Different countries have wide-ranging types of business structures. Whether you are an amateur or experienced business owner, the current needs and future success of your company starts with choosing the right company type as it affects viability, growth, and expansion both locally and internationally. Therefore, if you’d like to establish a company in Singapore, it is important to know and understand the type of business structures available in the country. This helps you come up with a viable vision and an achievable mission so that you can smoothly carry out your operations in accordance with the stipulated compliance standards, including tax rates, transfer of shares, personal liabilities and expectations from investors. The following company types are legally available in Singapore. Tianlong Services can help you choose the right company type as well as other related services, such as bookkeeping, accounting, tax, and consultancy services.
Company Types
Sole Proprietorship
With reference to Singapore Company Law, a sole proprietorship refers to a business that is not legally detached from its owner. Even though it is the easiest to set up, it is considered the riskiest because all assets and liabilities fall under the name of the owner or proprietor. A sole proprietor is personally responsible to all the firm’s profits, losses and obligations without limit. In addition, the owner can only buy property using his/her name and not the business name to facilitate payments of property tax from their personal funds.
In Singapore, the business can be registered by any citizen through ACRA, which is overseen by the Business Registration Act. Prior to registration, the applicants have to present their proposed business names to the Registry to confirm their availability through a search. This also ensures that the sole proprietors have updated their medisave payments.
Partnership
In Singapore, partnerships are legally recognized business structures registered by at least 2 members with complementing skills to carry out business with the aim of making a profit. Without the partners, the firm does not legally exist. It also ceases to operate if a partner dies, retires, or gives notice for its dissolution, and when becomes insolvent. Income generated from its business activities is normally used to remit personal income tax for its members.
Three types of partnerships exist in Singapore:
General Partnership
Closely resembling a sole proprietorship, members of this partnership structure are personally accountable for all debts and losses incurred in the business regardless of the level of their participation. It is highly risky because each partner shares responsibility for other partners’ actions.
Limited Partnership
Since partners’ liabilities are limited to the firm’s investments, it is the most dominant partnership structure in Singapore. Partners are prohibited from managing the business, and the risks to their personal assets depend on the current sum of investments. This business structure can have unlimited partners distinguished as General Partners (at least one) and Limited Partners. General partners have unlimited liability while that of limited partners is stipulated in the partnership agreement.
Limited Liability Partnership (LLP)
An LLP resembles a private liability company because it allows partners to manage the business but its legal existence is separated. The partners’ liability depends on their actions or inaction, as any debts and losses directly affect the involved partners, while the uninvolved ones are not held responsible. Owners usually remit a personal income tax of 0-22 percent based on the firm’s proceeds.
Limited Liability Company
In Singapore, owners of an LLC are protected from various business liabilities, as the company’s operations are not limited by shares. Liability of shareholders is directly related to the capital invested in their shares.
The three types of LLC include:
Private Limited Company (Pte. Ltd)
Similar to Tianlong Services Pte Ltd, only 50 or fewer people can hold shares in this type of LLC, and the public is not allowed to access them. When the company incurs debt exceeding the contributed share capital, none of the shareholders can be held accountable. Shareholders can easily transfer shares amongst themselves and raising capital is effortless, which helps the business to maintain a trustworthy image.
Public Limited Company (Ltd)
Unlike the Pte. Ltd, the company allows at least 50 people, its shares are available to the general public, and it can trade in the stock exchange. To avoid misappropriation of public funds, its operations are monitored by more stringent rules and regulations because large corporations prefer it.
Public Limited Company by Guarantee
Commonly associated with non-profit organizations, religious bodies, professional clubs, trade associations, and charitable societies, this type of LLC is established for many other reasons except making a profit. Generally, it aims to restrict liability resulting from members’ contributions to the company’s assets.
Business Structures for Foreigners
Foreigners who own companies, SMEs, societies, associations and related bodies in other countries and wish to expand in Singapore can choose one of the following structures to set up their businesses.
Here are some of the company types and business structures that a foreigner can register in Singapore.
Subsidiary Company
It functions like a private limited company that has its parent company as a major shareholder. Many foreigners in Singapore prefer setting up a subsidiary company because it allows 100 percent foreign ownership and it has a separate legal body. Furthermore, tax rates match that of local companies.
Branch Office
In Singapore, a branch office (BO) functions as an extension of the parent company and does not have a separate legal entity. It must be registered with the Accounting and Corporate Regulatory Authority (ACRA) and all its liabilities affect the parent company.
Representative Office
Foreign companies can register a representative office temporarily to carry out research and marketing undertakings before investing in Singapore. The parent company cannot engage in profit-making activities with this business structure because it also lacks any legal status.
Contact us for a quotation to incorporate your business in Singapore, or to speak with us.