A Limited Liability Partnership (LLP) in Singapore is a hybrid business structure that combines the operational flexibility of a general partnership with the legal protection of a private limited company. It is an ideal entity for professionals and small business owners who seek to limit their personal liability without the administrative burden of a corporation.
Specifically, unlike a sole proprietorship where the owner and business are one, an LLP possesses a separate legal personality, meaning partners are not personally liable for the business’s debts or the negligence of other partners. This structure is governed by the Limited Liability Partnerships Act 2005 and is regulated by the Accounting and Corporate Regulatory Authority (ACRA).
To navigate the business landscape effectively, it is crucial to compare the LLP against other common structures like Private Limited (Pte Ltd) companies and Sole Proprietorships. While an LLP offers tax transparency and lower compliance costs, a Pte Ltd might be superior for raising capital. Understanding these nuances is key to making an informed decision.
In the following sections, we will provide a comprehensive guide covering the detailed meaning, distinct benefits, tax implications, and a step-by-step registration process for setting up an LLP in Singapore. Whether you are a local entrepreneur or a foreign professional, this guide will clarify the path to incorporation.
What is a Limited Liability Partnership (LLP) in Singapore?
A Limited Liability Partnership (LLP) is a corporate body formed by being registered under the LLP Act, characterized by its separate legal personality and the ability to own property in its own name. It essentially serves as a “middle ground” between a partnership and a company, offering the best of both worlds for specific professional groups.
To understand this structure more deeply, we must look at its core legal foundation. An LLP is capable of suing and being sued in its own name, acquiring, owning, holding, and developing property, and having a common seal. This distinction is vital because, in a traditional general partnership, the partners are the firm. In an LLP, the firm exists independently of its partners.
This structure is particularly popular among chartered professions—such as lawyers, accountants, and architects—where partners want to work together but do not want to be held personally responsible for the professional malpractice or negligence of their colleagues. The liability of a partner is limited to their agreed contribution to the LLP, shielding their personal assets (like their home or personal savings) from business claims, provided they were not the ones directly at fault.
What are the Key Features and Benefits of an LLP Structure?
There are three primary features that define the LLP structure: separate legal personality, perpetual succession, and operational flexibility combined with limited liability. These attributes make the LLP a compelling choice for small teams and professional services.
- Separate Legal Identity: As mentioned, the LLP is a body corporate. This means the LLP is liable for its own debts and obligations. A partner’s personal assets are protected from the liabilities of the LLP. This is a significant upgrade from a Sole Proprietorship.
- Perpetual Succession: The existence of the LLP is not dependent on its partners. Any change in the partners (due to resignation, death, or bankruptcy) does not affect the existence, rights, or liabilities of the LLP. This ensures business continuity and stability for clients and stakeholders.
- Lower Compliance Costs: A LLP has fewer statutory requirements. They simply need to lodge an annual declaration of solvency.
- Operational Flexibility: The internal governance of an LLP is typically determined by the LLP agreement between partners. This allows the partners to create a management structure tailored to their needs, rather than follow the rigid hierarchy of a corporation.
LLP vs. Pte Ltd vs. Sole Proprietorship: Which Structure is Right for You?
The LLP wins on flexibility and lower compliance costs, the Private Limited (Pte Ltd) company is superior for scalability and tax incentives, while the Sole Proprietorship is optimal for simplicity and zero setup cost but carries the highest risk. Choosing the right structure depends entirely on your business goals, risk appetite, and capital needs.
