Choosing the right company entity to register your company in Singapore

Before you register for your business in Singapore, you need to decide on the kind of business entity type that best suits your needs. The choice of entity type will influence your day-to-day operations, taxes and how much of your personal assets are at risk. You should therefore consider factors such as:

The amount of capital to be invested
The number of beneficial owners
What liabilities and responsibilities are the owners prepared to assume
What risks are you safeguarding against
The ease of setting up the entity
The entity type that provides legal protection for the desired benefits

In this article, we will explain the different business entity types in Singapore, so you can best decide on the one that suits you best.

There are 5 types of business structure in Singapore:

Sole-Proprietor
Partnership
Limited Partnership
Limited Liability Partnership
Private Company/Exempt Company Limited by Shares

Here are the difference of each entity, some information might be overlapping, do take note of the differences.

Sole-proprietorship

A sole-proprietorship, you own the business solely as an individual, and have full control of your business. If you did not register for any other kind of business, you are automatically considered to be a sole proprietorship(??) This business structure does not separate your personal and business assets and liabilities – you are therefore liable for all debts and obligations of your business. Sole proprietorships are required to renew their registration annually with ACRA.

Pros: Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business ideas before forming a more formal business. There are fewer compliance requirements compared to companies.

Cons: Profits are taxed at owner’s personal income tax rates. It can also be hard to raise money because you cannot sell your company shares to investors, and banks are also hesitant to lend to sole proprietorships. It also has no right to own property under the company name.

Set Up Fees:

$115 ($15 name application fee & $100 registration fee) for 1-year registration.

$175 ($15 name application fee & $160 registration fee) for 3-year registration.

Note: Self-employed people must top up their Medisave before they register for a company. Approval from the Court or the Official Assignee is needed for undischarged bankrupts before they can register for a business.

Who can register:

Must be 18 years old and above.
Singapore citizen/Singapore permanent resident/EntrePass holder.
Foreigners must appoint an authorized representative who is ordinarily resident in Singapore.

General Partnership

A partnership is a business owned by a minimum of 2 and a maximum of 20 partners. Partnerships are typically formed between partners who wish to combine some or all of their resources, expertise, skills or industry know-how with the objective of making profits. Like sole proprietorships, partnerships are required to renew their registration annually.

Pros: Like sole proprietorships, general partnerships are less costly and easy to set up, administer and manage, and have less compliance requirements than companies.

Cons: Partners have unlimited liability and carry the burden for all debts of the general partnership. The partners may be sued personally and jointly in any legal dispute. All partners are required to file personal income tax to IRAS instead of corporate income tax.

Set Up Fees:

$115 ($15 name application fee & $100 registration fee) for 1-year registration.

$175 ($15 name application fee & $160 registration fee) for 3-year registration.

Who can register:

Must be 18 years old and above.
Singapore citizen/Singapore permanent resident/EntrePass holder.
Foreigners must appoint an authorized representative who is ordinarily resident in Singapore.

Limited Partnership

Limited partnerships have general partner(s) with unlimited liability, and all other partner(s) have limited liability. The general partner (which may be an individual or a corporation) is responsible for all of the limited partnership’s activities including reporting and other debts and obligations of the organisation. The liability of the limited partner does not exceed the amount of his/her agreed contribution.

Pros: Limited partnerships are ideal for passively-run businesses, and most are formed to establish funds for investments or to become licensed fund managers under the Securities and Futures Act (Cap. 289) to carry on fund management businesses.

Cons: General Partner is personally liable for debts and losses of the limited partnership, with the general partner also liable for the actions of the limited partner(s). There are also extensive documents required to detail legal distinction for the general partner(s), and the personal assets of the general partner(s) are unprotected.

Set Up Fees:

$115 ($15 name application fee & $100 registration fee) for 1-year registration.

$175 ($15 name application fee & $160 registration fee) for 3-year registration.

Who can register:

Must be 18 years old and above.
At least one general partner and a limited partner. Both partners can be individuals or a company/LLP.
Singapore citizen/Singapore permanent resident/EntrePass holder.
Foreigners must appoint a local manager who is ordinarily resident in Singapore.

Limited Liability Partnership

A limited liability partnership (LLP) is a corporate structure introduced in 2005 that allows two or more partners to form a partnership entity that offers more protection from liabilities due to the wilful misconduct or gross negligence of any partner(s) compared to the limited partnership structure.

Pros: An LLP is a separate entity from its owners and therefore can own property, sue or be sued. A partner of the LLP is not personally liable for the wrongful commission or omission of his/her partners, and in the event a claim is made against the LLP, its liabilities are limited to the full extent of its assets.

Cons: While the partners of the LLP are protected against any wrongdoing or negligence of the other partners, liability claims can be made personally against the errant partner and his personal assets. From a tax perspective, LLPs are not taxed at the corporate level and profits are treated at the personal income tax rate (where a partner is a company, its share of income from the LLP will be treated at the company income tax rate).

Set Up Fees: $115 ($15 name application fee & $100 registration fee).

Note: approval from the Court or the Official Assignee is needed for undischarged bankrupts before they can register for a business.

Who can register:

Must be 18 years old and above.
At least one general partner and a limited partner. Both partners can be individuals or a company/LLP.
Singapore citizen/Singapore permanent resident/EntrePass holder.
Foreigners must appoint a local manager who is ordinarily resident in Singapore.

Private Company/Exempt Company Limited by Shares

This is by far the most common business entity structure adopted by business owners in Singapore, and is a business entity registered under the Companies Act (Cap. 50). An Exempt Company has 20 or less members with no corporate shareholders while a Private Company has up to 50 members which can be comprised of individual or corporate shareholders.

Pros: A company has a separate legal entity from its members and directors, meaning it has no personal liability for debts and losses of company to shareholders. Profits are taxed at corporate tax rates of only 17%, with various tax exemption schemes available for new companies. Companies can buy property, sue or be sued under its own name.

Cons: Companies are more costly to set up compared to the other 4 options, with more formalities to administer and more compliance requirements. All companies must appoint a company secretary within 6 months of incorporation, and appoint an auditor within 3 months of incorporation unless in the case of an exempt company. There are also more complicated procedures involved in closing the business.

Set Up Fees: $315 ($15 name application fee & $300 incorporation fee).

Note: approval from the Court or the Official Assignee is needed for undischarged bankrupts before they can register for a business.

Who can register:

Must be 18 years old and above.
At least one shareholder.
At least one local director.
Singapore citizen/Singapore permanent resident/EntrePass holder.
Foreigners who wish to act as a local director of the company may apply for an Employment/EntrePass.

Find out more about how we can help you with your business registration needs today: contact us at fidcorp@fideliumgroup.com.