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Singapore Legal Entities
When the business is run by the individual itself without any partner and the profit or loss will be incurred by him then this type of business is called the sole proprietorship business / sole trader / proprietorship. All the assets belong to the individual himself and all the debts are also on the owner. So this means the owner has personal liability.
Advantages of Sole-Proprietorship
- Main advantage of sole-trader is ease of establishment.
- Profit belongs to a single person.
- Complete control of business operation as no interference of any other person.
- Tax filling is simple.
- To terminate this business is very easy.
Disadvantages of Sole-Proprietorship
- All the capital must be invested by the individual himself.
- The owner is responsible for the debts because he has control over the business.
- No corporate tax benefit.
- Limited capital.
2. Limited Liability Company (LLC)
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 an LLC, the liabilities of the owners are limited to the assets in the company and their personal assets are protected from business liabilities.
A Singapore LLC can be of the following types:
2.a. Private Limited Company
A private limited company is a LLC in which the shares are held by less than 50 persons and are not available to general public. Most privately incorporated businesses in Singapore are registered as private limited companies. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd.
A private limited company is the most advanced, flexible, and scalable type of business incorporation in Singapore. It’s also the most preferred type of Singapore business entity for serious entrepreneurs (as opposed to sole proprietorship or limited liability partnership).
2.b. Public Limited Company
A public limited company is a LLC that may offer its shares to general public. A public limited company must have at least 50 shareholders and is subject to significantly more strict rules and regulations since they have the power to raise funds from the public. Usually a public limited company is listed on a stock exchange. Public limited companies are meant for large businesses.
If you want to register the LTD company, please visit the LTD requirements page
To read more about company maintenance in Singapore jurisdiction, please click the link here
The partnership type of business structure attempts to address the limited-expansion constraint faced by a sole proprietorship by allowing two or more people to establish and co-own a business. A partnership firm has no legal existence separate from its partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the termination of the partnership. A partnership type of business structure may make sense only in very limited number of situations.
A partnership in Singapore is presented in three types:
3.a. General Partnership
A general partnership is not a very attractive way to structure a business in Singapore because a) like a sole-proprietorship, partners are personally liable for the debts and liabilities of the business; b) each partner can be held responsible for the actions of another partner.
3.b. Limited Partnership
The concept of limited partnership is an alternative to the general partnership type of business form in Singapore. It introduces the concept of a limited partner in addition to a general partner. The liabilities of limited partners are limited to their investment in the partnership (capital or property). However, such partners are unable to participate in the management of the business in a limited partnership. However, even a limited partnership in Singapore is not a very attractive vehicle for setting up a business for most people.
3.c Limited Liability Partnership (LLP)
Among the three types of partnership business entities, LLP is the most recent and most advanced business incorporation structure. It combines the features of partnerships and companies. LLP was introduced in Singapore in 2005 through enactment of Limited Liability Partnership Act. Registering an LLP gives owners the flexibility of operating as a partnership while enjoying many of the benefits that come with a corporate body like a private limited company.
A LLP is primarily meant for carrying a profession (e.g. accountants, law firms, architects, etc.) where two or more professionals would like to build a joint practice in a common field. The owners must enter into detailed agreements about how the profits and management responsibilities are divided. It can get very complicated and generally requires the services of a lawyer to draw up the agreement. Partners in a limited liability partnership are usually responsible for cultivating their own clients based on the partner’s specific area of focus.
A LLP must have at least two partners at all times. An LLP is not suited for a business that carries a trade.
4. Foreign Company
Foreign companies wishing to setup a presence in Singapore, have the choice of setting up a branch office, subsidiary, or a representative office in Singapore.
4.a. Subsidiary Company.
A subsidiary company is a private limited company incorporated in Singapore with the parent company as its shareholder. For small to medium-sized foreign businesses, a subsidiary company is the most preferred choice of registration in Singapore.
4.b. Branch Office.
A branch office is registered in Singapore as an extension of its parent company and not as a separately incorporated entity. The liabilities of a branch office extend to its parent company.
4.c. Representative Office
A representative office is registered in Singapore as a temporary arrangement for conducting marketing research activities. A representative office does not have any legal status and cannot be engaged in any profit yielding activities.
WHICH LEGAL ENTITY TYPE TO CHOOSE?
Deciding on the right business structure to incorporate in Singapore will depend on your particular situation and plans. As a general rule, you can use the following guidelines when making your decision:
- If you are a local person and would like to register a small business where you will be the only owner and the nature of your products/service does not carry liability issues, it might be easier for you to register your business as a Sole Proprietorship. However, you must carefully consider the fact that in case of any business liabilities, the claimants can go after your personal assets.
- If your business involves selling your services by way of the profession you hold (e.g. accountant, lawyer, architect, etc.) and you have one or more additional partners in a similar profession and would like to build a joint practice, setting up a LLP might be a suitable business structure for you.
- In all other cases, incorporating a private limited company in Singapore would be the best choice. Although compliance requirements are little more complex, it is by far the best structure in the long run.
Feel free to contact us to get more information about Singapore as a Jurisdiction and we can help you to choose the right legal entity for your business.
- Strategic location of Singapore
- Singapore is rated #1 in the world by World Bank for ease of doing business
- Singapore is rated #1 as the most politically stable country in Asia
- Singapore is rated #1 as the best labor force in the world
- Singapore is rated #1 in Asia for quality of life
- Corporate tax rates are about 8.5% up to $300K profits and a flat 17% above that
- There are no dividend or capital gains taxes in Singapore
- There is no estate/death/inheritance tax in Singapore
- Personal tax rates start at 0% and max out at 20% above $320K