Benefits of Limited Liability Partnership LLP
A Limited Liability Partnership LLP were introduced on 11 April 2005. It provides partnerships with the limited liability features of companies with the operational flexibility of partnerships.
The characteristics of Limited Liability Partnerships LLP are
- The partners can be individuals or companies.
- There must be a minimum of 2 partners. There is no maximum number of partners in a LLP.
- A LLP is a legal entity (i.e. it can sue or be sued in its own name and
can own or hold any property).
- Profits form part of each partner’s personal income and are taxed at personal income tax rates.
- The LLP can be created by registration of a new LLP or by conversion from an existing company or business to an LLP
- Local Manager of the LLP
It is compulsory for all LLPs to appoint at least one local manager. There can be more than one local manager. The local manager must be above 21 years old and be one of the following:
- a Singapore Citizen
- a Singapore Permanent Resident
- an Employment Pass holder
- an Approval-in-Principal Employment Pass holder OR a Dependant Pass holder
Limited Liability Partnership as an alternative to Incorporation
The personal assets of the partners are protected. In addition, owners are not personally accountable for the wrongful acts of other owners. However, partners can be personally accountable for debts and losses resulting from their own careless actions.
Any changes in the LLP, foe example resignation or death of partners will not affect its existence, rights or liabilities.
Easier to administrate compared to Private Limited Companies -lower cost
Like partnerships, there is no need to audit or file annual returns with ACRA. However, the appointed manager must make an Annual Declaration to ACRA stating whether the LLP is able to pay its debts as they become due in the normal course of business. LLP need not prepare their annual financial statement in accordance with the Singapore Financial Reporting Standards (FRS). Only if the turnover is more than $500,000 do the partnership need to prepare a certified financial statement. The financial statement need not comply with FRS. Thus it provides liability protection with a lower administrative cost compared to limited companies.
More attractive to investors
Investors may be more willing to join as silent partners as liability for partners is limited
Disadvantages of LLP
Compared to sole-proprietorships and partnerships, LLPs have more formalities and procedures to comply with.