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LLP or Pte Ltd: What’s Best for Your Singapore Business?

Picture of JWC Accounts & HR By  JWC Accounts & HR  ·  4 minute read

Choosing the right business structure is a critical decision for entrepreneurs in Singapore. Among the most popular options are the Limited Liability Partnership (LLP) and the Private Limited Company (Pte Ltd). Each business structure has its own set of benefits and obligations, and the right choice will depend on your specific business needs, goals, and growth plans. In this article, we’ll explore the key differences between LLP and Pte Ltd companies, what needs to be submitted during the registration process, and which structure may be the best fit for your business.

What is a Limited Liability Partnership (LLP)?

An LLP in Singapore is a hybrid between a partnership and a company. It allows partners to operate a business while enjoying limited liability protection. This means that partners are not personally liable for the debts of the business beyond their contributions to the LLP.

Key Features:

  • Legal Entity: Separate legal entity from its partners, capable of owning property and being sued in its own name.
  • Liability: Partners have limited liability protection, but they are not personally liable for the debts and losses of the LLP incurred by other partners.
  • Annual Declaration of Solvency: LLPs must lodge an annual declaration of solvency or insolvency. One of the managers must state whether the LLP can pay its debts in the normal course of business.
  • Taxation: Profits are taxed at each partner’s personal income tax rate.
  • Compliance: LLPs are not required to hold general meetings, appoint directors, or have a company secretary. They also do not need to file share allotments, making them more flexible in terms of governance compared to companies.
  • Management: LLPs require at least two partners, who can be individuals (at least 18 years old) or body corporate (company or LLP). At least one manager must be ordinarily resident in Singapore and at least 18 years old. Undischarged bankrupts cannot manage the business without court approval.
  • Flexibility: LLPs offer more flexibility in terms of management structure and control as compared to companies.

What is a Private Limited Company (Pte Ltd)?

A Private Limited Company (Pte Ltd) is a legal entity separate from its shareholders and directors. This structure offers greater protection for personal assets, as the shareholders’ liability is limited to their shareholding. It is the most popular business structure for growing businesses due to its ability to raise capital and perpetual succession.

Key Features of a Pte Ltd:

  1. Separate Legal Entity: A Pte Ltd is separate from its shareholders and can own property and sue in its own name.
  2. Limited Liability: Shareholders are only liable up to their unpaid shares.
  3. Corporate Taxation: The company is taxed at corporate tax rates, with tax exemptions available for start-ups on their first SGD 100,000 of taxable income.
  4. Regulation and Compliance: Pte Ltd companies are required to appoint a company secretary within six months, hold AGMs, and file annual returns with ACRA.
  5. Perpetual Succession: The company continues to exist regardless of changes in ownership.

Key Differences Between LLP and Pte Ltd

While both LLP and Pte Ltd offer limited liability protection, they differ significantly in their structure, taxation, and compliance requirements.

  • Liability Protection:
    1. LLP: Partners in an LLP are protected from personal liability for the business’s debts, but they are still liable for their own misconduct or negligence.
    2. Pte Ltd: Shareholders’ liability is limited to their shares, and they are not personally responsible for the company’s debts.
  1. Taxation:
    1. LLP: Profits are taxed at the personal income tax rate of each partner, which could be advantageous for smaller businesses with lower earnings.
    2. Pte Ltd: The company is taxed at the corporate tax rate, and shareholders are only taxed on dividends received. Pte Ltd companies also benefit from tax exemptions for start-ups.
  2. Ownership and Control:
    1. LLP: Ownership is shared among partners, and they have full control over business operations.
    2. Pte Ltd: Shareholders own the company, but directors are appointed to manage its operations.
  3. Regulatory Compliance:
    1. LLP: LLPs have fewer compliance requirements compared to Pte Ltd companies. They are not required to hold AGMs or file annual returns with ACRA.
    2. Pte Ltd: Companies must hold AGMs, file annual returns, and comply with more stringent regulations, making them more transparent but also more complex to manage.
  4. Business Continuity:
    1. LLP: An LLP can dissolve if one of the partners withdraws or passes away unless otherwise specified in the partnership agreement.
    2. Pte Ltd: A Pte Ltd has perpetual succession, meaning it can continue to exist regardless of changes in ownership.
  5. Raising Capital:
    1. LLP: LLPs may find it harder to raise capital, as they cannot issue shares and are typically viewed as less attractive to investors.
    2. Pte Ltd: A Pte Ltd can issue shares to raise capital, making it a more attractive option for businesses looking to expand.

What Do You Need to Submit for Registration?

Whether you choose to register an LLP or a Pte Ltd, you’ll need to submit specific documents and information to ACRA. Here’s what you need to know for each structure:

For LLP:

  1. Name Approval: The business name must be approved by ACRA.
  2. Partners’ Details: Information about all partners, including their personal details and identification documents.
  3. Registered Address: The LLP must have a registered office address in Singapore.
  4. Partnership Agreement: While not mandatory, it’s advisable to have a partnership agreement outlining the rights and responsibilities of each partner.

For Pte Ltd:

  1. Name Approval: The company name must be approved by ACRA.
  2. Shareholders’ Details: Information about all shareholders, including their personal details and identification documents.
  3. Directors’ Details: At least one director must be a resident of Singapore. Information about all directors must be provided.
  4. Registered Address: The company must have a registered office address in Singapore.
  5. Company Constitution: You must submit the company’s constitution, which outlines its rules and regulations.
  6. Share Capital: The company must declare its share capital. The minimum share capital is SGD 1.
  7. Company Secretary: You need to appoint a company secretary within six months of incorporation.

Which Business Structure is Right for You?

Deciding between an LLP and a Pte Ltd will depend on your business needs, growth plans, and the level of liability protection you desire. Here are some considerations to help guide your decision:

Choose an LLP if:

  • You are starting a professional services firm (e.g., law firm, accounting firm) where partners want flexibility and control.
  • You prefer a simple structure with fewer compliance requirements.
  • You want to avoid corporate taxes and be taxed at your personal income rate.

Choose a Pte Ltd if:

  • You are looking to scale your business and attract investors.
  • You want to benefit from corporate tax rates and tax exemptions.
  • You prefer a structure that ensures business continuity even with changes in ownership.
  • You want to limit liability and protect your personal assets from business risks.

Both LLP and Pte Ltd structures offer distinct advantages, but the right choice depends on your specific business needs and long-term goals. While an LLP provides more flexibility and simplicity, a Pte Ltd offers greater liability protection and potential for growth.

If you’re still unsure about which structure to choose or need help with the registration process, JWC Accounts & HR can guide you through every step, ensuring that you make the best decision for your business. Our team of experts will assist with compliance, tax matters, and ongoing management, so you can focus on growing your business. Visit jwc.com.sg to learn more about how we can help your business thrive!