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Section 1 Introduction
Section 2 Sole Proprietorships
Section 3 Partnerships
Section 4 Limited Partnerships
Section 5 Limited Liability Partnerships
Section 6 Companies
Section 7 Business Trusts
Forms of Business Organisations
14.1.1 Persons wishing to conduct a business in Singapore may do so through the following:
• A Sole Proprietorship
• A Partnership
• A Limited Partnership
• A Limited Liability Partnership
• A Company
• A Business Trust
Regulation of Business Organisations
14.1.2 Businesses fall within the regulatory purview of the Accounting and Corporate Regulatory Authority (ACRA). In addition, fund raising activities by businesses that involve the securities and futures markets come under the supervision of the Monetary Authority of Singapore. There are also industry – specific licensing requirements that need to be complied with. (To find out more about the business registration and licensing processes and applications, the reader may wish to visit the online Business Licensing Service on the Business.gov.sg website).
What is a ‘Sole Proprietorship’?
14.2.1 A ‘Sole Proprietorship’ may be described as a business that is carried on by an individual on his or her own without the use of a separate and distinct business form.
14.2.2 The sole proprietorship is the simplest form of business organisation. The law does not regard the sole proprietorship business as a different entity from its proprietor (or owner). As such, all rights that the business has are rights that belong to the proprietor. Similarly, all liabilities or debts that are incurred by the business are in law the liabilities or debts of the proprietor. The assets and profits that the business generates are owned by the proprietor who is personally liable to pay whatever tax payable in respect of these assets and profits. Should the proprietor die, the business will cease to exist.
Registration and Compliance
14.2.3 When a person wishes to carry on business in Singapore as a sole proprietor, he or she must first apply to register the business in accordance with the provisions of the Business Registration Act (Cap 32). This may be done by completing and submitting the relevant forms electronically using ACRA’s e-filing portal, Bizfile. The documents may be filed personally online or at ACRA or with the help of a professional firm of lawyers, accountants, chartered secretaries or service bureau. Subsequently, the proprietor must comply with all the requirements set out under the Business Registration Act such as the filling of changes in particulars of the business and its owner.
14.2.4 Under regulations made pursuant to the Business Registration Act, the Registrar may require a business owner who is not ordinarily resident in Singapore to appoint a local manager to be appointed.
Cessation of Sole-Proprietorship Business
14.2.5 A sole-proprietorship business will cease when the proprietor either dies or otherwise ceases to carry on business. The Business Registration Act requires any person registered under it who has ceased to carry on business to notify the Registrar of this. Failing to do so is an offence and may result in the imposition of a fine.
What is a Partnership?
14.3.1 A ‘Partnership’ is formed where two or more persons carry on a business in common with a view to making profit. Generally, the maximum number of partners allowed in a partnership is 20. The partners can either be individuals or bodies corporate. Should more than 20 persons wish to carry on business together, they will have to do so through a Company (see Section 5 below). This does not apply to partnerships formed solely or mainly for the purpose of carrying on any profession that is regulated by other legislation (eg law firms, accounting firms, medical practices).
14.3.2 A business partnership is also called a ‘firm’.
14.3.3 The law does not treat a partnership as a separate legal entity from its partners. The partners collectively own the assets of the partnership and are each individually liable for the debts and liabilities of the partnership. Each partner is personally liable for the full amount of debt owing by the partnership without any limit. Partners are taxed individually on their share of the partnership’s profits.
14.3.4 General rules governing Partnerships may be found in the Partnership Act (Cap 391).
Formation of Partnerships
14.3.5 There is no need to take any formal step to create a partnership. So long as there exists a relationship where two or more persons carry on business in common with a view to making profit, the law will recognise the existence of a partnership.
14.3.6 Section 2 of the Partnership Act provides some rules in determining whether or not a partnership exists. It also has rules to assist in determining whether or not a person is a partner of a firm. The most significant of these rules is that the receipt of a share of profits in a business by a person is strong evidence that the person is a partner in the business.
