Singapore Sole Proprietorship vs Limited Partnership (LP)?

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Features

Sole-Proprietorship

Limited Partnership (LP)

Introduction

• A basic & simple form of starting the business vehicle

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

Suitability of Business Vehicle

• Suitable for a small scale business with low risks

• Flexibility for allowing a diversification of a portfolio

Definition

• A business owned by one person

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

Ownership or Owners 

• Only one person

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

Legal Identity or Status

• Not a separate legal entity
• Owner has unlimited liability
• Can sue or be sued in individual’s own name
• Can also be sued in business name
• Can own property in individual’s name
• Owner personally liable for debts and losses of business

• 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

• Age 18 years or above. Singapore citizen / Singapore Permanent Resident / EntrePass holder.
• If owner not resident in Singapore, he must appoint an authorized representative who is ordinarily resident in Singapore.
• Self-employed persons must top up their Medisave account with the CPF Board before they register a new business name, become a registrant of an existing business name, or renew their business name registration.
• Undischarged bankrupts cannot manage the business 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

• Low set up costs among all business vehicles

• Low set up costs among all business vehicles

Renewal Costs

• Low costs for renewal

• Low costs for renewal

Perception of Business by the Public

• Regarded least trust worthy and credibility

• Regarded moderate trust worthy and credibility

Funding Opportunities

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

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

Yearly Statutory Obligations

• Yearly renewals (one year or three years)
• CPF Medisave Top-Up required for Self-employed Persons before they can renew sole-proprietorship

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

Taxation

• Profits taxed at owner’ personal income tax rates

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

Taxation Form

• Form B

• Form P for Partnership & Form B for respective Partners

GST Implication

• Based on combined turnover of all of your sole proprietorship firms plus income derived from other trades, professional services or vocation

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

Perpetual Existence in Law

• Existence subject to life of the owner and cessation of the business

• 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

• When the owner exits the sole proprietorship will cease

• Partners or corporate bodies can be changed

Closing the Business or Deregistration

• By Owner – Cessation of business
• Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct

• 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