Type of Business Structure in Singapore

Singapore Business Structures Overview

‍Singapore consistently ranks high in global business metrics, excelling in areas like political stability, economic competitiveness, business ecosystem efficiency, regulatory transparency, and other vital factors for business growth.

Singapore's legal framework accommodates a broad range of business structures, catering to the diverse requirements of entrepreneurs. The choice of business entity is pivotal, influencing factors such as owner liability, business transferability, growth potential, and the tax and compliance costs of maintaining the entity.

Available Business Entities in Singapore

1. Limited Liability Company (LLC)

‍An LLC, commonly known as Private Limited Companies, is formed by registering with Singapore's Accounting and Corporate Regulatory Authority (ACRA) under the Companies Act. It stands as a distinct legal entity, allowing it to own assets, enter contracts, and handle legal proceedings. The company's liability is confined to its share capital, and shareholders' liability is restricted to their respective share capital contributions. Shareholders can be individuals or corporations, and their personal assets remain protected from company liabilities.

Types of Private Limited Company’s:

• Private Limited Company (Pte Ltd): A prevalent choice among Singaporean entrepreneurs, a Private Limited Company's shares are privately held, with a maximum of 50 shareholders. The company's name typically ends with 'Private Limited' or 'Pte Ltd'.
• Exempt Private Limited Company: This type of company is exempt from annual audits. To qualify, it must have fewer than 20 shareholders, no corporate shareholders, and an annual revenue below S$500K. Instead of submitting audited statements, these companies provide a solvency declaration. They still need to maintain financial records in line with Singapore’s Financial Reporting Standards.

2. Public Company

There are two main types:

• Public Company Limited by Shares: This is an LLC with over 50 shareholders and can offer shares to the public. Such companies can list on the stock exchange after submitting a prospectus to the Monetary Authority of Singapore (MAS).
• Public Company Limited by Guarantee: Typically formed for non-profit purposes, these companies don't have shares. Their liability is limited to a guarantee amount specified in the Memorandum of Association.

3. Sole Proprietorship

A straightforward structure, the sole proprietorship has a single owner. It lacks a separate legal identity, making the owner personally liable for all business debts. It's exempt from annual filing and is best suited for low-risk businesses.

4. Partnership Structures

• Partnership (P): Formed by two or more entities, a Partnership doesn't have a separate legal identity. Partners share unlimited liability, and profits are taxed as personal income.
• Limited Partnership (LP): This structure includes both general and limited partners. While general partners have unlimited liability, limited partners' liability is restricted to their contributions.
• Limited Liability Partnerships (LLP): Merging features of partnerships and companies, LLPs offer limited liability to partners and have their own legal identity.

Foreign Entrepreneurs and Business Structures

‍Foreigners can own any business structure in Singapore, with 100% foreign ownership permitted. However, non-residents must appoint a local manager or Director for regulatory compliance. Sole proprietorships and partnerships come with unlimited liability, making them less suitable for foreigners not residing in Singapore. Conversely, incorporating a Private Limited Company is the safest and most practical choice, offering limited liability and the possibility to apply for an Employment Pass or Entrepass.

Foreign Company Options in Singapore

• Representative Office (RO): A temporary setup for foreign companies to conduct market research. It can't engage in profit-generating activities.
• Branch Office (BO): An extension of a foreign company, a BO must register with ACRA. It operates under the foreign company's name and is liable for its debts.
• Subsidiary Company: A local private limited company where a foreign company holds the majority or all shares. It's treated as a local entity for tax purposes and offers numerous benefits.

Conclusion

‍Singapore offers a diverse range of business structures, catering to both local and foreign entrepreneurs. The choice of entity plays a crucial role in determining the business's growth trajectory, tax implications, and compliance requirements. Entrepreneurs should carefully assess their business needs and consult experts before making a decision.