14.3.7 In most situations, partnerships are created through a partnership agreement entered into by the partners in the business. The agreement may be made orally or in writing.
Relation of Partners to Each Other
14.3.8 The relationship between partners is governed by the partnership agreement. The main elements usually found in such an agreement include details of:
• How profits and liabilities of the firm should be shared amongst the partners;
• The responsibilities of the various partners for the running of the business;
• The obligations that the partners have to each other (eg to render proper accounts);
• How a partner may leave the firm; and
• How the residual assets of the firm should be distributed should the partnership be dissolved.
14.3.9 Where there is no partnership agreement or where the agreement is not comprehensive, the relationship between partners is governed by the relevant provisions of the Partnership Act (Cap 391).
14.3.10 Partners are agents of each other and of the firm. A partner’s acts in relation to the normal business operations of the firm will be treated as being the actions of the firm and all its partners. While the authority of any individual partner may be restricted by agreement, such a restriction will not affect an outside party dealing with the partner unless the restriction is known by that party or that party either does not know or believe that the person he is dealing with is a partner of the firm.
Liability of Partners
14.3.11 Every partner (and if he dies, his estate) is liable for all debts and obligations of the firm that have been incurred while he is a partner of the firm. The firm and all its partners may also be sued for any wrongful act committed by any partner in the course of the business of the firm or with the authority of his co-partners.
Liability of Non-partners for a Partnership’s Debts
14.3.12 There are two situations where a person who is not a partner may be made liable for a partnership’s debts. First, a retired partner who continues to appear to be a member of the firm may, in circumstances specified under section 36 of the Partnership Act (Cap 391), be treated as still being a partner by parties dealing with the firm. Such a person may be made liable for the debts of the firm until he has done the necessary to notify others of his retirement from the firm. Secondly, where any person either by words or by conduct represents himself or allows himself to be represented as a partner of a firm, he will be liable to any person who has given credit to the firm on the strength of the representation.
Registration and Compliance
14.3.13 Persons who wish to carry on business in Singapore through a partnership must register their business under the Business Registration Act (Cap 32). They must also subsequently comply with the requirements under the Act.
Dissolution of Partnerships
14.3.14 A partnership will automatically be dissolved should any partner die or leave the firm. The partnership agreement may also provide for other instances in which the partnership is to be dissolved. This may include situations where any one of the partners becomes bankrupt or becomes of unsound mind. It is also possible for an application to be made to the Court to have the partnership dissolved under circumstances specified in section 35 of the Partnership Act (Cap 391)
SECTION 4 LIMITED PARTNERSHIPS
What is a Limited Partnership?
14.4.1 The Limited Partnership ('LP') was introduced in 2009 and is the most recent business form to be introduced to Singapore. An LP is a business organisation that consists of one or more 'general partners' and one or more 'limited partners'.
14.4.2 LPs are in essence Partnerships (see section 3 above) and are created pursuant to an agreement between the partners ("the LP agreement"). They do not have a legal personality that is separate from their constituent partners. The Partnership Act as well as the general law applicable to Partnerships apply to LPs subject to the provisions of the Limited Partnerships Act 2008 (Cap 163B). The matters discussed above in relation to the formation of Partnerships and the relation of partners to each other (14.3.5 to 14.3.10) apply to LPs.
Limited Partners
14.4.3 The key difference between LPs and Partnerships lies in the fact that LPs have 'limited partners'. A limited partner is defined as any partner who, under the terms of the partnership agreement, shall not be liable for the debts or obligations of the firm beyond the amount of his agreed contribution. The limited partner is thus said to enjoy 'limited liability' status. Anyone who is not a limited partner of an LP is a general partner. General partners are regarded in exactly the same manner as partners in a Partnership and are liable for all the debts and obligations of the LP incurred while they are general partners.
