Which is the best for a business, a Sole Proprietorship or a Partnership?

Jul 15, 2014
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PartnershipSingaporean entrepreneurs who want to be self-employed should get their businesses registered. Such an entrepreneur can choose to register it as a sole-proprietorship or find another like-minded individual and register a partnership. What you ultimately choose largely depends on your temperament and how you want to conduct your business.

Sole Proprietorship

Starting a business firm by forming a sole-proprietorship is a great option for an entrepreneur who wants to learn all the ropes of a business. As the sole owner of the business firm he or she can direct all of its business activities without consulting anyone. With proper documents, it need only 15 minutes for starting a company in Singapore as a sole-proprietorship.

  1. A sole proprietorship is not a legal person and its liabilities, losses and debts are the debts and losses of its owner.
  2. His personal assets can be used to pay off the firm’s debts.
  3. The profits made by a sole-proprietorship are the profits of its owner and he or she has to pay personal income tax on it.
  4. The finance for the future expansion of a sole-proprietorship is hard to get. It totally depends on the charisma, reputation and the business practices of the owner.


A qualified and experienced individual can team up with one or more equally capable professionals to form a Singapore company as a partnership. In the partnership deed, they can mention amount of capital, how they are going to run it and share the losses or the profits of the partnership. It is advisable for these professionals to hire incorporation services in Singapore like Singapore Audit.

Types of Partnership Firms

There are three types of partnership firms;

  1. General Partnership
  2. Limited Partnership
  3. Limited Liability Partnership (LLP)

General Partnership / Limited Partnership

The general partnership and the limited partnership are considered as risky as the liabilities of the partners are unlimited. The losses or the debts of the partnership are the responsibilities of the partners and like in a sole proprietorship, personal assets of the partners are at risk.

Limited Liability Partnership (LLP)

To overcome the liabilities issue related with partnerships and to reduce risk, the partners can register a relatively new type of partnership. It is called as Limited Liability Partnership (LLP). An LLP combines strength of a private limited company with that of a partnership.

A limited liability partnership firm’s deed contains details about the amount of capital and the agreement for sharing of workload as well as profits or losses among partners.

  1. An LLP is a separate legal person and hence, has the responsibility of paying off its debts and losses.
  2. It can sue or be sued in its own name.
  3. Personal assets of the partners are not involved.
  4. Liability of partners is limited to the amount of capital invested in the partnership.
  5. A limited liability partnership has perpetual existence which means, unless it is legally dismantled, it can go on operating. Its existence does not depend on any partner.
  6. A partner pays for the losses or the debs because of his or her own mistake, misconduct or malpractices. However, he or she is not responsible for the losses because of the other partners.

A sole proprietorship is a great tool for a novice entrepreneur to learn how to stretch and flex business muscles. On the other hand, a partnership is more suitable for somewhat experienced professionals. In Singapore, company registration has been made very simple and the environment is pro-business. This is the right time to start a business.