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Partnership agreements in singapore

PARTNERSHIP AGREEMENTS IN SINGAPORE

A partnership is a relationship between two or more than one persons moving a business with a vision of profit. Partnership agreements are for joint ventures setting up a partnership firm – partners can use this agreement to spell out their relevant rights and responsibilities with accuracy.

WHY SET UP A PARTNERSHIP?

  • Minimal formalities and administrative duties;
  • Low start-up costs;
  • High degree of privacy;
  • Freedom to change business plans;
  • Loans made to the partnership are based on personal credit;
  • Taxation at the individual partner’s income tax rate (and not of the entire partnership).

REGISTRATION REQUIREMENTS:

Similar to a sole proprietorship, any Singaporean citizen, Permanent Resident (PR) or any other EntrePass holder who should not be less than the age of 18 years old and above can have the rights to register for a partnership firm.

Also, from 1 January 1994, all Singaporean citizens and PRs are required to top up their Medisave account with CPF Board before they register for a partnership.

WHY USE A PARTNERSHIP AGREEMENT?

The Partnership Act provides a default framework of statutory rules that are modifiable the rights and duties of the partners. However, partners are free to deviate from the statutory rules and stipulate their own set of rules for regulating their partnership, in the form of their partnership agreement.

Even though verbal agreements are also lawfully obligatory, and they are more open to difference of opinions if there is inadequate convincing substantiation of the terms of these agreements. Partners are therefore encouraged to draft their own partnership agreement at the commencement of the corporation to diminish the terms of their agreement into writing.

WHAT TERMS SHOULD A PARTNERSHIP AGREEMENT CONTAIN?

  • Name and purpose of the partnership;
  • Responsibilities, performance and remuneration of each partner;
  • Contributions of individual partners, in terms of cash or sweat capital;
  • Procedure for the withdrawal of old partners and the admission of new ones;
  • Buy-out procedures;
  • Dispute resolution;
  • Financial and accounting arrangements;
  • Term and termination of the partnership; and
  • Valuation of partnership shares.
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