least 1 manager who is ordinarily resident in Singapore, who is at least 18 years old.
The manager need not necessarily be a partner, and takes part in the management of the LLP. This means that where the LLP fails to comply with certain rules and regulations of the Limited Liability Partnership Act, for example, failing to file a declaration of solvency, this manager will be held responsible. Thus, compared to partners, the manager of the LLP shoulders heavier responsibilities.
Registering an LLP is a considerably straightforward matter, and can be condensed into 2 main steps – first, reserving the LLP name; second, registering the entity.
Prior to the registration process, you should ensure that the following documents are ready and available:
- Proposed LLP name
- Proposed business and registered office of the LLP
- Particulars of the LLP partners/managers.
- Where the partner is an individual (including managers), information including their full name, identification, nationality and residential addresses must be furnished.
- Where the partner is a company, details of the company such as the company’s name, place of registration/incorporation, registration number and registered office must be furnished.
- Declaration of compliance. LLPs must file an annual declaration of solvency and maintain records (see below).
- Consent to Act as Manager (for the manager’s consent to act as such) and Statement for Non-Disqualification to Act as Manager (to declare that this manager is qualified to act as such, i.e not an undischarged bankrupt).
After preparing these documents, you may then complete the registration process:
1) Reservation of LLP name
To reserve an LLP name, log into BizFile+ using your SingPass or CorpPass. A $15 name application fee is payable. The application will be processed within 15 minutes upon payment.
The name will be reserved for 120 days from the date of approval, and no extension will be granted.
2) Registration of the entity
After obtaining approval for the LLP’s name, you may then proceed to register it with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+. For this, a $100 registration fee is applicable.
The application will be processed within 3 working days upon payment of the fees.
However, it may extend between 14 and 60 days, should the application be referred to other agencies/authorities for the relevant approval or review. For example, if the LLP is intended to set up a private school, the application will be referred to the Ministry of Education.
What Happens After Registering the LLP?
Issuance of Business Profile and UEN
Once the LLP registration is confirmed, the person who filed the registration will receive a confirmation email. This email will also contain a URL to download the LLP’s Business Profile. The Business Profile is an electronic report that contains information of your newly created entity.
On top of that, upon successful registration, your LLP will be given a Unique Entity Number (UEN), which must be shown on all of its invoices, bills and official correspondence. The UEN is also used when transacting with government agencies.
Within 15 months of the registration, the annual declaration of the solvency of the LLP must be made by its manager. This statement basically declares whether or not the LLP is able to pay off its debts. Subsequently, such annual declarations have to be made within an interval of 15 months.
Failure to make such a declaration within the time period may result in a fine of up to $5,000 and a court order for the LLP to be wound up.
Further, an LLP must keep and maintain records and accounts that explain and substantiate the financial position of the LLP. Such records must be kept for at least 5 years from the financial year end in which the financial transactions/operations the records relate to are completed.
Additionally, the partners must keep the records at an appropriate place of their choice, that allows access to all partners, as well as produce the records as and when required by the Registrar for his inspection
Non-compliance would subject every partner to a fine of up to $10,000, or to an imprisonment term of up to 2 years in the case of individual partners.
Taxation of LLP
An individual partner will be taxed based on his personal income tax rate.
Where the partner is a company, it will have to pay corporate income tax on its share of income from the LLP.
Renewing an LLP registration
No renewal of the LLP registration is required at all.
Closing an LLP
There are 2 main ways to close an LLP:
- Winding-up voluntarily by members or creditors, or compulsorily by the High Court;
- Striking-off by application to ACRA via BizFile+.
Registering an LLP may potentially help to save costs and hassle when it comes to running and managing your business, as compared to other business entities.
That being said, it remains important for you and your partner(s) to consider the advantages and disadvantages of an LLP carefully before making the registration.
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