An LLP can be defined as a partnership where the individual partner’s own liability is generally limited. As the name suggests, it requires a minimum of two partners with no limit on the maximum number of shareholders.

Some facts of the legal status include:

  • It is a separate entity from its partners
  • Can sue and be sued in LLP’s name
  • Can own property in LLP’s name
  • Partners are personally liable for debts and losses resulting from their own wrongful actions, but not from others’ doings

The statutory requirements of an LLP are lesser than that of a company, which is mainly an annual declaration of solvency/insolvency by all partners of whether is LLP is able or unable to repay debts incur over the course of the business. Compared to a company, there are statutory requirements for general meetings, directors, company secretary, share allotments, etc. These can be added costs to the business.

The profits of the LLP are taxed at all partners’ personal income tax rates assuming all are individuals. If the partner is a corporation, it will be applied at the corporate tax. For a company, its profits are always taxed at corporate tax rates.

What may be interesting to note is that, in an LLP arrangement, individual partners can enter into business agreements without the consent of the other partner(s). This is highly unpredictable unless partners are of close and amicable relationships.

Another possible concern with the LLP is when it comes to transferring ownership in an LLP, the assets, licenses, and permits must be transferred individually. In other words, the LLP cannot be sold as a whole like how a company can.

if you wish to find out more about the requirements to set up a Limited Liability Partnership (LLP) in Singapore, or any other forms of corporate structure, do approach us for a non-obligatory discussion.