Limited partnership and limited liability partnership
Show
A partnership is an agreement that exists between at least two parties to pursue a particular business activity. The purpose of the partnership is usually to make profit. The individuals or parties in the partnership agree to pool together their resources, skills and assets to pursue the particular business. As a result, all parties involved share the profit from such an undertaken. They are also liable for any obligations and debts that may result from the partnership. The Partnership AgreementThe partnership agreement is a binding legal document signed by the parties in a partnership. It contains all of the details of the partnership, and outlines the following information:
In cases of lapses in the partnership agreement, precedence is taken by the provisions of the Partnership Act. Partnership StructuresThere are two types of partnership structures. They are:
General PartnershipA General Partnership is registered under the Business Name Registration Act with the Accounting and Corporate Regulatory Authority (ACRA) and can contain a minimum of two partners and a maximum of twenty. If the number exceeds twenty, the partnership must be registered as a company, as it can no longer be a General Partnership. In a General partnership, all parties maintain personal responsibilities of the debts and liabilities the business incurs. The partners are also liable for the debts and losses other members of the partnership incur. In General Partnerships, there is no limit to the liability that the partners can personally incur. Limited PartnershipLimited partnerships require at least one general partner and a limited partner. The general partner(s) can either be an individual or a company and they actively participate in the management of the company. General partners have unlimited liability in Limited partnerships. Unlike in General Partnerships, there is no limit to the amount of partners that can be incorporated into a Limited Partnership. The partners can attach their assets if a claim is ever made on the Limited Partnership. Limited partners’ liabilities are limited to the amount of contributions made to the partnership and are not actively involved in the management of the business. The partners in a Limited Partnership can be either individuals, companies, or foreign registered companies. The Limited Partnership is a relatively new entity in Singapore and is registered with ACRA under the Limited Partnership Act. Both the Partnership Act as well as the general law, are applicable to partnerships, and they are subject to the provisions of the Limited Partnership Act. If a Limited Partnership exists without a Limited partner, it will be suspended and converted to a firm, with registration under the Business Names Registration Act. The Limited Partnership Status will be restored when a Limited Partner comes on board. Features of PartnershipsBoth General and Limited Partnerships have the following features in common: Lack of Legal IdentityWhen registered with ACRA, partnerships do not have a separate legal identity. Additionally, both types of partnerships cannot own properties in their name. However, they differ in the fact that General Partnerships can be sued in their names while Limited Partnerships cannot be sued. Validity and RenewalThe registration of the partnerships must be renewed with ACRA. This renewal can either be done every year or every three years and must be done before the current registration expires. EligibilityFor individuals, any adult (older than 18 years) is eligible to join a partnership. However, the individual must either be a citizen of Singapore, or a permanent resident who is self-employed. The individuals must also register for Central Provident Fund (CPF). Furthermore, they must top up their Medisave account if they want to register or renew their business registration. Singapore based companies are also able to register partnerships without any of these conditions attached. OfficersThe terms for General Partnerships and Limited Partnerships vary where officers are concerned. In the case where none of the owners of the General Partnership are residents in Singapore, a neutral individual must be appointed to fill the role of manager. This individual can be either a citizen of the country, a permanent resident or a foreigner on an employment pass or independent pass. In the case where none of the owners of the Limited Partnership are residing in Singapore, a manager must be appointed. The manager of this partnership will then be personally responsible for the discharging of all obligations of the partnership. He will also be subject to similar penalties and liabilities as a General Partner in the Limited Partnership if the partner defaults in his/her obligation. AddressThe operations of both the General and the Limited Partnerships require a physical address in Singapore. LimitationsNeither kind of partnership is able to register legal entities since they do not count as legal entities in themselves. Only a legal entity can register another legal entity. PerpetuityThe partnerships shall continue to exist for as long as the partners agree to keep it so. However, it will be ceased if its registration is not renewed or allowed to expire. It will also cease to exist when the partners or other authorized individuals file a cessation notice. ConsiderationsLiabilityPartners in General Partnerships continue to have unlimited liabilities. Personal assets owned by the partners are vulnerable and unprotected in the event of claims made against the partnership for losses, liabilities and debts incurred during the course of its business transactions. Each partner is additionally liable to bear the responsibility of losses incurred by other partners in the partnership. This unlimited liability very often discourages people from joining General Partnerships. DisputesDisputes often occur in partnerships despite the presence of partnership agreements. The disputes usually surround the management of the business and more often than not impact the business. In worst case scenarios, disputes often lead to the dissolution of the business, as well as a strained interpersonal relationship among the partners. TaxesTaxes are another turn off to partnerships. Each partner is charged personal tax on their share of the partnership’s profits. This is because the individuals in partnerships are not eligible for competitive corporate tax rates. Additionally, individuals who have higher consolidated incomes generated from other sources often bear higher tax rates. Capital PoolingThe most significant advantage of partnerships is the ability it confers to pool together capital and other resources. In Limited Partnerships, capital can also be sourced from partners who are willing to contribute financially but unwilling to actively participate in the partnership. They may do this to limit their exposure to the liability incurred by the partnership. ResponsibilityAll the partners in General and Limited Partnerships share the responsibility of the business. CostsCompared to company incorporation, partnerships exact a lesser toll during their set up. This saves the administration considerable time and resources. ForeignersForeigners who do not intend to relocate to Singapore need to appoint local managers or authorized representatives if the situation arises. However, this may often disrupt the control and operations of the business. If they instead wish to relocate to Singapore, they are advised to seek the advice and opinion of the Ministry of Manpower (MOM) in Singapore before registration. Registration RequirementsTo register a partnership with ACRA, there are certain documents required. They include:
The Registration ProcessThe process of registration of a partnership can usually be completed within 24 hours, provided that all involved partners and authorized representatives endorse the partnership’s online application. However, in unusual circumstances, the process may take up to two months. These circumstances usually surround ACRA referring the application for registration to other government agencies for review. Partners will usually be notified upon successful completion of the registration via an email. The partnership will also be issued a registration number and partners can obtain soft copies of the business profile online. Post Registration ComplianceThe following are the procedures that must be adhered to by all registered partnerships:
How Timcole can Help YouLooking to start a business in Singapore? Timcole can assist you in all business aspects. Timcole is one of the leading company incorporation and accounting firm based in Singapore. Our wide range of professional services serve as a one-stop solution for your business, offering you the most affordable price for services conducted with the highest level of excellency. |