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Singapore Business Entity Types

There are many types of business entities in Singapore that you can consider when setting up a business in Singapore. The highly recommended one is a private limited company since it can offer you many significant advantages, mainly safety and tax benefits.

Other options you can consider are sole proprietorship and partnership, in case you just want to set up a small business. Anyhow, to reach the best decision, you should grasp the basic concept of each. Let’s take a look at some of the most common types of entities in Singapore.

1. Types of companies and businesses in Singapore

To give you a clear picture, here are an outline of the most chosen types of companies and businesses in Singapore:

  • Limited liability companies (including private and public companies)
  • Sole proprietorship
  • Partnership (including general partnership, limited partnership, and limited liability partnership)

1.1. Limited liability company

Limited liability company, or an LLC, remains the most widespread and recommended type of business entity in Singapore. There are three main characteristics that make this form preferred by most business owners. Those characteristics include a separate legal status, members’ limited liabilities, and tax advantages.

Apparently, an LLC in Singapore is deemed as a distinctive legal entity that is separated from its owners. Due to this reason, a limited liability company can enter contracts, acquire and own assets, sue, and be sued in its own name.

This separate legal status of an LLC also leads to the limited liabilities of its members. Particularly, the owners (who are shareholders) have responsibilities limited only to their share value and do not hold any personal liabilities beyond that. The company itself is responsible for all the debts and liabilities incurred during its course of operation.

Furthermore, the income tax rate applied to an LLC stands at 17%, which is quite appealing when compared to other jurisdictions. Not to mention the fact that LLCs are eligible for a number of tax exemption schemes and other incentives that can help them legally cut off their payable taxes.

Limited liability companies in Singapore are categorized into specific types as follows:

  • Private company limited by shares (also called private limited company – LLC)
  • Exempt private company
  • Public company limited by shares
  • Public company limited by guarantee

The main differences among these specific types of companies in Singapore lie in the number of shareholders and the ability to raise capital by issuing shares or debentures to the public. The quantities of compliance requirements are also different among businesses.

One thing worth you should remember is that, unlike the first three options, a public company limited by guarantee does not serve as a profit-oriented business. In fact, it is for non-profits purposes and has members instead of shareholders.

All in all, the most recommended type for you is a private limited company (Pte. Ltd.). The maximum number of shareholders of this form of company is 20. Compared to a public company, the compliance requirements of a private one are much fewer, meaning less hassle paperwork and easier management for you.

>> Read more: Exempt Private Company in Singapore.

1.2. Sole proprietorship

A sole proprietorship is perceived as the most simple yet riskiest type of entity one could set up in Singapore. This business form is owned wholly by a single person and it is unincorporated in every sense.

The business type does not have a separate legal entity as well as a corporate structure. You, as an owner, will have unlimited liability for all debts and liabilities in the event of insolvency. As a trade-off, you have the privilege to reap all the earned profits.

And since there is no legal distinction between a sole proprietorship and its owner, the business is taxed according to your personal income. Compared to the corporate income tax rate (quite low at 17%), this is another huge shortcoming.

However, setting up a sole proprietorship can be a wise move when you wish to run a small business in Singapore. In addition to the owner’s full control, another benefit of a sole proprietorship is a very minimal set of compliance requirements. This may help you save more time and resources to invest in generating more profits. 

If you are a Singapore citizen, a permanent resident, or an EntrePass holder and are over 18, you are well-placed to start your business as a sole proprietorship. Foreigners and companies are also allowed to set up this business form. In such cases, you need to appoint a local manager to whom the associated liabilities would be subject. However, you should really consider the favors and privileges that a corporation, but not a sole proprietorship, can offer.

>> Read more: A go-to guide to a sole proprietorship in Singapore.

1.3. Partnership

A partnership is a business that has two or more people (called partners) who join forces to generate profits. Its scope of activities revolves around the partner’s expertise and skillsets. If all partners reside outside of Singapore, they must appoint at least a local authorized representative who resides in Singapore to take on certain responsibilities.

Though we do not encourage entrepreneurs to go into partnerships, there is great flexibility coming along with it – in terms of ease of setting and administering the business.

Partnerships in Singapore typically is divided into 3 categories:

Characteristics Types of partnership
General partnership (Partnership) Limited Partnership (LP) Limited liability partnership (LLP)
Legal status Not a separate legal entity Not a separate legal entity A separate legal entity
Members Between 2 and 20 partners One must-have general partner and other limited partners

No maximum number of partners

Partners can be individuals or corporations

At least 2 partners

No maximum number of partners

Partners can be individuals or corporations

Liability of member Partners have unlimited liabilities to all debts and losses incurred by other partners General partner has unlimited liabilities

Limited partners have liabilities limited only to their investment

Partners have limited liabilities only to their investment

Partners may hold personal liabilities for their own wrongdoings but not for other partners’ actions

Overall, a partnership seems to follow the same business structure as a sole proprietorship. The main difference is a partnership has more than 1 owner, meanwhile, a sole proprietorship is owned by only one.

Limited liability partnership (LLP), on the other hand, is the business form that you should really consider among the three types. What makes it outstanding from the other two are the separate legal status and the members’ limited liabilities.

It is reasonable to consider a limited liability partnership as a mix of partnership and limited liability company since it was initially passed to lift restrictions of the other two forms of partnerships.

When compared to an LLC, an LLP has fewer statutory requirements to comply. However, it cannot apply for many tax-cut schemes or other available beneficial programs that are designated only for companies in Singapore.

>> Read more: A guide to limited liability partnership in Singapore.

>> Read more: LLC vs LLP vs Sole Proprietorship in Singapore: What Are The Differences

2. Company registration for foreign companies

A foreign company that wishes to establish its presence or expand its business into the Singapore market can register one of the following types:

Subsidiary

In Singapore, a subsidiary is legitimately regarded as a private limited company and is owned by a so-called parent or holding company. One great feature of a subsidiary in Singapore is that it is eligible for 100% foreign ownership. Other obligations and benefits of a typical limited company may be applied to a subsidiary.

Branch

A branch is considered an extension of its parent company, which could be a multinational corporation. It is treated the same as its parent, thus, considered as a non-resident for tax purposes. That said, a branch in Singapore falls short of eligibility criteria to claim tax exemption.

Noticeably, a branch’s name should match that of its parent. And for legal and administrative purposes, you have to appoint a local authorized representative and leave a local registered address if you wish to register for a branch.

Representative office

If your sole need is to assess the viability of doing business in Singapore, setting up a representative office is a good call. One such low-cost entry has no legal status and can only be involved in non-transactional activities.

Should you need to establish one to conduct marketing research, there 2 requirements to take heed of:

  • You must not employ more than 5 employees.
  • The maximum lifespan of a representative office is 3 years, after which period it needs to be converted into a subsidiary or a branch or else it ceases to exist.

>> Read more: Registration options in Singapore for foreign companies.

3. Conclusion

There are many registration options to incorporate in Singapore. The most common types of companies and businesses in Singapore are limited liability companies (mainly private limited company, sole proprietorship and partnership (mainly limited liability partnership).

You are strongly recommended to aim for a private limited company type. This is due to its superior features, including its separate legal status, fine business structure and the ability to obtain tax exemption.

Say, if you have finalized to establish a company in Singapore. The next step is to learn how to set it up in Singapore. Let’s just keep going!

Or should you have any questions regarding types of business entities in Singapore, reach out to us via [email protected] With our established expertise, BBCIncorp is your business’s potential partner on the road to success.

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