S/No Comparison General Partnership Limited Partnership Limited Liability Partnership Company1. Which has more

formalities?Least Less Moderate Most, because it is governed by

Companies Act.Public Companies have more formalities.Private Companies have less and Exempt Private companies (no more than 20 members and all of its issued shares are owned by natural persons) least.Limited by shares, trading concerns, driven by profit.Limited by guarantee. Non trading concerns, mainly education, charitable organisation.

2. Is it a separate legal entity?

Not separate legal entity. Not separate legal entity. Separate legal entity. S4 of LLP Act. Obligations belong to the LLP

Separate legal entity. Saloman V Saloman Co. Ltd

3. Any limited liability for business debts?

Partners have unlimited liabilities

General partner unlimited liability. Limited partner liability up to contribution.

Members enjoy limited liability up to contribution.

Shareholders enjoy limited liabilities. Maximum liability up to investment. Not liable for company’s debt.

4. Who are the agents of the organisation?(Examinable)

Partners are agent of firm and fellow partners under S5 of Partnership Act.

Exceptions: Third party knew that partner has no authority or no knowledge that he was a partner.

Partners are jointly and severally liable for acts of tort in the course of business under S10 and S12 of Partnership Act.

General partner is an agent.

Limited partner is not an agent and not supposed manage under S6 of LP Act.

If limited partner starts to manage, he will be a general partner of the particular contract. Manage = Decision making, advice are not management.Under S6(3) of Limited Partnership Act.

General partner same position

Members are agent of LLP but not of each under under S9 of LLP Act.

Acts of torts only guilty partner and LLP liable under S8(4) of LLP Act.

Board of directors collectively.

Single director may be agent if he as authority.

Company vicariously liable for employees torts.

5. Who owns and manages the

Partners GP and LP owns.But only GP manages.

Members. Shareholders own the company.

organization? Board of directors manages the company.

Shareholders can be director, directors can be creditors, and shareholders can be directors.

6. Must a Secretary or Manager be appointed?

No. Manager if GP are resident overseas under S28 of LP Act.

Manager must be appointed. Secretary must be appointed within 6 months of formation.Public company must hire professional secretary, lawyers/secretary.

7. Any submissions of reports to ACRA?

No. No. Declaration of solvency. Annual returns.-Audited accounts-Balance sheet

Exempt private company enjoy less formalities.

8. Income tax (personal or corporate)?

Personal Personal Personal Corporate

9. Does it enjoy secrecy of its financial affairs?

Yes. Yes. Limited because of declaration of solvency.

No for public.

Exempt private enjoys secrecy. (Less than 20 individuals, less than 5m turnover)

10 Are auditors required to be appointed?

No. No. No. Yes, within 3 months of formation.

11. ROI – in what form is this received?

Profits Profits Profits Dividends.

12. How is dissolution achieved?

Voluntary or compulsory. Simple process.

Voluntary or compulsory.

Limited partners cannot dissolve.

Complex.Partners’ voluntaryCreditors’ VoluntaryIn court as they follow companies act.

Complex, follow company act.

13. How is the organization financed?

Partners Partners Members? Equity.Debt.Public company can offer shares to the public.

14. Are there any statutory duties/meetings?

Yes, partners have under S29 and S30 of Partnership Act. No meetings.

Yes, partners have under S29 and S30 of Partnership Act. No meetings.

Yes, partners have under S29 and S30 of Partnership Act. No meetings.Fiduciary Duties

Directors have fiduciary duties.To act in best interest of companies, no conflict of interest.

Annual General Meeting, Extraordinary General Meeting, Statutory meeting for public companies.

15. Is conversion to another business form possible?

GP to LLP under S20 of LLP Act.

No conversion. No provision. Private to public.Public to private.Private to LLP under S21 of LLP Act.

