Limited Liability Partnership (LLP) — a business structure in Singapore that creates a separate legal entity. It requires fewer compliance activities than a private limited company, for example, there’s no need to file annual returns. Each partner is taxed with personal tax off their individual income. If one of the partners is a company, it is taxed with corporate tax, but the LLP is not eligible for corporate tax exemptions.
What are the advantages of an LLP?
LLP is the newest form of business entity in Singapore, having been introduced in 2005. It is aimed to combine some of the characteristics of LLC and a partnership. It is mostly designed for several professionals (lawyers, architects, etc.) to be able to build a joint practice. It is important to specify the management responsibilities and the profits structure in the partnership agreement. The biggest advantage is LLP creates a separate legal entity, this shielding the partners from financial risks. It is similar to LLC this way, however, there are fewer responsibilities in terms of reporting. For example, you don’t need to file annual returns.
What you need to know about LLP
Both companies and individuals can become partners in an LLP, but you need at least two partners at all times. An individual will be taxed at personal tax rate on his or her income, while a company will be taxed at a corporate rate. However, the LLP itself is not eligible for the tax exemptions for SME (SUTE and PTE schemes). These are only options for LLC holders.
LLP examples in Singapore
An example of LLP would be as follows. You want to create a company that services to every need in the baking business. You join your existing company called “Cupcakes of the world Pte LTD”, yourself, and your friend, a macaron expert, into an LLP and you call it “The Bakers United LLP”. The new partnership offers services as a cupcake shop, a consultancy on cupcakes, and a consultancy on macarons.