post-title Legal protections offered by a limited liability company in Singapore

Legal protections offered by a limited liability company in Singapore

Legal protections offered by a limited liability company in Singapore

Legal protections offered by a limited liability company in Singapore

A Limited Liability Company (LLC) is a company limited by shares i.e. its liabilities are limited to the amount of share capital. LLC is a business entity registered under the Singapore Companies Act and a separate legal entity from its members. In a LLC, the liabilities of the owners are limited to the assets in the company and their personal assets are protected from business liabilities.

The costs involved in Singapore company incorporation are very small compared to what they are in other countries. Even though foreigners and foreign businesses have to hire local company incorporation, service providers for registering a company in Singapore the overall costs are easily affordable. Leave apart the filing fees, the annual report fees, the Attorney’s fees, and the first year franchise taxes. In view of the above benefits mentioned it is worthwhile to opt for Incorporation of a Limited Liability Company.

Why Is Asset Protection Important?

The goal of a comprehensive asset-protection plan is to prevent or significantly reduce risks by insulating your business and personal assets from the claims of creditors. Unfortunately, if you’re like most small-business owners, you are unaware of all the potential risks that can harm your business and the options available to protect your business and personal assets. An asset-protection plan employs legal strategies, put into place before a lawsuit or claim arises, that can deter a potential claimant or help prevent the seizure of your assets after a judgment. If you haven’t already put your asset-protection plan in place, don’t wait – the longer the plan has been in existence, the stronger it likely will be

Strategies used in asset-protection planning include separate legal structures or arrangements, such as corporations, partnerships and trusts. The structure(s) that will work best for you depends, in large part, on the kinds of assets you own and the types of creditors most likely to pursue claims against you.

The following are two general types of claims that can be made against you. For asset protection, it’s important to know the difference.

Internal claims – arise from creditors whose remedy is limited to assets of a particular entity, such as a corporation. For example, if you have a corporation which owns a piece of real estate and someone slips and falls on the property owned by the corporation, the injured party is limited to pursuing the corporation’s assets (i.e., the real estate). This assumes you did not cause the injury.

External claims – are not limited to the assets of the entity, but can extend to your personal assets as well. For instance, if the same corporation owned a truck which you negligently drove into a crowd of pedestrians, the injured could not only sue the corporation but also you and satisfy any judgment from corporate assets as well as your personal assets.


Corporations are a form of business organization created in accordance with state law. Legal ownership of the corporation vests in its shareholders, as evidenced by shares of stock. Generally, each shareholder is entitled to elect a board of directors (B of D) charged with the overall management of the corporation. The board of directors elects the officers (the president, secretary and treasurer), who are authorized to conduct the day-to-day business of the corporation. Many states permit a single individual to serve as sole director and to hold all of the corporate offices.

There are several types of corporations that are used to protect assets: business or C corporations, S corporations and limited liability companies (LLCs). The appeal of corporations as an asset-protection tool lies in the limited liability provided to its officers, directors and shareholders (principals). Corporate principals have no personal liability for corporate debts, breaches of contract or personal injuries to third parties caused by the corporation, employees or agents. While the corporation may be liable or responsible, a creditor is limited to pursuing only corporate assets to satisfy a claim: the assets of the corporate principals are not susceptible to claim or seizure for corporate debts. This protection from personal liability distinguishes the corporation from other entities, such as partnerships or trusts.


One prominent exception to limited liability is corporate principals relates to providers of personal services. Personal service liability includes work done for or on behalf of another by doctors, attorneys, accountants and financial professionals. For example, a doctor who forms a corporation and works for it as an employee may still be liable for damages attributable to treatment of a patient even though he was working for the corporation.

In addition, liability protection offered by a corporation will be available only if the corporation carries itself as a separate and distinct entity, apart from the individual shareholders or officers. If a corporation has no significant assets, a creditor can attempt to prove that the corporation is not acting as a separate and distinct business entity but is the alter ego of its officers or shareholders. This strategy is called piercing the corporate veil, and if successfully proven, it allows the creditor to reach beyond the corporation to the assets of its shareholders.

Limited Liability Corporations

Due to the added formalities imposed on S corporations, a newer entity has evolved, which affords similar liability protection to corporate principals as a C corporation and the same “pass-through” tax treatment of S corporations, but without the formalities and restrictions associated with an LLC.


General Partnership

A general partnership is an association of two or more persons carrying on a business activity together. This agreement can be written or oral. As an asset-protection tool, a general partnership is one of the least-useful arrangements because each partner is personally liable for all of the debts of the partnership, including debts incurred by other partners on behalf of the partnership. Any one partner can act on behalf of the other partners with or without their knowledge and consent.

This feature of unlimited liability contrasts with the limited liability of the owners of a corporation. Not only is a partner liable for contracts entered into by other partners, but each partner is also liable for the other partner’s negligence. In addition, each partner is personally liable for the entire amount of any partnership obligation.

Limited Partnership

A limited partnership (LP) is authorized by state law and consists of one or more general partners and one or more limited partners. The same person can be both a general partner and a limited partner, as long as there are at least two legal persons or entities, such as a corporation who are partners in the partnership. The general partner is responsible for the management of the affairs of the partnership and has unlimited personal liability for all partnership debts and obligations.

Limited partners have no personal liability for the debts and obligations of the partnership beyond their contributions to the partnership. Because of this protection, limited partners also have little control over the day-to-day management of the partnership. If a limited partner assumes an active role in management, that partner may lose his or her limited liability protection and be treated as a general partner. This restricted control over the partnership business diminishes the value of limited-partnership shares.


A trust is an agreement between the person creating the trust (referred to as the settler, trustor, or grantor) and the person responsible for managing the assets of the trust (the trustee). The trust provides that the grantor will transfer certain assets to the trustee, who will hold and manage the assets in trust for the benefit of another person, called the beneficiary. A trust created during the life of the grantor (an inter-vivos trust) is also called a living trust, while a trust created at the death of the grantor through a will or living trust is referred to as a testamentary trust.


Selecting the Right Asset-Protection Vehicle

If you own a professional practice or business, your risk of loss and liability for claims is particularly high, making this type of business a dangerous asset. Incorporating your business or practice long has been considered the best way to insulate your personal assets from liability and seizure resulting from claims against your business. However, the limited liability company is quickly replacing the standard business or C corporation as the asset-protection entity of choice.

If approved in your state, the LLC offers a more convenient, flexible, efficient and less-expensive alternative to the C corporation while providing the same level of protection. Because LLCs are creatures of individual state law, the filing requirements and protections they offer may differ from state to state. But for the most part, state law essentially separates the owners of the LLC and their personal assets for liability arising out of LLC activities.


Nevertheless, in many states, certain types of business professionals cannot afford themselves all of the protections offered by the LLC. Professionals, such as doctors, lawyers, dentists and psychiatrists, to name a few, can’t shield themselves from liability with either an LLC or a corporation for claims directly arising from their actions or inactions.

If the business entity cannot protect you personally, consider sheltering your personal assets in other entities, such as a family limited partnership (FLP), a trust or an LLC. Then, even if you are sued personally, at least some of your personal assets are protected within one or a combination of these entities, discouraging creditors from pursuing them.

A final note for professional practice or business owners: it is still worth your while to incorporate either with a C corporation or an LLC. While these business entities may not protect you from malpractice claims, they will shelter you from financial obligations of the corporation, unless you personally guarantee the debt. You also may be protected from most other claims of the business not directly related to your actions as a professional, such as claims of employees, suppliers, landlords or tenants.




Leave a Reply

Your email address will not be published.

Start your Journey here