14.4.4 Parties who wish to be limited partners in an LP have to register themselves as such under the Limited Partnership Act. Failing to do so will result in the limited partners being treated as if they were general partners of the LP thereby losing their limited liability status. Also, where a person deals with an LP after a partner becomes a limited partner, that person is entitled to treat that partner as a general partner of the LP until he has notice of the registration of that partner as a limited partner.
14.4.5 Limited partners should not take part in the management of the LP and should not have the power to bind the LP. Limited partners who take part in the management of the LP are liable for all debts and obligations of the limited partnership incurred while they so take part in the management as though they were general partners.
14.4.6 Subject to the LP agreement, limited partners may increase, reduce or draw out their contributions with the approval of the general partners.
14.4.7 Any distribution of capital or profits to the limited partners must be refunded if the following conditions are present:
(a) every general partner of the LP was insolvent at the time of the distribution or became insolvent as a result of the distribution;
(b) the limited partner knew or ought to have known at the time of the distribution that every general partner was insolvent or would become insolvent as a result of the distribution; and
(c) every general partner is adjudicated bankrupt or is ordered to be wound up within one year after the date of the distribution.
Formation of Limited Partnerships
14.4.8 LPs are formed in the same way as Partnerships (see 14.3.5 to 14.3.7 above).
Registration and Compliance
14.4.9 An LP may be registered under the Limited Partnership Act where it has limited partners that are registered as such under the Act. An LP is deemed to be a general practitioner unless one or more persons are registered as limited partners of the firm in accordance with the Act.
14.4.10 A Partnership can also be converted into an LP where one or more (but not all) of its partners register themselves as limited partners. The resulting LP formed must also register itself as an LP under the Limited Partnership Act. Where a person deals with a firm after it becomes an LP, that person is entitled to treat the firm as a general partnership until he has notice of the registration of that firm as an LP. He is also entitled to treat any person who was a partner of the firm as a general partner of the LP until he has notice of the registration of that person as a limited partner.
14.4.11 The registration of the LP is done through the lodging of prescribed documents by one of its general partners. Thereafter, the LP must comply with all the requirements set out under the Act such as the filing of changes in particulars of the LP, publication of its name and registration number on invoices and official documents and the keeping of proper accounts.
14.4.12 LPs registered under the Limited Partnership Act are not subject to the provisions of the Business Registration Act. Where the LP ceases to have any person named as its limited partner, its registration under the Limited Partnership Act will be suspended. Under such circumstances, the provisions of the Business Registration Act will apply to the LP.
14.4.13 Where every general partner of an LP is ordinarily resident outside Singapore, the Registrar may require a local manager to be appointed to be responsible for the discharge of all obligations attaching to the LP as prescribed by the Limited Partnership Act.
Dissolution of Limited Partnerships
14.4.14 The dissolution of LPs is similar to that for Partnerships (see 14.3.14 above). There are, however, some differences which relate to limited partners. For example, limited partners are not entitled to dissolve the LP by notice. Also, an LP is dissolved on the death, dissolution, bankruptcy or liquidation of a limited partner.
14.4.15 In the event of the dissolution of an LP, its affairs are to be wound up by the general partners unless there is a court order to the contrary.
What is a Limited Liability Partnership?
14.5.1 A Limited Liability Partnership (‘LLP’) is a business organisation comprising two or more persons associated for carrying on a lawful business with a view to profit that is registered as such under the Limited Liability Partnerships Act 2005 (Cap 163A). Despite its name, it is not regarded as a partnership and general partnership law does not apply to LLPs.
14.5.2 The LLP is a body corporate that has a separate legal personality. It can sue, be sued and own property in its own name. The LLP is liable for its own debts and the partners and managers of the LLP cannot be made liable for such debts. Each of the partners are assessed and taxed individually on their respective share of the profits in the LLP.
14.5.3 Every partner of the LLP is regarded as an agent of the LLP. However, the LLP is not bound by the acts of a partner which are not authorised where either this fact is known to the person dealing with the partner or the person does not know or believe the partner to be a partner in the LLP.
