LIMITED LIABILITY PARTNERSHIP (LLP)
A Limited Liability Partnership (LLP) is a partnership of at least two persons or body corporates (company or LLP), where all the partners generally have limited personal liabilities. Thus, an LLP is half-way between a partnership and a limited company. LLP was made available to combine the flexibility of partnerships with the protection of limited liability. Partners are generally personally liable for the debts and losses of LLP that are incurred because of their own wrongful actions. However, partners are not liable for debts and losses that are incurred by other partners’ wrongdoings. A Limited Liability Partnership is a separate legal entity from its owners/ partners, thus it can sue or be sued under its own name. In Singapore, an LLP can own properties in its name. There are no limits to the number of partners allowed. Profits are taxed at the individual partner’s income tax rates or at the corporate tax rate for corporate partners.
The Advantages of a Limited Liability Partnership
- Easy and fast to set up.
- Fewer formalities, procedures, regulatory duties, and statutory requirements to adhere to in comparison to a company.
- Each partner’s liability is limited to the amount of money he/she has given or promised to the LLP.
- Partners are not personally liable for the wrongful actions of other partners.
- Compared to sole-proprietorship and partnership, LLP has the increased ability to raise funds due to its multiple partners.
- Investors may be attracted to join as silent partners due to its limited liability characteristic.
- An LLP can exist perpetually.
The Disadvantages of a Limited Liability Partnership
- LLPs must comply with more formalities and procedures in comparison to sole-proprietorships or partnerships.
- As LLP is a fairly new business organization, some of its legal and tax requirements have not been fully determined.
- At least 2 partners. Partners can be individuals who are at least 18 years old and/or body corporate (company or LLP).
- At least one manager who is a resident of Singapore and at least 18 years old.
- An undischarged bankrupt needs an approval from the court or Official Assignee before he/she is allowed to manage a business.
- One time registration.
- LLP is required to lodge an annual declaration of solvency, stating whether the business is able or unable to meet its financial obligations during the normal course of business.
- The registration fee is $150.00 and the business name application fee is $15.00.
Cessation of Business
- By Partners or Creditors – voluntary winding up.
- By the High Court – mandatory winding up.
- By Striking-Off