Overview of Singapore Business Entities

Overview of Singapore
Business Entities

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CHOOSE A TYPE OF BUSINESS STRUCTURE
Choosing the right structure for the business is very cri cal for the
success of a venture. Tax and regulatory compliance requirements
varies depending on the type of en ty. Moreover, to a large extent,
the en ty type conveys an image and status of the business among
the commercial community in which it operates, thereby showcasing
the strength of the en ty's rela onship with internal and external
partners such as employees, suppliers, clients, fi nancial ins tu ons
etc.
Rikvin is the business incorpora on expert and aims to help business
owners choose the best op on for their business.
Our Incorpora on Specialists are available for consulta on should
you have ques ons about a suitable type of business structure for
your investment.
Here is a snapshot of the various plausible business en es in
Singapore, their features, merits and their demerits.
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SOLE PROPRIETORSHIP
This type of en ty is suitable for small businesses that have negligible
or no risks. It is owned by one person who is the decisive authority
and owns all the assets and liabili es of the business.
The business is not separate from the Owner who has unlimited
liability. Therefore Sole proprietorship may be the simplest type but
it also the riskiest.
Foreign individuals and companies can register a Sole proprietorship
but must appoint a local resident manager. Ci zens, Residents,
Employment Pass holders can register a Sole Proprietorship.
Advantages
Disadvantages
* Quick, easy and least expensive to set up.
* The owner's assets are at risk since owner is responsible
for all debts and losses.
* Easy to administer and manage because of undivided
authority and control.
* Earnings are charged at personal income tax rates and is
deprived of incen ves off ered to companies.
* Less administra ve du es, on going compliance
requirements.
* Lack of con nuity; the business is iden fi ed with the
owner therefore not perpetual and it ceases with the
* All the profi ts generated by the business will be taxed at
death of owner and is not transferable by part.
personal income tax level.
* Raising capital through loans from ins tu ons
* Easy to close.
or investors is diffi
cult due to inferior image and
dependency on sole owner.
* Must renew business registra on annually and top up
CPF account.
* Sole proprietors do not enjoy tax exemp ons and
rebates available to corpora ons.
Income ($)
Personal Tax Rate
Corporate Tax Rate
20,000
0%
0%
50,000
(8.5%) $4,250
0%
100,000
(14%) $14,000
0%
200,000
(17%) $34,000
(8.5%) $8,500
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GENERAL PARTNERSHIP
A General Partnership is most suitable for low risk, low profi le
businesses.
It allows the possibility of acquiring capital, talent and strategic assets
based on mutually agreed terms.
The business must have a minimum of at least 2 partners, and may
have a maximum of 20 partners. The partners are responsible for all
liabili es.
Singapore ci zens, permanent residents and Employment Pass
holders may register a general partnership fi rm.
Foreign individuals and companies may also register general
partnership fi rms but must have a local manager.
Advantages
Disadvantages
* Partnerships face fewer statutory controls than companies.
* Partners are jointly liable for partnership debts.
* Not required to audit or publish accounts or to register
* Partners personal assets are at risk since partners are
the Partnership Agreement. No returns are required to
liable for all debts and losses.
be made by partnerships, except for income tax.
*
Does not have a separate legal iden ty from the partners.
* The internal structure of partnerships is very fl exible.
Therefore, unless otherwise agreed, the partnership will
come to an end each me a partner leaves.
* Partnerships can be simple and cheap to set up. A
Partnership Agreement is, however, advisable.
* The avenues available for access to further capital for
expansion are restricted by the amount of security that
* All the profi ts generated by the business will be taxed at
can be given personally by the individual partners.
personal income tax level.
* Does not enjoy the generous corporate tax and rebates
that corpora ons are normally en tled to.
* Must renew business registra on annually and top up
CPF account.
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LIMITED LIABILITY PARTNERSHIP
A Limited Liability Partnership (LLP) is a perfect blend of partnership
setup and Private Limited Company.
LLP gives owners the fl exibility of opera ng as a partnership while
having a separate legal iden ty like a private limited company. There
must be a minimum of 2 partners. However there is limit on the
maximum number of partners in a LLP.
This type is highly favored by and suitable for individuals engaged
in professional services such as lawyers, architects, accountants,
management consultants etc. Foreign individuals and companies
can form a LLP but must appoint a local manager. Ci zens, Residents,
Employment Pass holders, local companies can register a LLP.
Advantages
Disadvantages
* Separate legal en ty, hence partners are not personally
* Constraints in transfer of ownership
liable for losses or debts, or wrongful acts of other
partners. However a partner is personally liable for
* S ll does not command a dis nguished image as a
claims against his personal wrongful acts or omissions.
private limited company
* It has perpetual succession. Any change in the partners
of a LLP does not aff ect its existence, rights or liabili es.
* Compliance requirements are simpler as compared
to private limited company.
* No annual returns fi ling required of LLPs, except for
income tax.
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PRIVATE LIMITED COMPANY
There are four types of companies in Singapore:
Private Limited Company - Not more than 50 corporate or individual
shareholders.
Exempt Private Company - Not more than 20 individual shareholders.
Public Company Limited by Shares - It is locally incorporated where
the number of shareholders can be more than 50.
Public Company Limited by Guarantee - It is one that carries out
non-profi t making ac vi es that have some basis of na onal or public
interest, such as for promo ng art, charity etc.
Advantages
Disadvantages
* Shareholders' personal assets are protected since
*
Companies can be more expensive to set up
they are not personally liable for debts and losses of
company.
* Companies are governed by
ghter rules and
regula ons
*
Ownership is transferable and addi onal shareholders
can be appointed thus enabling addi onal capital
* Liquida on or winding up can be more diffi
cult and
injec on for expansion purposes.
costly
* Conveys a professional commitment and vision
* Companies must maintain ongoing compliance with
hence maximizes the poten al of loans from banks
ACRA/IRAS
and other fi nancial ins tu ons and also establishes a
credible image among the business community.
* Company is perpetual and business opera ons
are undisturbed by changes in shareholders or the
holding pa ern.
8.50%
17.00%
* Qualifying condi ons:
* No more than 20 individual shareholders.
* Where there are corporate shareholders, at least
NO TAX
1 shareholder is an individual holding at least 10%
of the shares.
First S$100,000
T
a
x
a
ble income
S$100,001 - S$300,000
Above S$ 300,000
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This material has been prepared by AsiaBiz for the
exclusive use of the party to whom AsiaBiz delivers this
material. This material is for informa onal purposes only
and has no regard to the specifi c investment objec ves,
fi nancial situa on or par cular needs of any specifi c
recipient. Where the source of informa on is obtained
from third par es, AsiaBiz is not responsible for and does
not accept any liability over the content.
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