General Partnerships (GP)

General partnerships involve two or more individuals who share responsibility for managing a business. Each partner has unlimited liability and are completely responsible for the partnership’s debts.

Pros:

Low-cost

• Setting up a GP is simple and affordable. It does not require complicated regulations or significant fees as compared to other business structures.

No corporate taxation

• Income generated from a GP is taxed as the personal income of the partners. Should the partners fall within the lower levels of income, this could result in a lower tax rate.

Cons:

Costlier

• Higher costs for incorporation and accounting

Compliance and requirements

• More paperwork and legal compliance
• Must appoint at least one resident director and a company secretary
• Required to file annual returns

Privacy

• May be required to file information like financial statements publicly

Limited partnerships

Limited partnership (LP) involves at least one general partner with unlimited liability, and at least one limited partner with liability restricted to their investments.

Pros:

Limited liability for limited partners

• For limited partners of an LP, their liability is limited to the amount they have invested in the partnership. This protects their personal assets from the business’s debts.

Flexibility

• The general partners have a high level of freedom and control over the business daily operations.

Cons:

Unlimited liability for general partner

• The general partners have unlimited liability, which means in the case of financial difficulty, this would put your personal assets at risk.

Limited control for limited partners

• Limited partners are limited to financial investments and are not involved in daily operations. 

Higher legal and regulatory costs

• Setting up an LP involves more paperwork and regulatory compliance as compared to a GP.

Limited liability partnership (LLP)

Limited liability partnerships are a hybrid business structure that combines the flexibility of a partnership with the liability protection of a private limited company.

Pros:

Limited liability

• For shareholders of an LLP, their liability is limited to the amount they have invested in the company. This protects their personal assets from the business’s debts.

Less compliance

• LLPs have less stringent regulatory requirements. For example, they do not need to appoint a company secretary or hold annual general meetings.

No Minimum Capital Requirements

• LLPs do not have a minimum capital requirement to start the business.

Cons:

Limited growth

• LLPs are typically suitable for professionals such as lawyers, but may not be ideal for large-scale businesses as it limits the company’s potential for growth and upscaling.

Difficulty in attracting investment

• An LLP is not a separate legal entity from its partners, and does not have a particular business structure. This is unlike Private limited companies that follow a clear structure, which investors would thus deem to be more secure.