Decoding the Concept of Limited Liability Partnership (LLP)

Limited Liability Partnership (LLP)In the diverse world of businesses, a Limited Liability Partnership (LLP) holds a special place. It’s designed to provide its owners with the nimbleness of a partnership structure but with an added perk: a distinct legal identity akin to a private limited company. This means, as a registered entity under the LLP Act, it’s recognized as a separate legal body from its partners, can own property, and can independently initiate or face lawsuit proceedings.

 

Benefits of Setting Up an LLP

There are a few key advantages of operating as an LLP:

  1. Partners enjoy limited liability, with their personal financial risk limited to their capital input in the LLP. In other words, they’re not personally responsible for the LLP’s business debts.
  2. If one partner makes a mistake leading to financial loss, only that specific partner is held personally responsible. The personal assets of other partners who weren’t involved are protected.
  3. An LLP enjoys perpetual succession, meaning its existence, rights, and responsibilities aren’t influenced by changes in partnership.
  4. Less administrative burden: Unlike some business types, an LLP isn’t required to appoint a company secretary, hold Annual General Meetings (AGMs), or file annual reports. However, they must keep financial records and provide the Registrar with an annual solvency or insolvency declaration.

 

Understanding Taxation in LLPs

For taxation purposes, an LLP is considered a partnership, rather than a separate legal entity. This means partners are taxed based on their profit share from the LLP. The tax differs based on the nature of the partner: for individuals, it’s calculated as per personal income tax rates, while for companies it’s based on corporate tax rates.

 

Can Foreigners Establish an LLP in Singapore?

Yes, foreigners can form an LLP in Singapore. However, they’ll need to enlist the assistance of a registered filing agent (like a law firm, accounting firm, or corporate secretarial firm) to submit the online LLP registration application on their behalf.

For individuals with a Singpass, the LLP registration can be completed online through BizFile. Also, foreign LLP owners who aren’t residing in Singapore will need to designate a local manager who can be a Singapore citizen, a Permanent Resident, or an EntrePass/ Employment Pass holder.