Formation of a Limited Liability Partnership
14.5.4 An LLP is formed by registration under the Limited Liability Partnership Act. It must have a minimum of two partners. There is no limit on the number of partners that an LLP may have (see Paragraph 14.3.1 above). The partners can either be individuals or corporations.
Relation of Partners to Each Other
14.5.5 The relationships amongst partners in an LLP are governed by the limited liability partnership agreement. Matters not covered by the LLP agreement are governed by the provisions of the First Schedule of the Limited Liability Partnership Act.
14.5.6 A partner in an LLP can cease to be a member of the LLP in accordance with the LLP agreement or, where there is no agreement on the matter, by giving 30 days’ notice to the other members of his intention to leave the partnership. A partner will also cease to be a partner in an LLP upon death or dissolution. In such an event, the LLP is required to pay to the former partner (or his legal representative or its liquidator) an amount equal to the former partner’s capital contribution to the LLP and the former partner’s share in the accumulated profits of the LLP. The amount is determined as at the date the former partner ceased to be a partner.
Registration and Compliance
14.5.7 Upon registration, LLPs must comply with the provisions of the Limited Liability Partnership Act and any Rules made under the Act. If the LLP is not carrying on business under its registered name, it must also comply with the provisions of the Business Registration Act.
14.5.8 All LLPs must have at least one manager who is a natural person and who is of full age and capacity. Such a manager must also be ordinarily resident in Singapore. Managers are persons who are concerned in or who take part in the management of the LLP. They need not be a partner of the LLP.
14.5.9 The manager is the person who will be held responsible should the LLP fail to comply with the requirements of the Act pertaining to:
• The filing of a declaration of solvency under section 24 of the Act;
• The publication of the LLP’s name, registration number and limited liability status on its invoices and correspondence; and
• The registration of any change in particulars of the LLP
14.5.10 The following persons are disqualified from acting as a manager of an LLP:
• Undischarged bankrupts (unless they get permission from the High Court or the Official Assignee);
• Persons who are under disqualification from so acting pursuant to an order by the High Court because of their previous role in managing LLPs which have become insolvent or which were wound up on grounds of national security;
• Persons who have been convicted of specified offences; and
• Persons who are disqualified from acting as directors or from being involved in the management of companies under the Companies Act (cap 50).
14.5.11 An LLP will need to have a registered office in Singapore to which all notices and correspondence may be sent.
Winding-Up
14.5.12 An LLP will continue to exist until it is dissolved. Dissolution often takes place after a process called ‘winding-up’ has been completed. The winding-up may be effected voluntarily upon the resolution of its partners. Alternatively, it may be effected following a Court order being made upon the successful petition of the LLP itself, any of its partners (or persons representing their estates), any creditor, the liquidator or the Minister for Finance. The grounds on which a petition for an order for the winding up of an LLP and the procedures relating to both voluntary and Court-ordered winding up of LLPs may be found in the Fifth Schedule of the Limited Liability Partnership Act.
14.5.13 During the winding-up, the assets of the LLP will be called in by the liquidator and realised. The money collected will be used to first pay off all the debts of the LLP. Any amounts remaining will be distributed to the partners of the LLP in accordance with the LLP agreement.
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SECTION 6 COMPANIES (note - for a detailed discussion of the law relating to Companies, please see Chapter 16)
SECTION 6 COMPANIES (note - for a detailed discussion of the law relating to Companies, please see Chapter 16)
What is a Company?
14.6.1 A Company is an entity that is registered under the Companies Act (Cap 50). It has its own legal personality that is distinct from its members and the persons who manage the company. Companies can therefore own property and sue or be sued in their own names. They are recognised as taxable entities in their own right.
Types of Companies
14.6.2 The Companies Act (Cap 50) contemplates different types of companies (see Diagram). Companies may be classified according to whether they are “private” or “public” as well as according to their members’ liability.