To help you make an informed decision, let’s analyze the critical differences between these entities in the table below.
| Feature | Sole Proprietorship | Limited Liability Partnership (LLP) | Private Limited (Pte Ltd) |
|---|---|---|---|
| Liability | Unlimited. The owner is personally liable for all debts and losses. | Limited. Partners are protected from the firm’s debts and other partners’ negligence. | Limited. Shareholders are only liable up to the amount of their share capital. |
| Taxation | Personal Income Tax (0% – 24%). No corporate exemptions. | Personal Income Tax (0% – 24%). No corporate exemptions. | Corporate Tax (Flat 17%). Eligible for significant tax exemptions (e.g., SUTE). |
| Scalability | Limited to personal savings or loans. Hard to scale. | Difficult to raise external capital (investors usually want shares). | Easy to raise capital by issuing new shares to investors. |
| Credibility | Low perception of scale. | Professional image, suitable for service firms (lawyers, architects). | High credibility, preferred by banks and large suppliers. |
Koobiz Insight: If you are planning to raise Venture Capital or sell shares in the future, a Pte Ltd is the standard requirement. However, if you are a group of lawyers or consultants keeping profits within the team, an LLP is often more tax-efficient and easier to manage. Koobiz can assist you in evaluating these options based on your specific financial projections.
What are the Requirements to Register an LLP in Singapore?
Registering an LLP requires four fundamental components: a minimum of two partners, at least one locally resident manager, a registered local address, and a unique business name. These are the statutory minimums mandated by ACRA to ensure the entity has a legal footing and accountability in Singapore.
Specifically, ensuring you meet these criteria beforehand will prevent delays during the application process.
- Partners: An LLP is required to have at least two partners. These can be individuals (min. 18 years old) or corporate bodies (other companies). There is no cap on the maximum number of partners.
- Managers: at least one manager is an “ordinarily resident” in Singapore. This person must be a Singapore Citizen, Permanent Resident, or an EntrePass/Employment Pass holder. The manager is responsible for statutory compliance. Note that a partner can also be a manager.
- Registered Address: A P.O. Box is not accepted. A physical address in Singapore is mandatory. This can be a commercial office or a residential home (under the Home Office Scheme).
- Compliance Declaration: All partners have to be included in a statement of non-disqualification (e.g., not an undischarged bankrupt) and consent to act as managers/partners.
How to Register an LLP with ACRA? (Step-by-Step Guide)
The registration process involves three main steps: Name Reservation, Registration Filing via BizFile+, and Payment of Fees, resulting in the issuance of a Unique Entity Number (UEN). The entire process is digital and can typically be completed within 15 to 30 minutes if all documents are in order.
Let’s break down the execution of these steps to ensure a smooth incorporation experience.
Step 1: Reserve the LLP Name:
Log in to ACRA’s BizFile+ portal using your Singpass. Submit your proposed LLP name. The name will be rejected if it is identical to an existing entity, undesirable (vulgar), or similar to reserved names. Once approved, the name is reserved for 120 days.
Step 2: Submit Registration Details:
Registration of the new business entity:
- Details of partners and managers (ID numbers, addresses).
- The registered office address.
- The nature of business activities (SSIC Codes).
- Endorsements from the appointed partners/managers (they will receive an email to accept their appointment via BizFile+).
Step 3: Pay the Registration Fee:
The registration fee for an LLP is SGD 100. After payment and endorsement, ACRA will issue an email notification confirming the registration – this serves as your official Certificate of Incorporation. You will also receive your Business Profile, which acts as the firm’s “birth certificate.”
Need Professional Help? Koobiz offers comprehensive incorporation services to handle the entire ACRA registration process for you, ensuring you start your business on the right legal footing without the hassle.
What are the Tax Implications and Compliance Requirements for an LLP?
Managing an LLP involves understanding tax transparency principles and adhering to the annual declaration of solvency to avoid penalties. Unlike a company that pays tax on its own profits, an LLP functions as a “pass-through” entity for tax purposes.
To clarify the ongoing obligations of an LLP owner, we must look at how taxation and reporting differ from other structures.
Is an LLP subject to Corporate Income Tax in Singapore?
No, an LLP is not a separate taxable entity and is not subject to corporate income tax; instead, it is treated as a tax-transparent entity where partners are taxed on their share of the income.
Specifically, the LLP itself does not file a Corporate Tax Return (Form C-S/C).
- Individual Partners: Will be taxed at personal income tax rates, which are progressive from 0% to 24%.
- Corporate Partners: Will be taxed at the corporate tax rate (17%).
