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Global Links Asia Consulting Pte Ltd

Types of business structure in Singapore

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The very first basic step for anyone setting up a company in Singapore is to choose the right business structure. To do so, it is important to understand all the features and functions of different types of companies in Singapore to make the right decision when selecting the most suitable business structure for your company.

Therefore, Global Link Asia Consulting will help you find out all about popular types of companies in Singapore to set up a business in Singapore successfully.

 

 

1. What are the most popular types of business structures in Singapore?

1.1. Sole Proprietorship

A Sole Proprietorship is a business structure that can be owned by an individual, a company, or a limited liability partnership.

The legal status of a Sole Proprietorship can be defined as follows:

  • It is not a separate legal entity from the business owner
  • The business owner has full control of the company’s business activities. (which means the business owner is personally liable for all the debts and losses of the Sole Proprietorship)

1.2. Partnership

A Partnership is a business incorporated by multiple partners (at least 2 partners and at most 20 partners). The partner can be an individual, a company, or a limited liability partnership.

The legal status of a Sole Proprietorship can be defined as follows:

  • It is not a separate legal entity from the business owner
  • The partners are personally liable for all the debts and losses of the partnership

If the number of partners exceeds 20, the partnership must be transformed into a Private Limited Company (Pte.Ltd.) following the rules of Companies Act, Chapter 50.

1.3. Private Limited Company (Pte.Ltd.)

A Private Limited Company is a business structure with a separate legal entity (which means the company has the right to own property and perpetual succession). Usually, the names of Private Limited Company end with "Pte. Ltd." or "Ltd" as a part of the company name. The shareholders of a private limited company can either be individuals or corporate entities or both.

This is the most preferred type of business structure in Singapore because individuals or companies will obtain numerous benefits and incentives from the government when opening this type of company in Singapore.

1.4. Limited Liability Partnership (LLP)

Limited Liability Partnership is regarded as a company with a legal personality separate from its partners. Limited Liability Partnership possesses perpetual succession (which means any change in its partners will not affect its existence, rights, or liabilities).

Limited Liability Partnership (LLP) is one of the most popular business structures in Singapore. Limited Liability Partnership (LLP) helps the owner to achieve the flexibility of operating as a partnership while having a separate legal identity like a private limited company.

Partners of Limited Liability Partnership are not subjected to any responsibility of business debts incurred by the company. However, they will be held liable if the claims of losses are the consequences of their own wrongful act or omission.

Limited Liability Partnership must keep:

  • Accounting records
  • Profit and loss accounts
  • Balance sheets
  • These documents will help the company to explain the transactions and financial position in a certain period of time.
Note:
For the failure to comply with the record-keeping obligation, the company and its partners shall be liable to prosecution and fines or imprisonment, or both.
In addition, Limited Liability Partnership is required to submit to ACRA an annual declaration of solvency or insolvency ( being able or unable to pay its debts, respectively).

1.5. Limited Partnership (LP)

Limited Partnership (LP) is another preferred business structure in Singapore. The minimum partner number for Limited Partnership is 2 partners:

  • 1 general partner who is liable to any loss incurred by the company (if any); and
  • 1 shareholder with limited liability (limited partner).

Limited Partnership does not have a separate legal entity.

  • An individual or a company can be a general partner or limited partner of an LP.  However, in case of no general partner is residing in Singapore, the company must appoint a local manager.
  • The general partner is in charge of all business activities of LP and is liable for any of its debts and obligations. Nevertheless, limited partners do not involve in the company management and are held liable only to the extent of their agreed contribution in shares.
  • If there is no limited partner registered with ACRA, the incorporation of Limited Partnership will be suspended, and the general partners will be considered registered under the Business Names Registration Act. Only when there is a limited partner registered with ACRA will the registration of Limited Partnership be restored.
  • During the Limited Partnership registration, the lodgers are required to indicate whether the proposed Limited Partnership meets all the standards set in Regulation 12 of the Limited Partnership Regulations and announce the name of the licensed fund manager.

2. Who can set up a business in Singapore?

Both individuals and companies can set up or own a Private Limited Company or Partnership in Singapore.

For individuals or businesses deciding to set up a company in Singapore, it is the basic requirement to have comprehensive knowledge of the types of companies in this Merlion nation. However, not all business owners are able to spend a great deal of time and effort to make the right decision about their business models. Therefore, a business consultant with a profound understanding of the Singapore business sector is the most optimal solution for all individuals and companies starting up a business in Singapore.

3. Frequently asked questions about business structure in Singapore

3.1 Why Private Limited Company (Pte. Ltd.) is preferable for foreigners?

  • Separate legal entity: A Private Limited Company has its own legal entity, independent of its shareholders and directors, and can acquire assets, assume debts, enter into contracts, sue, or file a lawsuit on its own behalf.
  • Credible image: Being an incorporated business entity presents a better image than being a Sole Proprietorship or a Partnership firm. As a Private Limited Company, your business will be taken more seriously by potential clients, suppliers, bankers, and other professionals you will be dealing with.
  • Tax benefits and incentives: A Singapore Private Limited Company is a very efficient tax entity. In Singapore, the effective corporate tax rate is below 9% for companies with profits up to SGD 300,000 and a flat 17% for profits above SGD 300,000. Also, Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level, dividends can be distributed to shareholders tax-free.

3.2 What are the key differences of the Singapore business structures?

The main different points include: Legal Status and Liability of the business owners:

  Sole Proprietorship  Partnership Limited Partnership (LP) Limited Liability Partnership (LLP) Private Limited Company (Pte.Ltd.)
Legal status Not a separate legal entity  Partners have unlimited liability
  • General partner has unlimited liability
  • Limited partners have limited liability
  • Partners personally liable for debts and losses resulting from their own actions
  • Partners not personally liable for debts and losses of LLP incurred by other partners
Members have limited liability
Liability of the business owners Owner has unlimited liability  Not a separate legal entity Not a separate legal entity Separate Legal Entity Separate Legal Entity

3.3 Which factors should be in consideration when choosing types of business structure in Singapore?

Business owners may need to take these questions into account when selecting the most suitable business structure:

  • How much capital are you prepared to invest?
  • How many owners will there be in the business?
  • What liabilities and responsibilities are you prepared to assume?
  • What risks are you prepared to take?
  • What are the advantages and disadvantages of the different business entities?
  • Is the business entity easy to close?

Global Links Asia Consulting Company - a consulting firm specializing in offering ONE-STOP solutions for every business in every level of your business development - is ready to support your business with the following services:

With our one-stop solutions, we pride ourselves on being a trustworthy partner - working directly with major notable banks such as OCBC, DBS, UOB, Standard Charter Bank, ANZ, etc and international payment gateways such as PayPal and many other partners. With many years of experience working in this industry and having supported many companies, Global Link Asia Consulting are confident to bring the best quality of our services to all clients.

Contact us now:

  • Vietnamese Hotline(+84) 0938 531 588 (Call/ Skype)
  • Singaporean Hotline: (+65) 3163 4102 (Call)
  • Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

This article was written by Global Link Asia Consulting Pte. Ltd., and was first published on https://www.globallinkconsulting.sg/ on 9 July, 2021. Its copyright belongs to Global Link Asia Consulting Pte. Ltd.. All rights reserved. You may not, except with our express written permission, copy, modify, commercially distribute or exploit the content.

 

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