Private Companies
14.6.3 A private company is one whose memorandum or articles of association:
• restricts the right of its members to transfer their shares in the company; and
• limits the number of members that the company can have to not more than 50.
The restriction on the right to transfer shares in a private company usually takes the form of a requirement that the transfer be first approved by the company’s board of directors or a requirement that the shares be first offered to be transferred to existing shareholders.
Exempt Private Companies
14.6.4 A private company in the shares of which no beneficial interest is held directly or indirectly by any corporation and which has not more than 20 members is regarded as an “exempt private company”. Such companies are exempted from some of the provisions of the Companies Act (Cap 50). For example, an exempt private company with an annual revenue of less than $5 million is exempted from the audit requirements under the Act and does not need to file its financial statements with the ACRA. It is also exempted from prohibitions against loans to its directors or to companies related to its directors under sections 162 and 163 of the Act.
Public Companies
14.6.5 Any company that is not a private company is a public company. Public companies may or may not be listed on a stock exchange. Where they are so listed, they are usually referred to as “listed companies” and have to comply with the rules and regulations of the stock exchange on which they are listed.
Companies Classified According to Members’ Liability
14.6.6 The majority of companies (whether private or public) are companies that are “limited by shares”. This means that they are formed on the principle that the liability of their members are limited to the amount, if any, unpaid on the shares that the members respectively hold. A public company can be “limited by guarantee”. Such companies are formed on the principle of having the liability of their members limited to the respective amounts that the members guarantee to contribute to the property of the company if it is wound up. Finally, private or public companies can be set up as “unlimited companies”. Here, there is no limit placed on the liability of the company’s members for the debts of the company.
14.6.7 Companies limited by shares are the most appropriate form of company for the conduct of business activities, and consequently the most commonly used for business. As such, the discussion below will focus primarily on such companies.
Formation of Companies
14.6.8 A company comes into existence upon registration under the Companies Act (Cap 50). It can have a minimum of 1 member. Theoretically, there is no limit to the number of members that a company can have. The members can be individuals or corporations.
Governance Structure
14.6.9 The governance structure of a company and the interrelationship between the company, its members and its managers is governed by the company’s constitutional documents (the Memorandum of Association and the Articles of Association) as well as by the provisions of the Companies Act. It is also not uncommon to find the members of companies (usually in joint venture arrangements) entering into ‘shareholder agreements’ as amongst themselves to capture some of their key rights and obligations in relation to how the company is to be structured and managed.
Members / Shareholders
14.6.10 A person can become a member either by subscribing for shares in the company or by purchasing the company’s shares from another person. The key rights and obligations of the members in relation to each other and to the company may be found in the Companies Act as well as in the company’s constitutional documents. Members of a company are most commonly referred to as ‘shareholders’.
14.6.11 The main rights that members have include:
• The right to be given notice of and to attend and participate in general meetings of members;
• The right to be treated fairly and to have the provisions of the company’s constitutional documents complied with;
• The right to make some key decisions in relation to the company through the general meeting (these include matters such as the appointment and removal of directors and auditors of the company; the issue of shares and the amendment of the company’s constitutional documents);
• The right to a share of declared dividends (dividends can only be declared out of available profits); and
• The right to have the company wound up in specified circumstances and to share in the residual assets of the company.
14.6.12 Members are not liable for the debts of the company.
Directors
14.6.13 The responsibility for managing a company generally lies with the company’s Board of Directors (“the Board”). The members of the Board may also be members and / or employees of the company. In larger companies, however, it is common for some of the Board members not to be employees of the company. Board members have onerous duties towards the company. These include the duty to act honestly, with reasonable care, skill and diligence in the conduct of the company’s affairs and the duty to act in the best interests of the company generally.
Registration and Compliance
14.6.14 Upon registration, companies must comply with the regulatory provisions of the Companies Act and any Rules made under the Act. If the company is not carrying on business under its registered name, it must also comply with the provisions of the Business Registration Act.
