Limited Liability Partnership (LLP) In Singapore
Introduction of a Limited Liability Partnership (LLP) In Singapore
LLP or Limited Liability Partnership is an ideal collaboration of private limited company and a partnership firm. Since it was introduced, one can register for business entity of this kind and it has been following a worldwide recognition around various developed companies. LLP registration is possible for local companies, Singapore Citizens and Singapore Permanent Residents. Foreign companies and individuals should appoint a local resident manager to register for general partnership firm. With Limited Liability Partnership, the owners can flexibly operate their business as a partnership firm with enjoying the legal recognition as a private limited company. In LLP, there should be at least 2 partners and has no limit for maximum number of partners. Individuals, who are providing their professional services in the country like architects, lawyer, management advisors and accountants etc.
General partnership law does not apply to LLPs
A Limited Liability Partnership (LLP) is a business organisation comprising two or more persons associated for carrying on a lawful business with a view to profit that is registered as such under the Limited Liability Partnerships Act (Cap 163A). Despite its name, it is not treated as a partnership and general partnership law does not apply to LLPs.
Legal Identity of LLP is separate legal personality
The LLP is a body corporate that has a separate legal personality. It can sue, be sued and own property in its own name. The LLP is liable for its own debts and the partners and managers of the LLP cannot be made liable for such debts. Each of the partners are assessed and taxed individually on their respective share of the profits in the LLP.
Every partner is agent of LLP but LLP is not bound by unauthorized acts of partners
Every partner of the LLP is regarded as an agent of the LLP. However, the LLP is not bound by the acts of a partner which are not authorised where either this fact is known to the person dealing with the partner or the person does not know or believe the partner to be a partner in the LLP.
Governing relationship by LLP agreement
The relationships amongst partners in an LLP are governed by the limited liability partnership agreement. Matters not covered by the LLP agreement are governed by the provisions of the First Schedule of the Limited Liability Partnership Act.
Methods through which one can cease being member of LLP
A partner in an LLP can cease to be a member of the LLP in accordance with the LLP agreement or, where there is no agreement on the matter, by giving 30 days’ notice to the other members of his intention to leave the LLP.
A partner will also cease to be a partner in an LLP upon death or dissolution. In such an event, the LLP is required to pay to the former partner (or his legal representative or its liquidator) an amount equal to the former partner’s capital contribution to the LLP and the former partner’s share in the accumulated profits of the LLP. The amount is determined as at the date the former partner ceased to be a partner.
Registration and Compliance
Compliance with the Limited Liability Partnerships Act
Upon registration, LLPs must comply with the provisions of the Limited Liability Partnerships Act and any Rules made under the Act. This includes:
Annual filing of a declaration of solvency or insolvency:
- Under Section 24(1) of the LLP Act, the manager of every LLP is required to lodge a declaration stating whether the LLP is solvent or insolvent (i.e. able to pay off its debts or not).
- Under Section 24(2), the first annual declaration must be lodged within 15 months from the date of the registration of the LLP. Subsequent declarations must be lodged once every calendar year and not more than 15 months after the lodgement of the last declaration.
- If the LLP requires an extension of time to lodge the declaration, it can apply for an extension of time under Section 24(3) of the LLP Act.
- Keeping of proper accounts to be made available for inspection by the authorities when required;
- Having a registered office to which all communications and notices may be addressed; and
- Publication of its business name, registration number and limited liability status on it invoices and official correspondences. If the LLP is not carrying on business under its registered name, it must also comply with the provisions of the Business Names Registration Act.
One manager of full age and capacity.
All LLPs must have at least one manager who is a natural person and who is of full age and capacity and need not be a Partner. Such a manager must also be ordinarily resident in Singapore. Managers are persons who are concerned in or who take part in the management of the LLP. They need not be a partner of the LLP.
Manager will be held responsible for non-compliance of the Act
The manager is the person who will be held responsible should the LLP fail to comply with the requirements of the Limited Liability Partnership Act pertaining to:
- The filing of a declaration of solvency under section 24 of the Act;
- The publication of the LLP’s name, registration number and limited liability status on its invoices and correspondence; and
- The registration of any change in particulars of the LLP
Disqualification from acting as Manager of LLP
The following persons are disqualified from acting as a manager of an LLP:
- Undischarged bankrupts (unless they get permission from the High Court or the Official Assignee);
- Persons who are under disqualification from so acting pursuant to an order by the High Court because of their previous role in managing LLPs which have become insolvent or which were wound up on grounds of national security;
- Persons who have been convicted of specified offences; and
- Persons who are disqualified from acting as directors or from being involved in the management of companies under the Companies Act (cap 50).
Ways of dissolving an LLP
- An LLP will continue to exist until it is dissolved.
- Dissolution often takes place after a process called winding-up has been completed.
- The winding-up may be effected voluntarily upon the resolution of its partners.
- Alternatively, the winding-up may be effected following a Court order being made upon the successful application of the LLP itself, any of its partners (or persons representing their estates), any creditor, the liquidator or the Minister for Finance.
Assets management after dissolution
- During the winding-up, the assets of the LLP will be called in by the liquidator and realised. The money collected will be used to first pay off all the debts of the LLP. Any amounts remaining will be distributed to the partners of the LLP in accordance with the LLP agreement.
Pros or Advantages of a Limited Liability Partnership
- Lower registration cost and easy to set up
- Reduced compliance obligations – general meetings, directors, company secretary, etc., are not required
- Only an annual declaration of solvency or insolvency is required
- LLPs are considered as a separate legal entity from their owners, which means that owners are not responsible for any debts or losses the business incurs
- Easier than Partnerships and Sole Proprietorships to secure funding for the start-up years of the business
- Succession of LLPs are perpetual, until they are struck off or wound up
Cons or Disadvantages of a Limited Liability Partnership
- Profits are taxed are based on the owner’s income level – this means that as the owner’s income level increases, taxes increase as well due to Singapore’s progressive tax system
- Not eligible for Government funded micro loans