Business structures: Private Limited vs Limited Liability Partnership

8 minute read

Singapore is a leading country to run a business due to its business-friendly policies and vibrant economy, be it for a local or foreign business entity.

But there is a laundry list of things to do before you launch – on top of registering your business, you need to choose the structure to conduct your business in.

In most cases, Singapore-based business owners would choose a Private Limited (Pte Ltd) and Limited Liability Partnership (LLP), both of which have their unique offerings and conditions. In this article, we’ll compare both structures and address some frequently asked questions.

Overview:

What is a Private Limited (Pte Ltd)?

Setting up a Private Limited company requires a minimum of one Singapore resident director. The Pte Ltd structure is the most popular choice among business owners.

Shareholders are not personally liable for the business debts and losses of a Pte Ltd firm. Such a business structure enjoys a separate legal status, which means your personal assets and finances are kept separate from a legal suit.

Ptd Ltd firms must comply with regulatory requirements, such as Annual General Meetings, (AGMs) submission of unaudited financial statements to the Accounting and Corporate Regulatory Authority (ACRA), and corporate secretarial reporting.

Pte Ltd companies are taxed at corporate tax rates of up to 17%. With its compliance requirements, this structure is best suited to companies that project long-term expansion – and Sleek can help!

What is a Limited Liability Partnership (LLP)?

The Limited Liability Partnership, or LLP, is the next most popular business structure. LLP companies are taxed at personal tax rates of up to 22% and are subject to bookkeeping requirements.

They require a minimum of 2 partners to a maximum of 20 partners. The ownership is equal among all partners. Like a Private Limited company, LLP partners are not personally liable for any debts incurred by the company.

But shareholders will be held responsible if they have caused any losses or claims due to a wrongful act or omission.

LLPs are best suited for professional service providers, such as lawyers, architects, accountants, and management consultants.

What are the differences between a Pte Ltd and LLP?

It’s a lot to take in, so we have summarised the key differences between the two business structures.

Type of business structure Cost of set-up and requirements Number of shareholders and partners Tax rates Reporting requirements Liability and legal status

Private Limited company

(Pte Ltd)

S$315 to set up. Minimum of one Singapore resident director needed >Maximum of 50 shareholders Corporate tax of up to 15 percent Corporate secretarial reporting, annual general meetings, submission of unaudited financial accounts Separate legal entity. Shareholders and owners are not personally liable for company debts and losses.
Limited Liability Partnership company (LLP) S$115 to set up. Singaporeans, permanent residents and Employment Pass holders, and foreign individuals and companies can apply. Minimum of 2 partners to maximum of 20 partners. Ownership is equal among all partners. Personal tax of up to 22 percent Regular bookkeeping; declaration of solvency or insolvency yearly

Separate legal entity.

Partners are not personally liable for any losses or claims incurred by the company.

However, partners may be held personally liable if they are found to have caused losses and claims due to their own wrongful acts of omissions.

Which business structure is better for my business?

You’re now familiar with the basics of a Pte Ltd and LLP structure. But how do you know which to go for? Here are the pros and cons of Pte Ltd and LLP structures.

Type of business structureProsCons
Private Limited company (Pte Ltd)
  • Companies are taxed at corporate rates of up to 15&
  • Shareholders are not personally liable for debts and losses of the company
  • Easier access to loans, tax exemptions, and grants from the government
  • Allows for a maximum of 20 shareholders
  • Access to funding by bringing in new shareholders
  • Company continues to exist in spite of death, resignation of insolvency of shareholders or directors, through the transfer of share
  • More compliance requirements. A Pte Ltd company is mandated to follow regulations in the Singapore Companies Act, or risk facing penalties
  • The company must have at least one director and one corporate secretary
  • Pte Ltd companies are required to submit unaudited financial accounts to ACRA and/or the Internal Revenue Authority Singapore (IRAS)
  • Annual general meetings must be held regularly
  • Higher operational costs due to a higher level of compliance required
  • Higher registration cost
Limited Liability Partnership company (LLP)
  • Lower registration cost
  • Fewer compliance requirements – directors, corporate secretary and annual general meetings are not required
  • Only an annual declaration of solvency or insolvency is needed
  • LLPs are also considered separate legal entities, which means company owners are not personally liable for business debts and losses of the business
  • LLPs are perpetual entities – they continue to exist despite death, resignation or insolvency of shareholders, unless they are wound up or are dissolved
  • LLPs is taxed at personal tax rates, which is higher than the corporate tax rate
  • LLPs are not qualified to obtain government loans
  • Requires a minimum of two partners at all times, or the company will be dissolved
  • Lacks ease of transfer of ownership

Most business owners prefer the Pte Ltd due to its lower taxes and access to government grants.

Psst.. if you’re thinking of doing the same, let Sleek help you out! We’ve helped thousands of Pte Ltd companies set up their business effectively.

Ultimately, business owners should choose the structure that complements their business needs. We have listed the pros and cons in a table below for easier comparison.

Frequently asked questions

Is Pte Ltd the same as LLP?

The short answer is no, although they do share a few similarities. For instance, they are separate legal entities which mean shareholders and partners are not held personally liable for business debts and losses.

However, there are more differences than commonalities. LLPs are only required to declare insolvency or solvency annually. The law requires Pte Ltd companies to carry out directorial and corporate secretarial reporting.

Can a LLP be converted to a Pte Ltd in Singapore or vice versa?

Yes for both conversions but some conditions apply. For conversion from LLP to Pte Ltd, one needs to set up a Pte Ltd, before transferring ownership and dissolving the LLP.

For the conversion from Pte Ltd to LLP, one needs to make sure that the partners of the business are also its shareholders before the date of conversion.

Is Pte Ltd considered a limited partnership?

No. A limited partnership is not a separate legal entity, meaning owners can be held liable for debts and obligations of the LP.

Let Sleek guide your business

With the existing rules and regulations governing companies, running your own business isn’t that straightforward. Let Sleek’s incorporation services take care of this crucial part of your business. Do note that we only offer incorporation for Pte Ltd and Sole Proprietorships only.

Start a business in less than 3 hours with us. Talk to our experts today.

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