*LLP is a bit like general partnership, especially insofar as rights and duties of partners themselves concerned, insofar of the relationship of the partners themselves concerned (differs mainly in liability of partners to T)

Exam Question:

Given the fact that LLP and companies have limited liability, why would you choose to set up a company?Both LLP and company enjoy similar benefits. Both have limited liability. But companies can convert into a public company and list itself on stock exchange to make public offer, LLP cannot, easier to raise funds. Companies have far more tax exemptions than LLP. But there is a problem with companies. Being a shareholder does not mean that you are a director, but if you are a partner you can make decisions for the partnership.

Choose the appropriate business form.

Comment on the accuracy of a statement.

Concept Questions:

1) Shareholders own the company. Board of directors manages the company under S157A of the Company Act. In private companies, shareholders tend to be directors. In public companies, those who own the companies need not manage the company.SG: AB Pte Ltd for private companies, AB Ltd for public companiesUK: AB Ltd for private companies, AB Plc for public companies.Australia: Proprietary for private companiesunlimited companies are exceptions.

2) LLP are more similar to company as they are both separate legal entity and perpetual successionGP in LLP own and manages the companyShareholders in company does not necessarily manage.

3) No separate entity for both.LP has Limited Partner who enjoys limited liability up to contribution.

4) Company and LLP as both governed by Company Act.

5) Sole Proprietorship, General Partnership under S9 of Partnership Act. GP in LP also liable for business debts.

6) General Partnership under S5 of Partnership Act. LLP under S9 of LP Act. Companies’ director if they have authority.

7) General Partnership under S10 and S12 of Partnership Act, firm and other partners liable.

8) Members committed a tort, LLP liable under S8(4). But in companies, individual shareholders and directors are not agents.

Discussion Questions:

1a) Partners: Peter and Paul. Paul is partner because of 20% profit. (Prima facie evidence of a partnership).Under S5 of Partnership Act, every partner is an agent of firm and fellow partners. Both of them are agents of firm and each other.Even though Paul has no authority, Printek Pte Ltd did not know of restrictions and was led to believe that Paul was a partner under S8 of PA.S5 exception does not apply.Under S9, both of them are jointly liable for business debts.

1b) Paul commits a tort in the course of the firm’s usual business.Under S10 and S12 of the Partnership act, both partners are jointly and severally liable Cress & Sprouts.

1ci) Paul is a director, so he is an agent if he has authority.Signing on contract was out of his job scope which is editing and creating aspects of magazine.Apparent authority not in issue due to question.Suppose we consider apparent authority, was receptionist someone who had power to make that representation? She had no actual authority, Paul’s authority is doubtful. Could you argue usual authority by virtue of position?As a result, no apparent/actual authority, unable to bind company to contract.

1cii) Company is a separate legal entity.Peter is only liable up to the amount he invested.Hence, Peter is not personally liable to Printek.

1d) S8(4) of LLP Act – If partner commits tort while acting in course of LLP’s business, LLP is liable together with the partner who commits tort.Paul committed tort of defamation in ordinary course of business, cannot sue peter for Paul’s defamation as he is not Paul’s agent.

Additional Questions:

1) Uncle: Avoid stupid fool and careless fool.Uncle is partially correct. LLP is better than GP and LP.

2) Limited liabilities = Abel, Ben and Charlie want to limit their liabilities. LLP and company are separate legal entity from its partners/members. GP and LP cannot satisfy.Management: Abel and Charlie wish to manage – LLP and company (as directors and shareholders) are both suitable. Ben does not wish to manage, so LLP is not suitable.

Only company is suitable where Ben can be a shareholder, Abel can be both shareholder and director, Charlie only a director.Unauthorised transactions/wrongdoings of others: As a director, one is not an agent of fellow directors. Hence, Abel’s wrongdoings or any unauthorised decision will not cause Charlie to be liable.Private limited company as <20 people. Fulfils all the requirements.