- Note: Since the LLP is not a taxable entity, it cannot claim tax incentives available to Pte Ltd companies
What is the Annual Declaration of Solvency?
The Annual Declaration of Solvency is a mandatory statement lodged by the managers stating whether the LLP is able to pay its debts as they fall due during the normal course of business.
Specifically, this is the primary compliance requirement for LLPs, replacing the complex financial filing required for companies.
- Procedure: Managers must lodge this declaration via BizFile+ annually.
- Timeline: It must be lodged within 15 months from the date of registration, and subsequently once every calendar year (not exceeding 15 months from the last lodgement).
- Penalty: Failure to lodge this declaration is an offense under the LLP Act and can result in late filing penalties or prosecution.
Can Foreigners Register an LLP in Singapore Without Relocating?
Yes, foreigners can register an LLP in Singapore without relocating, provided they appoint at least one locally resident manager to meet the statutory requirement.
This structure allows foreign investors to maintain ownership without physically residing in the country.
- The Challenge: ACRA requires one manager to be “ordinarily resident” (Citizen, PR, or EP holder). A foreigner living overseas cannot fulfill this role alone.
- The Solution: Foreigners must engage a Corporate Service Provider (like Koobiz) to provide a Nominee Manager service. This Nominee Manager fulfills the statutory requirement but typically does not have executive power over the business.
- Visa Implications: Registering an LLP does not automatically grant a work visa. If the foreign partner wishes to move to Singapore to run the business, they must apply for an Employment Pass (EP) or EntrePass, though approval for LLP owners can be stricter than for Pte Ltd shareholders.
How to Convert a Sole Proprietorship or Partnership to an LLP?
Converting involves a process of registering a new LLP, transferring the business assets and undertakings to it, and then terminating the old business entity.
There is no direct “convert button” in the ACRA system; it is a legal transition process.
- Register the New LLP: Follow the standard registration steps mentioned above. You can often retain the same business name if the old entity consents to it.
- Transfer Assets: Execute a business transfer agreement to move assets, contracts, and client lists from the Sole Proprietorship/Partnership to the new LLP.
- Novate Contracts: Ensure existing contracts with suppliers or landlords are updated to reflect the new LLP entity (since the LLP is a separate legal person).
- Cessation: Once the transfer is complete, file a “Cessation of Business” for the old Sole Proprietorship or Partnership via BizFile+ to close it formally.
Ready to Incorporate? Start Your Journey with Koobiz
Navigating the legalities of partnership agreements, tax compliance, and ACRA regulations can be complex for new business owners. Koobiz specializes in simplifying company incorporation in Singapore, ensuring your business starts on the right legal footing.
Whether you need assistance with registering your LLP, finding a Nominee Manager, or managing annual compliance, our team provides expert guidance tailored to your needs.
Visit Koobiz.com to Incorporate Your Company Today
Frequently Asked Questions (FAQs)
What is the minimum capital requirement for an LLP?
Unlike a Private Limited Company which typically has a minimum paid-up capital of SGD 1, an LLP does not have a statutory minimum capital requirement. Partners contribute capital based on their mutual agreement outlined in the LLP agreement.
Do I need to audit the accounts of an LLP?
Generally, no. Most LLPs are not required to audit their accounts. However, an audit is mandatory if the LLP has corporate partners (companies) or if the LLP is large (e.g., significant revenue or assets). For the majority of small professional LLPs, a simple solvency declaration is sufficient.
Can a single person register an LLP in Singapore?
No, a single individual cannot register an LLP alone. The LLP Act requires a minimum of two partners to register. If the number of partners falls below two for more than two years, the remaining partner may become personally liable for the LLP’s obligations.
Is an LLP suitable for a startup planning to raise Venture Capital?
No, an LLP is generally not suitable for startups seeking Venture Capital (VC) funding. Investors typically require equity (shares) in exchange for their capital, and an LLP does not issue shares. A Private Limited Company (Pte Ltd) is the preferred structure for raising investment.