14.6.15 All companies must have at least one director who is ordinarily resident in Singapore. Only individuals who have attained the age of 18 years and who are otherwise of full legal capacity may be appointed as a company’s director. The following persons are disqualified from acting as company directors:
• Undischarged bankrupts (unless they get permission from the High Court or the Official Assignee);
• Persons who are under disqualification orders made by the Court;
• Persons convicted of specified offences or offences involving fraud or dishonesty punishable with imprisonment for three months or more. (The disqualification is for five years from the date of conviction of the relevant offence, or, where the person has been sent to prison, from the date of release).
14.6.16 Companies must also have a registered office to which all notices and official documents may be sent and at which the company is to keep the various registers that it is required to maintain under the law. Companies must also appoint a competent Company Secretary whose main responsibility is to ensure administrative and regulatory compliance.
Winding-Up
14.6.17 A company will continue to exist until it is dissolved. Dissolution often takes place after a process called ‘winding-up’ has been completed. Winding-up can take place voluntarily upon an appropriate resolution being passed by the company’s members. Alternatively, it can take place by an order of Court upon the successful petition of the company, a creditor, a contributory, a liquidator or a judicial manager of the company.
14.6.18 During the winding-up, a liquidator will be appointed. The liquidator’s role is to collect and realise the assets of the company. Generally speaking, the money collected will be used to first pay off all the debts of the company, and any amounts remaining will be distributed to the shareholders of the company.
14.6.19 Once the winding-up is concluded, steps can be taken to dissolve the company and have it de-registered.
What is a ‘Business Trust’?
14.7.1 A ‘trust’ may be described as an arrangement where a person (called the ‘trustee’) holds property for the benefit of others (called ‘beneficiaries’). A Business Trust is a trust that operates and runs a business enterprise. It is not a separate entity in that the trustee of the business trust is regarded as the legal owner of the assets in the trust. Under the general law of trust, the beneficiaries of the trust are liable for the legal obligations of the trust.
14.7.2 A business trust can distribute its operating cash flows to its beneficiaries. Depending on the circumstances and how the trust is structured, tax may be payable either on profits made by the trust or by the beneficiaries on their respective shares in the profit under the trust.
Creation of Business Trusts
14.7.3 Business trusts are usually created under a document called a ‘trust deed’. Among other things, the trust deed will:
• define the property and the purpose of the trust, and in the case of a business trust, the business to be carried out under the trust;
• the duties of the trustee;
• the entitlements of the trust’s beneficiaries.
14.7.4 Trusts are governed by the general law of trusts and by the provisions in the Trustees Act (Cap 337).
Registered Business Trusts
14.7.5 It is possible for a business trust to be registered under the Business Trusts Act (Cap 31) if the business trust fulfils certain criteria. The purpose of the Business Trusts Act is to put into place a framework to regulate business trusts that wish to raise funds from the general public.
14.7.6 Registered business trusts must have a trustee-manager whose role is to safeguard the interests of beneficiaries (referred to as ‘unitholders’ under the Business Trusts Act) of the trust and to manage the business of the trust. The trustee-manager must be a Singapore registered company, which is not an exempt private company, whose sole business is the management and operation of the trust. The duties and responsibilities of the trustee-manager are set out under the Business Trusts Act. The Trustees Act does not apply to registered business trusts.
14.7.7 Unitholders in registered business trusts are also given certain rights, some of which may not be available under general trust law. These include:
• limited liability
• the right to remove and replace the trustee-manager;
• the right to fair treatment;
• the right to bring a representative or derivative action on behalf of the trust.
14.7.8 Although a registered business trust is not a separate entity, it is taxed as such. Unitholders are not taxed on the sums received as distributions from the registered business trust.
Termination or Winding-up of the Business Trust
14.7.9 Generally, business trusts may be terminated pursuant to the provisions in the trust deed. Notwithstanding the provisions of the trust deed, however, the unitholders of registered business trusts can direct the trust’s trustee-manager to wind up the trust by passing a special resolution to that effect. In addition, the Business Trusts Act allows the trust to be wound up by the Court on the petition of the trustee-manager, a director of the trustee-manager, a unitholder or a creditor of the business trust.
14.7.10 Upon winding up, the assets in the business trust are to be applied in accordance with the trust deed.
Forms of Business Organisations - Comparative Table
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Sole Proprietorship
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General Partnership
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Limited Partnership
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Limited Liability Partnership
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Company
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Business Trust
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Registered Business Trust
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Owner(s) of the business
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Sole Proprietor.
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Partners.
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Partners.
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Limited Liability Partnership (partners have a share in the capital and profits of the LLP).
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Company (members / shareholders own ‘shares’ in the company that give them certain rights in relation to the Company).
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Trustee (on trust for beneficiaries).
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Trustee-manager (on trust for unitholders).
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Legal Status
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Not a separate legal entity.
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Not a separate legal entity.
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Not a separate legal entity.
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Separate legal entity.
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Separate legal entity.
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Not a separate legal entity.
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Not a separate legal entity.
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Party that is liable for debts of the business
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Sole Proprietor.
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Partners.
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General Partners (fully); Limited Partners (up to agreed contribution).
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Limited Liability Partnership.
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Company.
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Trustee / Beneficiary (may draw from assets under the trust).
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Trustee-manager (may draw from assets under the trust).
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Responsibility for management of business
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Sole Proprietor.
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Partners.
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General Partners.
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Partners.
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Board of Directors.
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Trustee or manager appointed by trustee.
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Trustee-manager.
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Comparative Regulatory / administrative compliance requirements
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Minimal.
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Minimal.
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Low.
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Low.
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Low to high depending on size and whether it is listed.
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Low to medium depending on requirements in trust deed.
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Medium to High depending on profile of unitholders (eg whether retail or institutional).
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Access to finance
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Only from proprietor’s personal investment and borrowings.
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Only from partners’ personal investments and borrowings (maximum 20 partners).
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Only from partners’ personal investments and borrowings.
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Only from partners’ personal investments and borrowings.
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Can access capital market.
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Limited to amount placed in the trust. No access to retail investors in capital market.
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Can access capital market.
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Returns
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Proprietor entitled to full profits from business.
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Partners entitled to share of profits from business.
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Partners entitled to share of profits from business.
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Partners entitled to share of profits from business.
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Shareholders entitled to share of dividends when declared. Dividends can only be paid out of available accounting profits.
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Beneficiaries entitled to share of distributions. Distributions may be paid out of operating cash flows.
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Unitholders entitled to share of distributions. Distributions may be paid out of operating cash flows.
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Taxation
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No tax paid by business. Personal tax paid by proprietor.
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No tax paid by partnership. Personal tax paid on share of profits by partners.
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No tax paid by LP. Personal tax paid on share of profits by partners.
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No tax paid by LLP. Personal tax paid on share of profits by partners.
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Corporate tax paid on profits. No tax paid by shareholders on dividends.
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Tax paid by trustee on income generated by trust. Personal tax paid by beneficiaries on share of income to which they are entitled. Tax system in place to avoid ‘double taxation’.
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Tax paid by trustee on income generated by trust at corporate tax rate. Distributions received by unitholders exempted from tax.
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Source: Victor Yeo, Joyce Lee, Pamela Hanrahan, Ian Ramsay, Geof Stapledon, Commercial Applications of Company Law in Singapore, CCH, 2011.
Updated as at 7 September 2011
By: Victor Yeo
Associate Professor and Head, Division of Business Law
Nanyang Business School, Nanyang Technological University
Disclaimer: The articles and briefings on this website are for general information only. Readers are advised to seek specific legal advice before acting on the contents set out therein. If advice is required, please consult a
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