Forming a Partnership in Singapore
The profits are divided among the partners and the partners own the assets collectively, as per the terms agreed in the Partnership Agreement. In the event of lapses in the partnership agreement, the provisions of the Partnership Act will take precedence.
Types of Partnership
The partnership structure is of two types:
1. General Partnership (GP)
A minimum of two partners is required and the maximum number of partners must be limited to 20. If the partners are more than 20, it must be incorporated as a company. All partners are personally liable for the debts and liabilities of the business. The partners’ liability remains unlimited. The partners are liable for the debts or losses incurred by the other partners. It is registered with ACRA under the Business Name Registration Act.
2. Limited Partnership (LP)
A LP must have at least one general partner and one limited partner. There is no upper limit on the number of partners. The liability of the general partners is unlimited. Their personal assets can be attached, in the event of a claim made on the LP. The general partners actively participate in the management of the company. A general partner can be an individual or a company.
The limited partners’ liability is limited to the amount of their contribution to the partnership and they do not involve in the active management of the business. A limited partner can be an individual, company or a foreign registered company.
LP is registered with ACRA under the Limited Partnership Act. It is relatively a new type of entity in Singapore. The Partnership Act as well as the general law applicable to Partnerships applies to LPs, subject to the provisions of the Limited Partnership Act. If there is no limited partner, the partnership will be suspended and will be converted to a firm registered under the Business Names Registration Act. When Limited Partners come on board the entity will be restored as a ‘live’ Limited Partnership.
Features of a Partnership
Lacks Legal Identity: The registration of a partnership does not constitute a separate legal identity. So both LP and GP lack legal identity of their own. A General Partnership cannot own property in its own name but it can sue and be sued in its own name. A Limited partnership can neither own property nor it can sue or be sued in its own name.
Validity/ Renewal: The registration must be renewed. It can be renewed for a period of one year or three years. Renewal must be done before the expiry of registration.
Eligibility: Any natural person whose age is 18 years and above can register a partnership. Another Singapore registered company is also eligible to register a partnership.
Singapore citizens and Permanent Residents who are self employed are required to register for CPF and top up their Medisave account in order to register or renew their business registration.
Officer: In a GP, if none of the owners are residing in Singapore, a natural person must be appointed, as a manager. Such person must be ordinarily resident in Singapore. Ordinarily resident means, a citizen or permanent resident of Singapore or foreigners on employment pass or dependent pass.
In the LP if none of the general partners are resident of Singapore, a manager who is ordinarily resident in Singapore must be appointed. The manager is personally responsible for the discharge of all obligations of the LP. He is subject to the same liabilities and penalties as a general partner of the LP if the general partner defaults in respect of such obligation.
Registered Address: A local Singapore physical address is required.
Taxation: Chargeable profits are treated as personal incomes of the partners who are individuals and are subjected to personal income tax rates. In the case of corporate partners chargeable profits are subjected to corporate tax rates.
Limitation: As it does not constitute a legal entity, a partnership cannot register another legal entity.
Continuity: It continues to exist as long the partners agree to keep the partnership. It will cease to exist if the registration is left to lapse and not renewed. Filing of cessation notice by the partners or authorized representatives will also amount to cessation of partnership.
Read more about setting up a partnership in Singapore at InCorp Global.