Sole proprietorship

Partnerships Limited Liability Partnership (LLP)

Limited Partnership (LP)

Companies (private) Companies (public)

Key features One owner 1. 2-20 partners2. Carrying on of a business3. Common objective of generating profit

1. Identified by LLP in its name2. 2 – infinity partners3. Perpetual succession

1. Identified by LP in its name2. 2 – infinity partners3. At least one general partner, and one limited partner4. LP cannot take part in management of LP (downside), if he takes part, he is deemed as GP and has unlimited liability

1. Company is an incorporated business organisation registered under Companies Act2. Owners are referred to as “members” and invest in company’s business3. Most companies are divided into shares and members are shareholders holding shares in company4. Shareholders have rights e.g. rights to vote and rights to dividends5. Creditors are not shareholders/members, just a lender/supplier on credit6. Directors manage the company, and are appointed by shareholders, and directors may or may not be shareholders7. Corporate decisions do not need approval of shareholders EXCEPT fundamental changes e.g. changes to M&A, changes affecting shareholders’ rights8. Must have secretary9. Directors and secretary are regarded as officers of company and have duties to fulfil (notes)10. Minimum 1 member11. Perpetual succession of companies12. Maximum 50 members13. Restrictions on transfer of shares14. Private, Pte, Sdn, Sendirian seen in name

12. No maximum members13. No restrictions

Liability Unlimited 1. Whose liability?Every partner bears equal liability, unless prior partnership agreement states otherwise

1. Whose liability?LLP is a separate legal entity, and thus can own property in own name and can sue and be sued in own name,

1. Whose liability?LP is NOT a separate legal entity:General partner’s legal position is the same as legal position of partner

1. Whose liability?Can sue and be sued in own nameCompany’s liabilities are its own and shareholders/members and directors are not liable for company’s obligationsEXCEPT:

2. Liability of partners towards 3rd party:Relationship to 3rd prty: S5 of Partnership Act (if partner acts with authority firm bound/any act done by partner for carrying on, on the usual way of business of firm will bind firm, regardless whether partner had firm’s authority to act, UNLESS partner acted without authority AND 3rd party knew partner did not have authority OR didn’t know he was partner3. Tortious LiabilityS10: If partner commits tort while acting in ordinary course of business of firm OR while acting with authority of his co-partners, firm is liable for tort4. Change in constitution of firmA joins at time X and is not liable for debts owed prior to X, unless agreed otherwiseB leaves/retires at time X, and is still liable for debts owed prior to X (unless agreed otherwise), and would still be liable

and LLP’s liabilities are its ownLLP has perpetual succession, change in partners does not affect existence, rights, liabilities of LLP2. Liability of partners/LLPS9 in LLP Act: Every partner of a LLP is an agent of LLP (NOT of his other partners)LLP will not be bound by anything done by partner IF the partner had no authority from LLP to do that thing, and third party knows partner had no authority, OR does not know that the person is a partner3. Tortious LiabilityS8: If partner commits tort while acting in course of LLP’s business OR with LLP’s authority, LLP is liable for tort (other partners not liable)S8(2): Partner is NOT liable for tortious acts committed by LLP (unless he is the one who committed tort)4. Change in constitution of firmS9 (3) of LLP Act: where a person ceases

in a general partnership, meaning unlimited liability, and thus the GP is liable for debts and obligations of LPLimited Partner’s liability is capped at the amount of agreed investment by LP, and is NOT liable for debts and obligations of LP beyond his agreed investment

If company’s business has been carried on to defraud creditors, people responsible can be personally liable for debts incurred to these creditors, and if person incurs debt on behalf of company with no reasonable expectation of settling debts, he can be held personally liable for debts2. Whose rights?Company’s rights are its own and should be enforced by companyEXCEPTIONS:If majority of the shareholders committed fraud on company and used majority power to stop action by company against them, minority shareholders can take action in company’s name against majorityS216A of Companies Act – Court can allow member to bring action on behalf of company IF it is in company’s interest

*Company itself has unlimited liability for own debts regardless of whether is it a limited or unlimited company

