A comprehensive introduction to the different types of business entities in Singapore.
Singapore is regarded as one of Asia’s premier business centres. Some of the primary reasons for expanding business in Singapore include the transparent regulatory structure, low tax rate, highly open economy, and business-friendly atmosphere.( types of companies in singapore)
Many investors and entrepreneurs have entered Singapore over the years to start their businesses; every newcomer has the same question in their mind: what is the most trustworthy sort of business entity you should incorporate in Singapore?
In this article, we discussed the many forms of companies that can be formed in Singapore. Furthermore, if you intend to form a company in Singapore, you should read our Complete Guide to Singapore Company Registration to ensure that you do not overlook any vital instructions.
What types of businesses are there in Singapore?( types of companies in singapore)
In Singapore, the three most popular business entities are a partnership, a single proprietorship, and a Limited Liability Company.
Partnership( types of companies in singapore)
Another sort of business structure in Singapore that requires at least two partners is the partnership. Clearly, the partnership entity is not distinct from its partners. This simply implies that the partner will be jointly and severally liable with the other partners in the firm, as well as individually liable for all Company formalities and duties, with the limited partners excluded from the Limited partnership.
The three primary types of partnerships in Singapore are as follows:
- General collaboration (GP)
- Limited liability company (LP)
- Partnership with a limited liability (LLP)
The following are some of the key characteristics and distinctions between the three forms of Singapore partnerships:
Legal status: A limited liability partnership is a legal entity in its own right. The general partnership and limited partnership, on the other hand, are not considered different entities.
Partners’ obligations in Singapore Limited Liability Partnership are limited to their contributions to the partnership. Limited partnerships and general partnerships, on the other hand, have the possibility of holding infinite obligations to any accountability linked with other partners.
The number of partners in a Singapore general partnership entity is limited to a minimum of two and a maximum of twenty. In contrast, there is no upper restriction on the number of partners in a limited partnership or a limited liability partnership.
Imposed tax rates: The partners of a limited liability partnership are taxed on their personal income tax or corporate income tax, depending on whether they are a corporate body or an individual. Remember that in Singapore, partnership entities have less tax exemption than Singapore Limited Liability Companies.
Partnership compliance requirements( types of companies in singapore)
When compared to forming a limited liability company in Singapore, forming a limited liability partnership firm is a less difficult undertaking.
The sole proprietorship( types of companies in singapore)
A sole proprietorship is without a doubt one of the simplest and most difficult business formations in Singapore. This is usually termed one Man show, which suggests that a complete commercial entity will be operated by one individual or corporation. There will be no partner in the solo proprietorship corporation. However, the owner of the company will be solely accountable for all the business earnings and losses.
The essential characteristics of a Singapore sole proprietorship
Some of the important elements of Singapore single proprietorship entity comprises of:
Legal status: A sole proprietorship firm in Singapore’s primary aspect is that it is a legal status and is not separated from its owner.
Unlimited liability: There are no constraints to the owner of a sole proprietorship company as they are the ones liable for all the arising obligations, debts, and losses.
Taxes: The taxation structure of a sole proprietorship company in Singapore is based on the business owner’s personal income.
Sole proprietorship compliance requirements
In Singapore, a sole proprietorship business is characterised as one that has a minor burden in terms of maintenance obligations. Renewal and submission of tax returns with IRAS are two significant responsibilities that every firm must address.
Limited Liability Corporation
Let us start with a limited liability company; a limited liability company is one of the most frequent types of business entity in Singapore, especially for individuals looking to start their own business in the city-state.
The following types of limited liability companies can be formed in Singapore.
Private limited company by shares and Exempt private company are two types of private companies.
A public company is one that is limited by shares and limited by guarantee.
Advantages of forming an LLC in Singapore
The following are the benefits of operating a limited liability corporation in Singapore:
Limited liability: Shareholders or the company owner of a Singapore Limited liability company are only liable for liabilities equal to the amount of shares invested in the company.
Separate legal status: A separate legal status is a legal entity that is distinct from its company owners. A limited liability company is also obligated to sign contracts, acquire and possess assets, and can be sued or sued in its own name.
