A general partnership in Singapore is a business structure where two or more individuals or corporations, up to a maximum of 20, agree to carry on a business together to make a profit. It’s one of the simplest ways for multiple owners to set up a business. Unlike a private limited company, a general partnership is not a separate legal entity. This means the business and its owners are legally the same, which has significant implications for liability.
Key Characteristics
Liability
This is the most critical feature. Partners have unlimited liability, both jointly and severally.
- Jointly Liable: All partners are collectively responsible for the business’s debts and obligations. If the business is sued, the partnership as a whole is responsible.
- Severally Liable: Each partner is also individually responsible for the entire debt. If the business cannot pay its debts and the other partners are unable to contribute, a creditor can pursue one partner for the full amount. This personal liability extends to personal assets like homes and savings.
Governing Law
General partnerships in Singapore are primarily governed by the Partnership Act 1890, an old English law that is still part of Singapore’s statutes. A formal partnership agreement is highly recommended to outline the rights, responsibilities, and duties of each partner, but it is not mandatory. Without an agreement, the provisions of the Partnership Act will apply.
Registration and Structure
- Registration: The business must be registered with the Accounting and Corporate Regulatory Authority (ACRA).
- Number of Partners: The minimum is two, and the maximum is 20. If the number exceeds 20, the business must be incorporated as a company.
- Management: Unless stated otherwise in a partnership agreement, all partners have an equal right to participate in the management and control of the business.
Taxation
A partnership itself does not pay income tax. Instead, the income is distributed to the partners according to their agreed profit-sharing ratio. Each partner is then taxed on their share of the income at their personal income tax rates.
| Advantages ✅ | Disadvantages ❌ |
|---|---|
| Easy to set up with fewer formalities. | Unlimited personal liability for all partners. |
| Lower compliance costs than a company. | Limited to 20 partners, restricting growth. |
| Direct management by partners. | Lack of legal separation from owners. |
| Flexible profit-sharing arrangements. | Potential for disputes if no agreement exists. |