According to data from the Department of Statistics, an increasing number of businesses have registered in Singapore over the past five years. The number of companies formed in the island-state has increased from approximately 21,500 in 2006 to 34,000 last year. This was in spite of the financial crisis which struck in 2008 and affected the rest of the world.
This uptrend is testament to Singapore’s ability to absorb seismic financial shocks from the rest of the world and in turn, become the go-to jurisdiction to do business.
Companies and entrepreneurs looking to set up shop in Singapore may choose to set up any of the following business entities – a Limited Liability Partnership, Partnership, Limited Partnership and a Company.
1. Limited Liability Partnership
A limited liability partnership (LLP) is a business vehicle where the individual partner’s liability is generally limited. The LLP is considered a separate legal entity from its partners. Hence, it allows owners the flexibility of operating as a partnership while enjoying a distinct legal identity from the entity, very much like a private limited company.
To set up an LLP, there must be at least two partners, and there is no maximum limit on the number of partners. The partners can be individuals who must be at least 18 years old or another company or LLP.
LLPs are easy to set up, and require less formalities and procedures to comply than a company. Registration costs less too and there are fewer regulatory duties to adhere to than a company as there are no statutory requirements for general meetings, directors, company secretary or share allotments.
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Partnerships are set up by two or more co-owners of a business. It is meant to circumvent the limitations faced by sole proprietorships.
They are formed generally between two and 20 partners. However, a partnership with more than 20 partners must register as a company.
Like sole proprietorships, partnerships are not separate legal entities from the owners and partners have unlimited liability, as they are personally liable for the debts and losses incurred by the partnership business. Hence, the liability of partners is joint and severe.
Like the LLPs, partnerships can be set up quickly and easily. They are also easy to manage as there are less administrative details to manage.
3. Limited Partnership
The limited partnership differs from an LLP such that it must have at least one general partner and one limited partner.
There must be at least two partners, one of whom is a general partner and at least one limited partner. There is no maximum limit to the number of partners.
It is also not a separate legal entity from the business; the general partner has unlimited liability and is personally liable for all debts and losses incurred.The limited partner, on the other hand, has limited liability and is not personally liable for the debts or obligations beyond the amount of his agreed contribution.
A company has a legal entity separate from its shareholders and directors. Members have limited liability and are not personally liable for debts and losses incurred by the company. Companies can be limited by shares or limited by guarantee.
Singapore companies that are limited by shares can register as private companies, which have 50 members or less, or as public companies which have more than 50 members. If the private company has 20 members or less, all of which are individuals, such private companies are considered as exempt private companies.
The option you choose depends on your business plans. If you have partners who can work with you professionally, you may consider an LLP. Otherwise, the private limited company option is a good choice for entrepreneurs with plans to go regional or global due to its flexibility and scalability.