Starting your own business? There are many structures to choose from and we always get asked the key differences between a Pte. Ltd. vs LLP.
The few key factors to consider between a Pte. Ltd. vs LLP are:
- Tax rates
- Yearly reporting requirements
- No. of owners and shareholding
- Ease of setup
The most detailed explanation and details are available from ACRA website, it comes with an informative video as well. We will of course digest and summarize for your convenience.
LLP is taxed at personal tax rates whereas Pte. Ltd. is taxed at corporate tax rates. The maximum personal tax rate is 22% whereas the maximum corporate tax is 17% so LLP will be taxed higher.
Yearly reporting requirements
Bookkeeping and taxation required for both LLP and Pte. Ltd. Pte. Ltd. however have additional compliance such as corporate secretarial reporting, AGMs and unaudited financial accounts submission. LLP just have to do an annual solvency declaration.
No. of owners and shareholding
LLP requires a minimum of 2 partners up to a maximum of 20 partners and the ownership is equal between all partners in its setup. Pte. Ltd can be owned by an individual or more up to a maximum of 50 shareholders. A Pte. Ltd. ownership can be different in its setup.
Ease of setup
Cost of setup for Pte. Ltd. is S$315 vs S$115 for LLP. A Pte. Ltd. company is also required to appoint a qualified personnel to the position of corporate secretary within 6 months of incorporation.
The partners of the LLP will not be held personally liable for any business debts incurred by the LLP. A partner may, however, be held personally liable for claims from losses resulting from his own wrongful act or omission, but will not be held personally liable for such wrongful acts or omissions of any other partner of the LLP. For a Pte. Ltd, members not personally liable for debts and losses of company and liability is limited to the shareholding of the company.
It is definitely easier and more convenient to start up a LLP in the short term but there might be some liability exposure though limited. So depending on the nature of your business, if it has lower risk, it is possible to start off with a LLP in order to bootstrap on money and processes. In the longer term, a Pte. Ltd. would offer more liability protection and flexibility towards funding and expansion.
We provide advisory on incorporation and corporate services so please feel free to contact us for more details.