Limited Liability Partnership as a Hybrid Business Organization

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The limited liability partnership; A hybrid of two different forms of business organizations – the partnership and the company. The Limited Liability Partnership (LLP) was introduced as a new business entity in Singapore in 2005. Its definition under S14 of the Limited Liability Partnership Act (LLPA) shares a resemblance to S1 of the Partnership Act (PA): it comprises of two or more persons carrying on a lawful business in view of profit upon registration with the Accounting and Corporate Regulatory Authority (ACRA). Partners may be individuals, other LLPs or companies registered under the LLP agreement and thus bounded by the laws governing the act. As a hybrid business entity, the LLP combines the limited liability features of…show more content…
Furthermore, as the members of the LLP share profits and losses in the partnership as stated in S24(1) PA, hence they owe a duty of good faith to each other. They must account to the LLP for any secret profits that they make from the partnership without the consent of the other members, including profits gained from any competing business S29(1) PA. Another similarity is in the capital raising process via partners’ individual contributions and bank loans which differs from companies whereby securities can be issued to raise funds. The aspect of limited liability also makes raising capital easier by attracting investors to join as silent partners. Lastly, LLPs are taxed similarly to partnerships as disclosed by the IRAS. No income tax is assessed at the entity level as the members are considered to be running a personal business. Therefore their personal income are assessed and taxed in accordance to their respective share of the profits in the LLP. In conclusion, the introduction of the LLP as a hybrid business entity encompassing traits of both partnerships and companies serve to cater to industries whereby there is minimal need for large organizations but a need for greater flexibility in business operations. Before its introduction, these businesses were grey areas whereby there was no proper provision of regulations to cater to these business forms. Through the consideration of its successes in the UK, it
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