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Overview of Singapore Business Entities

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Different types of Business Entities in Singapore

There are different types of business entities which you have to select while thinking of the start of the business in Singapore. This decision will help in determining the tax considerations, the rules or regulations that apply to particular types of business. Also the other sources of getting investment like your investors, banks and lenders will accordingly give help for your business.

Following includes the different types of Business Entity in Singapore:

1) Sole-Proprietorship
2) Company
a. Private limited company
b. Public limited company
3) Partnership
a. General Partnership
b. Limited Partnership
c. Limited Liability Partnership (LLP)
4) Singapore Foreign Office

1) Sole-Proprietorship

When the business is run by the individual itself without any partner and the profit or loss will incurred on him then this type of business is called the sole proprietorship business or sole trader or Proprietorship. All the assets are belonging to the individual himself and all the debts are also on the owner. So this means owner has personal liability.

Advantages of Sole-Proprietorship

  1. Main advantage of sole-trader is ease of establishment in Singapore. As few rule and regulations are incurred as compared to other businesses.
  2. Profit belongs to a single person.
  3. Complete control of business operation as no interference of any other person.
  4. Tax filling is very simple.
  5. While terminating this business it is very easy.

Disadvantages of sole-Proprietorship         

  1. All the capital must be invested by the individual himself who is very difficult.
  2. Alone you are responsible for the debts because one has control over the business.
  3. No corporate tax benefit.
  4. You can sale the business only by the sale of business assets.
  5. Limited capital.

 

2) COMPANY


In Singapore the private limited company is most common and known as “Pte Ltd” company. A Private limited company provides the flexibility to the owners to protect the personal assets from business liabilities of the company. Special tax benefits are also providing in Singapore for the company.
Two types of company are there:

  1. Private limited company
  2. Public limited company

a) PRIVATE LIMITED COMPANY
The company register under the Singapore Companies Act, Chapter 50 are said to be the Private limited company (Pte Ltd). Small and middle sized business are generally incorporated in Pte Ltd company. Pte Ltd has its own legal identity, separate from its shareholders (who own the company) and its directors (who manage the company). Corporation tax is paid by the company on their profits. Under the Singapore new one tier tax system directors of the company pays the income tax on the behalf of the employee’s officers on any salary fixed by the company and the shareholders gets the dividend. Private limited company is the most advanced and flexible with many advantages to the owners. Following are the advantages or benefits provided by the Singapore to the private limited company:

  1. Shareholders are not liable to pay any debt beyond their share capital in case of loss incurred by the company.
  2. A Private limited company has its own legal entity.
  3. Easy to transfer the ownership.
  4. Raising of the funds are easy in this type of company.
  5. Singapore’s single tire policy also beneficial for the shareholders as on time tax is charged on profit at corporate level then the dividend is distributed in shareholders without any further tax deduction.
  6. No effect is on the company because of the death of the shareholder or any change in the ownership of the shareholder.

DISADVANTAGES

  1. Hard rules and regulation of private limited company as compared to proprietorship.
  2. Closing of the company is very complex than any other form of business.
  3. Directors must not make any hidden profit out of the company and they must exercise their powers for the benefit of the company only.
  4. Directors have to disclose certain information about their interests in the company's shares, contracts and debentures.
  5. Private limited company is very expensive to set-up.

b) PUBLIC LIMITED COMPANY
This is divided into two parts which are as follows:

  1. Public Company limited by shares
  2. Public Limited Company by Guarantee

i) PUBLIC COMPANY LIMITED BY SHARES
It is locally incorporated company where the number of shareholders can be more than 50. By offering shares and debentures to the public public limited company can raise their capital funds. In order to raise its capital, a public company must register a prospectus with the Monetary Authority of Singapore.
ii) PUBLIC COMPANY LIMITED BY GURANTEE
A public company limited by guarantee is the non-profit making concerns which include the professional bodies, trade societies, charitable trust, clubs etc.
If you want more information plz contact with our advisory team GNV Consultancy.

3) PARTNERSHIP

When the business is run by the partners (Owners) or more than one person and all the profit and loss is also divided by the partners. Generally there are two to twenty partners in the partnership business if more than twenty partners then it will be called the company.
A partnership consisting of foreign individuals will not be registered by the Registrar unless the manager of the business is local resident of Singapore. In Singapore the Partnership can be of three types:

1) General Partnership: In Singapore a general partnership is not a very attractive way to start a business because like a sole proprietorship, partners are personally liable for all the debts and liabilities of the business and each partner can be held responsible for the actions of another partner.

2) Limited Partnership: More attractive way to setup the business in Singapore is the Limited Partnership than the general partnership. In addition with the general partner concept it introduces the concept of a limited partner. The liabilities of limited partners are not more than the investment in the partnership. In a limited partnership the partners are unable to participate in the management process of the business.

3) Limited Liability Partnership (LLP): Newly and the advanced business incorporation structure in Singapore in the LLP. LLP includes the mixed features of the partnerships and companies. In Singapore LLP was introduced in 2005 through enactment of Limited Liability Partnership Act. After registering with LLP owners gets the flexibility to operate its business as in partnership and also enjoying many of the benefits of a corporate body. In Singapore LLP is basically meant for the professionals who would like to have joint practice. Partners must get into very detailed agreement about the profits and the holding of management. Sometimes it gets so complicated that to draw up the agreement the lawyers are required.

Advantages

  1. Partnerships face fewer statutory controls than companies.
  2. No returns are required to be submitted by the partnerships, except for income tax.
  3. The internal structure of partnerships is very flexible.
  4. Limited Personal liability means one is not responsible for the debts.
  5. Separate legal entity.
  6. A partnership is simple and cheap to set up.

Disadvantages

  1. Minimum 2 partners are required all the time.
  2. Not easy to transfer the partnership.
  3. No corporate tax benefits.

4) SINGAPORE FOREIGN OFFICE


Foreign companies wishing to set up branches in Singapore, but for tax reasons most prefer to set up a subsidiary. The Companies has the choice to establish a company, branch or subsidiary.

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