Benefit from taxation. The most significant advantage of forming a limited liability company in Singapore is that, like all other entities, it is subject to the 17% income tax rate. Furthermore, the Singapore government provides a unique business climate and a wonderful tax system to all qualifying enterprises by offering a profusion of tax exemption models and tax relief that can significantly lower the tax burden.
The Drawbacks of a Singapore LLC
Running a limited liability company in Singapore is undoubtedly advantageous, but there are certain things that every business owner must manage in order for their company to develop. Nonetheless, when compared to a public firm, a private company is immune from numerous reporting obligations. Some of the issues with a Singapore limited liability company include:
- Filing IRAS tax returns
- Filing annual ACRA returns
- Organizing AGMs (Annual General Meeting)
- Accounting reports must be submitted.
- Several other obligations as assigned by authorised authorities
What are the choices for international companies registering in Singapore?
There are three sorts of registration choices available to all international people and businesses looking to grow their commercial presence in Singapore and globally.
Subsidiary
A subsidiary company is essentially a stakeholder in the main holding company. A subsidiary company is often founded in Singapore as a private limited business. As a result, these firms normally have the same liabilities and benefits as a private limited company in Singapore.
Office of Representation
A representative office is recommended for any foreign enterprises looking to grow their operations in Singapore. Conducting market research, testing the market, and raising brand recognition are all popular reasons for establishing a representative office in Singapore.
A representative office, like a subsidiary firm, has no legal distinction. The foreign parent business will be fully liable for all liabilities and debts incurred by the office. Furthermore, it is not permitted to conduct any profit-generating activity in the country.
Subsidiary office
A branch office is an extension of the parent corporation, which already has a headquarters outside of Singapore. A branch office in Singapore, for example, grants permission to perform business activity. However, because this form of business structure is not regarded a separate legal entity, its appropriate parent company will assume all of the branch’s applicable liabilities and assets.
When discussing the branch office’s tax system, the branch office is referred to as a non-resident for tax purposes. In this regard, most international corporations’ branch offices, including newly created companies and local resident companies, will receive no tax exemption benefits. However, when compared to a subsidiary company incorporated as a private limited company in Singapore, the subsidiary company is more advantageous.
Which form of business is best for you?
It is always best to choose only the type of Singapore firm that best matches you and your business needs.
It is also critical for anyone wishing to form a company in Singapore to evaluate numerous considerations before making a final decision, since each firm has different characteristics, downsides, and benefits that you may be looking for. Tax advantages, investment capital, the number of business owners, and other requirements relating to each type of business entity are the most frequently asked questions when establishing a company in Singapore.
We hope the above tutorial on types of entities in Singapore has helped you understand what kind of business entities you can register in Singapore and their important characteristics.
Singapore needs Directors
A director manages and directs a company’s affairs. A director must be objective, operate in the company’s best interest, and be honest and diligent.
The Companies Act requires one minimum director.
A corporation must have a Singapore-based director.
The director’s “normal residence” is Singapore. Singaporeans, permanent residents, and EntrePass holders are considered usually resident. An Employment Pass holder may be accepted as a resident director, subject to employment rules and regulations. EP holders who desire to take up a secondary directorship in another company (other than the one their EP is authorised for) must apply for and be granted a Letter of Consent (LOC) before registering with ACRA.
Any adult can be a company director. No director age limit. Bankrupts and those convicted of fraud or dishonesty are barred from being directors.
Secretary
Within 6 months of incorporation, any firm must select a secretary. The company secretary must live in Singapore and not be the only director. In certain cases, the Secretary may be accountable for the company’s lawbreaking.
Auditor
Except for exempted private limited companies, all others must engage an auditor within 3 months of incorporation.
Audit-exempt qualifications
Excluded private companies with annual revenue of $5 million or less are exempt from audits. A new small firm idea will decide audit exemption. A private corporation is no longer required to be audit-exempt.
It meets 2 of 3 criteria for two consecutive years.
(i) revenue $10m;
(ii) assets under $10m
(iii) 50 employees (Singaporean employees)
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