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Of all the choices you make when deciding on incorporating an entity in Singapore, one of the most important factors is the type of business structure (i.e. legal entity) you choose for your business. Your decision can affect the amount you pay in taxes, the image and perception of your business among your clients and suppliers, the amount of paperwork your business is required to do, the personal liability you face, the ability to borrow money, and the possibility to expand your business.
This guide provides an overview of the various types of business entities in Singapore and the differences among them. Each of these is subject to different regulatory and tax regimes reflecting their organization and ownership.
The following are the main business entity types in Singapore:
A private limited company is a LLC in which the shares are held by less than 50 persons and are not available to general public. Most privately incorporated businesses in Singapore are registered as private limited companies. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd. For example, our company, Hawksford Singapore Pte Ltd, is incorporated as a private limited company. The shareholders of a private limited company can either be individuals or corporate entities or both.
A private limited company is the most advanced, flexible, and scalable type of business form in Singapore. It’s also the most preferred type of Singapore business entity for serious entrepreneurs (as opposed to sole proprietorship or limited liability partnership). For more detailed information about private limited companies, refer to Singapore company registration guide.
A public limited company is a LLC that may offer shares to the general public. A public limited company must have at least 50 shareholders and is subject to significantly more stringent rules and regulations since they have the power to raise funds from the public. A public limited company is usually listed on a stock exchange. Public limited companies are outside the scope of this article as they are meant for large businesses.
A public company limited by guarantee is a type of business entity meant for non-profit purposes. For more information, refer to setting up a non-profit entity in Singapore.
Speak to our experts. We've guided thousands of entrepreneurs and international businesses make the right choices when setting up in Singapore.
Foreign companies wishing to setup a presence in Singapore, have the choice of setting up a branch office, subsidiary, or a representative office in Singapore.
For more information about these options, refer to foreign company registration options in Singapore.
The partnership type of business structure attempts to address the limited-expansion constraint faced by a sole proprietorship by allowing two or more people to establish and co-own a business. A partnership firm has no legal existence separate from its partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership. A partnership type of business structure may make sense only in very limited number of situations. We generally don’t recommend this type of business structure to business owners.
Partnerships in Singapore can be of three types:
A general partnership is formed by a minimum of 2 persons and maximum of 20 persons. Partners pay their taxes as personal income tax, based on their share of income from the partnership.
A general partnership is not a very attractive way to structure a business in Singapore due to the following reasons:
Limited partnership is an alternative to the general partnership type of business form in Singapore. It introduces the concept of a limited partner in addition to a general partner. The liabilities of limited partners are limited to their investment in the partnership (capital or property). However, limited partners are unable to participate in the management of the business. In a nutshell, even a limited partnership in Singapore is not a very attractive vehicle for setting up a business for most people.
Among the three types of partnership business entities, LLP is the most recent and most advanced business incorporation structure. It combines the features of partnerships and companies. LLP was introduced in Singapore in 2005 through enactment of Limited Liability Partnership Act. Registering an LLP gives owners the flexibility of operating as a partnership while enjoying many of the benefits that come with a corporate body like a private limited company. It is important to note, however, that a LLP must have at least two partners at all times.
A LLP is primarily meant for carrying a profession (e.g. accountants, law firms, architects, etc.) where two or more professionals would like to build a joint practice in a common field, and is not suited for businesses that carry a trade. The owners must enter into detailed agreements about how the profits and management responsibilities are divided. It can get very complicated and generally requires the services of a lawyer to draw up the agreement. Partners in a limited liability partnership are usually responsible for cultivating their own clients based on the partner’s specific area of focus.
Refer to our guide on Singapore LLP registration for more information.
Deciding on the right business structure to incorporate in Singapore will depend on your particular situation and plans. As a general rule, you can use the following guidelines when making your decision:
Hawksford is a leading provider of company formation and administration services for companies of all sizes in Singapore. To support businesses in Singapore, we offer customized company formation solutions designed exclusively to meet the needs of Foreign Entrepreneurs, Foreign Companies and Singapore Residents.
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