LIMITED PARTNERSHIP (LP)
A partnership of at least two persons or body corporates (company/LLP), with one or more General Partners and one or more Limited Partners. There are no limits to the number of partners allowed. A limited partnership is not a separate legal entity from its owners. However, General Partners have unlimited liabilities, while Limited Partners have limited liabilities. This means that General Partners are personally liable for the firm’s debts and losses incurred by other General Partners. On the other hand, Limited Partners’ liabilities are limited to the amount of their investments in the firm. Limited Partners do not take part in the management of the business; they received a share of the business profits and losses, as stated in the partnership agreement. If the partners are individuals, profits are taxed at the partners’ personal income tax rates. If the partners are body corporate, profits are taxed at the corporate tax rate. A Limited Partnership cannot buy properties in the firm’s name.
A Limited Partnership can exist perpetually subject to the partnership agreement concerning transfer or change of ownerships among partners. If there is no Limited Partner(s), the Limited Partnership will be suspended and the General Partners are deemed registered under the Business Registration Act. This situation will be reversed once a new Limited Partner is appointed.
The Advantages of Limited Partnership
- Easy, fast, and inexpensive to form.
- Easy to administer and manage.
- Unlike a private limited company, a limited partnership has less administrative duties to adhere to.
- With more than one owners, a limited partnership has the increased ability to raise funds.
- Limited Partners can leave or be replaced without dissolving the limited partnership.
The Advantages for the General Partners
- The General Partners gain a much needed source of capital for the firm from the Limited Partners, while still maintaining control over the daily operations and management of the firm.
The Advantages for the Limited Partners
- For a successful firm, the Limited Partners enjoy the profits of the firm with a minimum effort.
- In the case that the firm fails, the Limited Partners are protected from the majority of the liabilities and legal issues. The Limited Partners stand to lose only the investment that they put in the firm.
The Disadvantages for the General Partners
- In the event of failure or losses, the General Partners are financially and legally liable.
- If a General Partner wants to change his/her role in the company or add a new partner, the Limited Partners may be able to veto this decision, as generally partners have the rights of first refusals in transfer cases.
The Disadvantages for the Limited Partners
- Limited Partners do not have any control over how the firm is being managed by the General Partners.
- Withdrawal of investments in the firm may be difficult.
- At least one General Partner and one Limited Partner; both can be individuals who are above 18 years old or body corporates (company/LLP).
- If General Partners are not residents of Singapore, they must appoint a local manager who is a Singapore resident.
- Self-employed persons must make sure that they have paid their Medisave account with the CPF Board before they can register a new business, join an existing business, or renew the license of an existing business.
- An undischarged bankrupt needs an approval from the court or Official Assignee before he/she are allowed to manage a business.
- Registration of a Limited Partnership must be renewed every year.
- The registration fee is $50.00 and the business name application fee is $15.00.
Cessation of Business
- By the General Partners.
•Cessation of Business or Dissolution of Limited Partnership.
- By the Registrar (The Accounting and Corporate Regulatory Authority – ACRA).
• If the General Partners do not renew the yearly business registration.
• If the Registrar is satisfied that the business is defunct.