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Private Limited (Pte Ltd) vs. Limited Liability Partnership (LLP): Choosing the Right Business Structure

When it comes to selecting the most suitable business structure for your new business venture, navigating the choice between a Private Limited (Pte Ltd) company and a Limited Liability Partnership (LLP) requires careful consideration of various factors. Let’s look at a detailed comparison of Pte Ltd and LLP across key dimensions:

1. Cost of Setting Up:

  • Pte Ltd: Setting up a Pte Ltd entails higher initial costs, typically around S$315, including registration fees..
  • LLP: In contrast, the setup costs for an LLP are more economical, averaging around S$115,

2. Requirements of setting up:

Pte Ltd: Mandatory appointment of a local director and a corporate secretary

LLP:  Mandatory appointment of at least one manager who is a local resident. No statutory obligation to appoint a company secretary.

3. Tax Rate:

  • Pte Ltd: Pte Ltd companies are subject to corporate tax rates, capped at 17%, offering stability and predictability in taxation.
  • LLP: LLPs, taxed based on personal tax rates, may face rates as high as 22%, potentially impacting smaller businesses and startups.

4. Annual Reporting:

  • Pte Ltd: Annual reporting for Pte Ltd companies involves comprehensive requirements such as corporate secretarial reporting, holding AGMs, and submitting unaudited financial accounts, ensuring transparency but also increasing administrative burdens.
  • LLP: LLPs have simpler reporting obligations, limited to submitting a solvency or insolvency declaration annually, streamlining compliance efforts.

5. Number of Owners:

  • Pte Ltd: Offering flexibility, a Pte Ltd company can have one to 50 shareholders, accommodating diverse ownership structures and investment scenarios.
  • LLP: With a minimum requirement of two partners and a maximum cap of 20 partners, LLPs foster collaboration and equality among partners.

6. Liability and Legal Status:

  • Pte Ltd: Members of a Pte Ltd benefit from limited liability protection, ensuring their personal assets are shielded from business liabilities. Additionally, Pte Ltd operates as a separate legal entity, distinct from its members and directors.
  • LLP: Partners in an LLP enjoy similar limited liability protection, safeguarding personal assets from partnership debts. However, partners may be personally liable for their own wrongful acts or omissions.

7. Ease of Setup:

  • Pte Ltd: Despite higher setup costs and stricter compliance requirements, Pte Ltd offers a recognised corporate structure with established credibility in the business landscape.
  • LLP: With lower setup costs and simplified compliance obligations, LLPs provide an accessible entry point for startups and professional service providers seeking operational flexibility.

8. Capital Raising Potential:

  • Pte Ltd: Pte Ltd companies have streamlined access to funding from investors and banks, as they can raise capital by issuing shares. This ease of capital raising enhances scalability and growth opportunities.
  • LLP: While LLPs can raise capital through bank loans or partnerships, it may be challenging as it depends on the credibility of the partners. Limited options for business grants and ineligibility for certain government schemes may further limit funding avenues.

Summary of the Key Differences between Pte Ltd companies and LLPs in Singapore

 Private Limited Company (Pte Ltd)Limited Liability Partnership (LLP)
Number of ownersMinimum of 1; Maximum of 50Minimum of 2 partners; No maximum limit
Who can set upAny foreign &/or local individual &/or company

Must appoint a local director		Any foreign &/or local individual &/or company

Must appoint a local manager
Best for Most popular, advanced and scalable business structure

Eligible for tax exemptions and ease of raising capital

Hybrid structure blending partnership and corporate elements

Ideal for professionals like lawyers, architects, consultants, and accountants
Legal statusSeparate legal entity distinct from its shareholdersSeparate legal entity distinct from its partners
LiabilityLimited liability for shareholdersLimited liability for partners
Raising capital Can raise capital via share issuance

Easier to get access to funding from banks and investors		Raising capital through bank loans can be challenging as it depends heavily on the partners' credibility
Grant eligibilityMeets the criteria for Startup SG and various business grants.Limited availability of business grants and ineligible for Startup SG grants.
TaxationTaxed at a flat rate of 17%Taxed at personal income tax rates each partner

Corporate partners will be taxed at corporate tax rates
Tax exemptions Eligible companies can claim 75% tax exemption on the first S$100,000 of their chargeable income

Companies ineligible for the tax exemption scheme can still benefit from partial tax exemption (75% exemption on the 1st $10,000 of chargeable income; plus additional 50% exemption on the subsequent $190,000)		Personal tax relief if applicable

Corporate tax relief if the corporate partner is eligible
FormalitiesMore costly to set up (registration fees, ongoing compliance costs, etc)

Must appoint a company secretary within 6 months of incorporation

Must maintain proper records and financial transactions for at least 5 years from the relevant Year of Assessment

Must file annual returns 		Quicker to set up

One time registration

Annual declaration of solvency must be lodged
Government set up fee$315 ($15 name application fee; $300 incorporation fee)$115 ($15 name application fee; $100 incorporation fee)
Business ContinuityPerpetual succession until wound up or struck off

Difficult to transfer ownership

Perpetual succession until wound up or struck off

Easier to transfer ownership through sale or purchase of company shares

Frequently Asked Questions:

☞ Is a Private Limited company the same as a Limited Liability Partnership (LLP) in Singapore?

While both Pte Ltd companies and LLPs offer limited liability protection to their owners, they differ in terms of ownership structure, compliance requirements, and taxation.

☞ Can LLPs be converted to Pte Ltds and vice versa?

Yes, LLPs can be converted to Pte Ltds and vice versa, subject to certain conditions and regulatory requirements.

☞ Can foreign individuals or entities register as owners of Pte Ltds or LLPs? Yes, both Pte Ltds and LLPs allow foreign individuals and entities to register as owners or partners, subject to certain restrictions and compliance requirements.

What are the annual compliance requirements for Pte Ltds and LLPs? Both Pte Ltds and LLPs have similar compliance requirements, including filing annual returns and financial statements. However, Pte Ltds have additional annual compliance requirements, such as holding annual general meetings and appointing auditors (unless exempt).

☞ Which structure offers better tax benefits, Pte Ltd or LLP?

The choice between Pte Ltd and LLP depends on various factors, including the specific circumstances of the business and the tax objectives of the owners. Both structures offer different tax benefits, and it’s essential to consult with tax professionals to determine the most advantageous option for your business.

Using an incorporation service as an extension of your team

Setting up a company in Singapore can be challenging, but with professional support, it can be simple. Counto’s mission is to support your new business, take away the complexities of compliance, and save you time and money throughout the year. Speak to us directly on our chatbot, email us at [email protected], or contact us using this form.

 

Here are some articles you might find helpful:

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Filing requirements for Pte Ltd companies

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How to register your company

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