Setting Up a Partnership in Singapore: A Comprehensive Guide

What Is a Partnership?

A partnership is a business structure in Singapore where two or more individuals come together to form a profit-making enterprise. It’s a step up from a sole proprietorship with only one registered owner.

The partners are not considered separate legal entities from the business. This makes the partners personally liable for any liabilities or claims against the business. For this reason, it's not always a recommended structure to choose. There are two forms of partnerships in Singapore, each with its own pros and cons.

How Does a Partnership Work?

When forming this type of business, a legal document (the partnership agreement) is drawn up, which clearly outlines each partner’s equity contribution, roles and management responsibilities, the distribution of profits and losses, how decisions will be made and how the enterprise will be dissolved. All liabilities and obligations are the partners' responsibility, in line with the terms of the agreement and the type of partnership formed.

Partnerships are relatively easy to set up and are often used by small businesses, such as law firms or accounting firms. It is important to note that each partner is fully responsible for the actions of the other partners, so it is crucial to choose partners carefully and to have a clear agreement in place before disputes arise.

Types of Partnership

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Features of a Partnership

Lacks Legal Identity

Much like a sole proprietorship, partnerships are not considered to be separate legal entities from the owners. They are therefore limited in their legal capacity. Neither a GP nor an LP can own property in the business's name. An LP cannot sue or be sued in its name, whereas a GP can.

Validity/ Renewal

Registration is only valid for one or three years and must be renewed within sixty (60) days of expiry. You can only renew for three years if specific Medisave requirements are met. The renewal fee is non-refundable and can be paid online via BizFile.

Eligibility

To be eligible to register a partnership in Singapore, you must be 18 years or older and either a citizen, permanent resident or eligible FIN holder.

If you're self-employed, your Medisave account must be topped up and up to date.

If you're a foreigner, you must appoint at least one local, authorised representative.

Officer

An officer of a partnership must be 18 years or older, a natural person and a resident of Singapore. If all the partners are outside of Singapore, then an authorised representative (or manager) must be appointed. This can be done on BizFile.

Registered Address

A local address in Singapore is required to register, operate and renew a partnership. This applies to both a GP and LP.

Taxation

Because there’s no legal separation between the entity and its owners, a partnership doesn’t pay tax. Instead, each partner will pay tax on their portion of the profits on their individual tax return. Where a corporation is a partner, the profit share will be taxed under their corporate tax rate.

Continuity

Both forms of partnership can cease to exist if the registration expires or if all partners mutually agree to close the business. Unexpected events, such as death, can also dissolve the enterprise. A cessation notice must be filed with ACRA if trading is ceased.

Limitation

A partnership cannot register or own another entity as it is not a legal entity of and in itself, and therefore has no capacity to enter into ownership agreements.

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Documents Required in Setting up a Partnership

Creating a partnership in Singapore requires the following documents:

1. Proof of identity for each partner (e.g. passport or NRIC)
2. For a company partner, the registration information of the company
3. Proof of residential address for each partner (e.g., utility bill or bank statement)
4. An approved trading name
5. A partnership agreement
6. A registered business address in Singapore
7. Declaration of compliance

Consent to Act as Manager and Declaration of Non-Disqualification of Act as Manager

Registration must be lodged with ACRA and should be completed within one business day, provided there are no errors with documentation, or no other government agencies are required to review the application. If successful, the applicant will be notified via email and receive a registration number.

Key Considerations in Forming a Partnership

1 Unlimited Liability

Unlimited liability is one of the main disadvantages of a partnership firm. In a GP, all partners can be held liable, which puts you at risk of the actions taken by other partners. An LP provides some level of protection to the limited partners only, but that comes at the expense of not being allowed to partake in the management of the business.

2 Disputes

There are often different types of partners in a partnership. This can lead to disputes over hiring, expansion, profit distribution and closing the business. It’s important that the legal agreement clearly explains how decisions will be made and how disputes will be handled and mediated. The agreement should also be reviewed periodically to keep it up to date.

3 Consensus

It’s unlikely that partners will be able to agree on every decision, all the time. The partnership agreement should clearly define how decisions will be made. In some cases, the agreement can allocate rights to certain partners, usually based on their capital contribution, giving them a larger vote. The agreement can also permit certain, less important decisions, to be made without consensus.

4 Tax

Tax is another reason that registering a partnership can be unattractive. Partners will pay tax on their share of the profits, in their personal capacity. If you fall into a high-income tax bracket, you could be paying significantly more than a company. This is something worth considering before choosing your business structure.

5 Pooling of Capital

One of the obvious benefits of a partnership is the ability to achieve more with pooled resources and capital. Because obtaining financing can be more difficult as a sole proprietor, and even as a partnership, this is one of the advantages of a partnership firm. In an LP, additional limited partners can be added to contribute capital, without requiring any management in the business.

6 Shared Responsibility

Partners can benefit from sharing the responsibility that comes with running a business. At the same time, in a GP, the negative actions of one partner will also be shared by all others.

7 Lowered Cost

A partnership is a more affordable business structure to set up — cheaper than a corporation. The ongoing compliance and administration fees are much lower, saving you money and time.

8 Consideration for Foreigners

As a foreigner, you can register a partnership in Singapore, but you must appoint a local, authorised representative or manager. Not being present can expose your business to mismanagement, though. If you intend to relocate to Singapore, you should consult the Ministry Of Manpower (MOM) before applying. The rejection rate for employment passes is high.

Francesca Del GiudiceBusiness Writer

Francesca is a content creator with over 5 years of cross-industry experience that spans academic research, consulting, venture, and tech startups.

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