Singapore Company vs Limited Partnership (LP)?

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Features

Company

Limited Partnership (LP)

Introduction

• One of the most preferred corporate vehicle for wider range of business journey

• Often used as investment vehicle for large projects requiring substantial source of cash

Suitability of Business Vehicle

• Suitable for carrying all types of business activities including professional services

• Flexibility for allowing a diversification of a portfolio

Definition 

• A business form which is a legal entity separate and distinct from its shareholders and directors

• A partnership consisting of two or more persons, with at least one general partner and one limited partner

Ownership or Owners 

• Exempt Private Company – 20 members or less and no corporation holds beneficial interest in the company’s shares
• Private Company – 50 members or less
• Public Company – can have more than 50 members

• At least 2 partners; one general partner and one limited partner.
• No maximum limit.

Legal Identity or Status

• A separate legal entity from its members and directors
• Members have limited liability
• Can sue or be sued in company’s name
• Can own property in company’s name
• Members not personally liable for debts and losses of company

• Not a separate legal entity
• General partner has unlimited liability
• Limited partner has limited liability
• Can probably sue or be sued in firm’s name
• Cannot own property in firm’s name
• General partner personally liable for debts and losses of the LP
• Limited partner not personally liable for the debts or obligations of LP beyond amount of his agreed contribution

Requirements For Registration or Formation or Incorporation

• Minimum of one share.
• Minimum Paid-up capital is S$1 (SGD One Only)
• At least one shareholder.
• At least one director ordinarily resident in Singapore, at least 18 years old.
• If a foreigner wishes to act as a local director of the company, he can apply for an EntrePass from the Ministry of Manpower (MOM).
• Undischarged bankrupts cannot be a director and cannot manage a company without approval from the Court or the Official Assignee.

• At least one general partner and limited partner. Both can be individuals (at least 18 years old) or body corporate (company or LLP).
• If all general partners are ordinarily resident outside Singapore, they must appoint a local manager who is ordinarily resident in Singapore.
• Self-employed persons must top up their Medisave account with the CPF Board before they register as a partner of a new LP, become a registered partner of an existing LP, or renew their LP registration.
• Undischarged bankrupts cannot manage the business without approval from the Court or the Official Assignee.

Easiness of Registration

• An easy process to be completed within a few hours however subject to referral to different authorities which may delay up to 14 working days

• An easy process to be completed within a few hours however subject to referral to different authorities which may delay up to 14 working days

Level of Fees for Registration

• High when comparing to other form of business vehicles

• Low set up costs among all business vehicles

Renewal Costs

• Perpetual succession hence renewal is not applicable

• Low costs for renewal

Perception of Business by the Public

• Regarded more trust worthy and credibility

• Regarded moderate trust worthy and credibility

Funding Opportunities

• Avenue for equities from members including venture capital funding.
• Obtaining financial loans is relatively easier compared to other form of businesses.

• Obtaining loans from banks is only by mortgaging the personal assets of the partners.

Yearly Statutory Obligations

• Must appoint a company secretary within 6 months of incorporation.
• Must appoint an auditor within 3 months after incorporation, unless the company is exempt from audit requirements.
• Annual returns must be filed.
• Statutory requirements for general meetings, directors, company secretary, share allotments must be complied with.

• Yearly renewals (one year or three years)
• CPF Medisave Top-Up required before they can renew LP

Taxation

• Profits taxed at corporate tax rates

• Profits taxed at partners’ personal income tax rates (if individual) / corporate tax rate (if corporation)

Taxation Form

• ECI & Form C or C-S

• Form P for Partnership & Form B for respective Partners

GST Implication

• GST obligation is at entity level based on own turnover

• Based on combined turnover of all partnership businesses with the same composition (structure) of partners

Perpetual Existence in Law

• A company has perpetual succession until wound up or struck off.

• Existence subject to partnership agreement.
• If there is no limited partner, the LP registration will be suspended and general partners are deemed registered under the Business Registration Act.
• Once a new limited partner is appointed, the registration of the LP will be restored to “live” and general partners’ registration under the Business Registration Act ceases.

Transfer of Ownership

• Ownership can be transferred by sale and purchase of shares

Closing the Business or Deregistration

• Winding Up – Voluntarily by members or creditors, compulsorily by the High Court
• Striking off

• By general partner – Cessation of business or dissolution of LP
• Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct