Grasping the Basics of a Limited Partnership (LP)

A Limited Partnership, or LP, is a unique kind of partnership involving at least two partners, including one or more general partners and at least one limited partner. There’s no ceiling on the number of partners in an LP. Unlike some business models, an LP doesn’t have an independent legal identity separate from its partners. This means it can’t own property, sue, or be sued under its own name. LP creation follows the same process as a standard partnership but operates according to the Limited Partnerships Act (Cap 163B), the Partnership Act, and the common law associated with partnerships.

 

What is the Role of a General Partner?

A general partner, who can be either an individual or a corporation, takes on the responsibility of managing the LP. This role includes unlimited liability for all of the LP’s debts, financial commitments, and legal proceedings. They’re the decision-makers when it comes to everyday operations, and they don’t need to consult with limited partners for such matters. Any disagreements relating to routine matters can usually be sorted by a majority of the general partners.

If all the general partners aren’t Singapore residents (be they citizens, Permanent Residents, holders of an EntrePass/ Employment Pass), a local manager must be hired to fulfill the LP’s obligations. This manager is held accountable in the same way as a general partner in case of any defaults.

 

What is the Role of a Limited Partner?

In contrast, a limited partner isn’t accountable for the LP’s debts and financial obligations beyond their agreed contribution. They can be an individual or a corporation, and their role typically involves providing capital without getting involved in management or decision-making activities. In fact, if a limited partner engages in LP management, they risk their limited liability status and could be viewed as a general partner.

The LP’s registration with ACRA will be suspended if there’s no registered limited partner, resulting in the partnership being listed under the Business Names Registration Act. Once a limited partner gets registered, the business regains its recognition as an LP.