Types of company in Singapore

Incorporation of Singapore Companies

TYPES OF COMPANY AVAILABLE

  1. Private Limited Company
  2. Limited Liability Partnership
  3. Sole Proprietorship

 

General Process

  1. Submission of  application of incorporating
  2. Preliminary company name check and consultancy service
  3. Preparations of incorporation documents
  4. Company Registration and bank account opening upon approval

 


PRIVATE LIMITED COMPANY

A Private Limited Company is the most common form of business entity in Singapore. Individuals often sought to incorporate a Private Limited Company because it offers less liability imposed on business owner. The benefits of these entities makes it the most popular among investors and business owners.

Main Features

  • It has a separate legal entity and distinct from its shareholders and directors
  • Nature of the legal status permits shareholders and business owners to have limited liabilities for the debts and losses of the company.
  • Company has the rights to own properties.
  • It can sue or be sued in its own name
  • A minimum of 1 and a maximum of 50 shareholders
  • A subsidiary company, with at least one individual shareholder with minimum of 10 percent shareholding, is entitled to local tax and development incentives

Singapore government’s tax policies provides support to start ups business owner by exempting a sizable amount of tax for their initial years of business. This can greatly free up extra cash flow for their company to invest on business operations.

As stipulated by Singapore’s law, a minimum of 1 shareholder, 1 resident director, 1 company secretary, 1 valid registered Singapore address, and 1 SGD initial paid-up capital. The process is fairly simple and can be done within hours. Business owner only need to submit their application and upon approval, the company will be register with Singapore’s authority (i.e. ACRA).

 


 

LIMITED LIABILITY PARTNERSHIP

As the business environment gets more competitive, there is a need for a more flexible modern business entity.

Similar to the private limited company a limited liability partnership can operate as a separate legal entity. The difference is business owner of a LLP company has flexibility of operating in a conventional partnership setup and have limited liability protection similar to the benefits enjoyed by shareholders of a company all while having a separate legal identity.

This entity is govern by a less strict body and therefore require less severe compliance and in turn save cost. Depending on the nature of operations and business, it is not necessary for business owner to have audited accounts & qualified company secretary. Additionally, it is more structured  compared to sole-proprietorship or conventional partnership. It is also a rather simple and flexible business entity because of its nature; easy incorporation, termination and maintenance. ​​​

 

The LLP business structure is designed for the purpose to maximize profit for business owner. It is suitable for small and medium enterprises, joint ventures and venture capital to grow their businesses without having to worry too much on their personal liabilities, personal assets and strict compliance requirements. This type is also suitable for professional bodies and individuals engaged in professional services such as lawyers, architects, accountants and management consultants for the purpose of carrying on their professional practice and provide a full set of services without having to worry interruptions arise from compliance to authority.

Any debts and obligations of the LLP will be borne by the assets of the LLP and not that of its partners’. An LLP has the legal status of a body corporate which is capable of suing and being sued in its own name, holding assets and doing such other acts and things in its name as bodies corporate may lawfully do and suffer.

With the introduction of LLP, entrepreneurs will have more options to choose the most preferred form of business vehicle

In short, the features of a LLP are,

  • More structured business entity which has the features of a company as well as a conventional partnership
  • Governed by a separate internal business regulation and offering limited liability protection to its partners
  • Offering a simple and flexible business entity in term of its formation, maintenance and termination​
  • Minimum of 2 partners but not maximum limits
  • Partners can be individuals or body corporate (company or other LLP)

Singapore citizens, residents, and employment pass holders can register a LLP. Foreign individuals and companies may also register a LLP but must appoint a local manager for compliance purposes.

Things to note*​

  • Constraints in transfer of ownership
  • Does not command a distinguished image as a private limited company.
  • Although a Singapore LLP is considered as a tax resident, it is not seen as a company entity, therefore company profits is taxed on a personal income rate.
  • Unless the partner is a company, then its share of profit will be taxed at a company rate.

 


 

SOLE PROPRIETORSHIP

A Sole Proprietorship is another option of company that business owner can incorporate in Singapore. It is the simplest form of business entity with one sole owner who have all the authority over the decision making process and is responsible for all assets and liabilities of the company.

Singapore citizens, permanent residents and holders of visa (employment pass/Entrepass) are eligible to register a sole proprietorship company in Singapore. Foreign individuals and companies will need to appoint a Singapore citizen or Singapore permanent residents to be the resident manger for the sole proprietorship for compliance purposes.

Different from Private Limited Company, the sole proprietorship does not have a separate legal entity and the business owner has unlimited liability and has full responsibility over all the assets and debts. The company itself is also not eligible to own any property or land.

Why Incorporate a Sole Proprietorship?

  • Fast, simple and cheap to register
  • Easy to manage and maintain
  • Business owner have full authority on every aspect on the operations of the business.
  • Less administrative duties, on going compliance requirements.
  • Easy to close and terminate.

 

Things to note*

  • More risk upon business owner’s asset as full responsibility on debts and losses.
  • All the profit ts generated by the business will be taxed at personal income tax level.
  • Business owner are not entitled to the same incentives (tax advantage and rebates) offered to corporate.
  • Business owner are required to renew business registration annually and top up CPF account.
  • The business is identified with the owner therefore it cannot be passed down completely and will ceases when the owner is no longer around. Addition to that, raising capital through loans from investors might be prove difficult as lack of trust might discourage them.

 

The requirements for a Sole Proprietorship is fairly simple

  • Minimum of one owner
  • Valid Singapore office address
  • For foreign individuals and companies only: minimum one manager who must be a Singapore resident

All profits earned by a business belong to the sole proprietorship/partners, are subject to personal income tax and require a contribution to CPF Medisave based on profits declared with Inland Revenue of Singapore (individual rates vary between 6 and 8 percent). All self-employed persons are required to pay Medisave contributions as long as they earn a yearly net trade income of more than S$6,000.