Benefits Of Partnerships

In a general partnership, partners have an unlimited liability and business-related acts of one partner can legally bind all other partners. This mean that each partners have an equal responsibilities for the debts and losses incurred by the other partners. If the business is unable to repay its financial obligations or any outstanding liabilities, the partners’ personal assets can be seized by creditors to repay these debts. Partnership ceases to exist upon the partners’ retirement, death or bankruptcy which would mean that all the employees would be out of job. Since the maximum number of partners is capped at 20, the capital contributed by the partners for the business growth would be limited. The profits earned would be taxed at partners’

The establishment of partnership can also be easily formed, managed and the start-up costs are relatively low. It has a flexible management system as long as all partners agree to the decisions made. Accounts does not need to be audited and annual returns need not be filed with ARCA. (4) Furthermore, it is regulated less strictly as compared to a company whereby it has to adhere to the Companies Act. All partners can choose to participate in managing the company. (1) Partnership is generally a “pass through” tax entity. Since partners are taxed instead of partnership, the filing tax returns is relatively easy as there is no need for filing a separate tax return.

By converting a general partnership to a private limited company, firstly, shareholders will only be liable up to the amount of share it holds. This means that shareholders only need to repay the liabilities up to the amount of shares they hold and the shareholders’ personal assets are protected from being seized by creditors. Secondly, the company, as a separate legal entity, operates in perpetual session, whereby the

Firstly, the registration for a private limited company is a little more complex, costly and would take up to 2-4 weeks to be registered. A total of S$315 for approved company name and registration fee. There is also a need for annual filing requirements which includes tax return, annual accounts, holding Annual General Meeting, etc. An additional costs will be incurred for hiring professional firms such as auditors, lawyers, accountants to manage the setup of the company and ongoing compliance requirements of the company. Secondly, restriction are made to the raising of capital through issuing shares as well as the rights of transferring shares. The memorandum and articles of association imposed a restriction of right for its members to transfer their shares in the company and it has to first be agreed by the shareholders before transferring the shares. Thirdly, it also has to adhere closely to the Singapore Companies Act set by the government. Penalties will be issued if found to be any violation of rules or regulation. Fourthly, there is a need for greater disclosure and administration requirements whereby directors must make disclosure to the company information about their interests in the company’s contacts, shares, and debentures. Also, the freedom of the company to enter into a contracts with the directors is restricted. Lastly, not everyone in the company has the right to control