*There exists a fiduciary relationship between a director and the company

towards 3rd party after X UNLESS third party had notice of retirement (s36(1) of Partnership Act) OR third party never knew he was a partner5. Liability of non-partnerGeneral rule: non-partner is not liable for anything the firm has doneException: S14 of Partnership Act: if non-partner is represented as partner to Third party, who as a result gives credit to firm relying on representation, it makes the non-partner liable as a partner

to be the partner of LLP, the person is regarded to be as the partner still, unless the third party has been notified about the cessation of this partner/notice that the former partner has ceased to be a partner of the LLP has been delivered to the Registrar

Ease of formation

Easy, just register

Easy, just register Moderate, register under LLP Act, and by 2 or more persons associated for carrying on lawful business with view to profit, and there must be at least one manager ordinarily resident in SG

ModerateMust appoint manager if all general partners are not ordinarily resident in SG

Hard1. Through process of registration with ACRA (Accounting & Corporate Regulatory Authority) and according to Company Act2. Relatively more time-consuming and expensive compared to the rest3. Must lodge company’s memorandum of association and articles of association with ACRAMemorandum of association sets out company’s key characteristicsArticles of association sets out internal management of company

Ease of maintenance, (Regulations)

Easy Easy Quite hard Moderate HardExempt companies (not more than 20 members and none of the shareholders is

Hardest, more regulations than private companies because public companies can invite

corporation) are subjected to even fewer regulations

the public to invest in them and thus it is necessary to protect public interest through these stringent regulations

Relative ease of raising funds

Hard Hard Quite easy Moderate Easy Easy

Law that governs it

No law specifically, but need to comply with 1. Business Registration Act (meaning need to register)

1. Partnership Act 1. Limited Liability Partnerships Act (NOT Partnership Act)

1. Limited Partnership Act 2008AND2. Provisions of Partnership Act*if there is conflict, LP > PA

1. Companies Act

Ease of dissolution

Easiest, can simply close and cease business, only need to notify Registrar of Business

Easy, dissolve according to agreement, if none then according to the provisions of Partnership Act, and if Partnership is registered, inform authorities

Can be involuntary dissolution pg 253

Moderate1. Voluntary winding up(i) Partners’ voluntary winding up, and can repay debts within 12 months, partners have control(ii) Creditors’ voluntary winding up, when LLP is unable to repay debts within 12 months, and creditors will have control2. By courtWinding up petition granted by court

Liquidator will have to be appointed to gather assets and pay debts in accordance to the Fifth Schedule of LLP Act,

GP must file notice of cessation of business

Depends on limited or unlimited company!Limited company: liability of members in a limited company is limited to the amount left UNPAID on their shares (identified via limited, ltd, berhad, bhd)Unlimited company: members have unlimited obligation to contribute towards discharge of company’s debts

Dissolution of company: Need to undergo the winding up process where the liquidator sells off company’s assets and distributes proceeds to creditors in repayment of debt owed to these creditors, and the order of repayment is set out in Companies Act, and only with surplus then it is distributed to members, and upon dissolution, company ceases to exist pg 351 for bankrupt, page 362 for winding up

and the partners are one of the last priority

Forms of winding up:1. Voluntary winding up(i) Members’ voluntary winding up: Members make decision to wind up company, company is solvent, and members have control over the winding up process and the appointment of the liquidator(ii) Creditors’ voluntary winding up:Members make decision to wind up company, company is NOT solvent and creditors have control over the winding up process and the appointment of liquidator2. Winding up by courtWinding up petition is made (possibly by creditor, or person inside company) to court and court grants petition

*LLP and companies have strict and troublesome regulations because they are separate legal entities and debts owned = the organisation and not theirs and hence there is a need to have someone creditors can look to, to be fair to creditors.

*LLP is a bit like general partnership, especially insofar as rights and duties of partners themselves concerned, insofar of the relationship of the partners themselves concerned (differs mainly in liability of partners to T)

*Unlimited companies are the rarest because most people would want to limit their members’ liabilities upon winding-up, they are often used in situations where the benefits of incorporation (e.g. separate legal personality and perpetual succession) are desired, but limitation of liability is prohibited.