Guide to Types of Business Entities and Companies in Singapore

Introduction

Regarding ACRA there are 4 types of business entity. Sole Proprietorship, Limited, Partnership, Private Limited Company (PTE). Starting a business in Singapore? One of the first things you’ll need to decide is the type of business entity under singapore companies you want to establish. The ideal business structure determines important factors like taxes, personal liability, and running your company so it’s critical to pick the right one. Here are the main types of business entity to consider to open a company in Singapore.

Types of company in singapore

  1. Sole Proprietorship
This is the simplest and most common business structures in Singapore. There’s no distinction between you and the business owned—you’re the owner and responsible for all profits, losses and legal issues. Easy to set up, but you have unlimited personal or individual liability for debts.

     2. Partnership

In a partnership, two or more people share ownership and responsibilities in the running of a business. There a few types—like general, limited liability, limited partners—which have different formalities to set up, legal requirements and liability exposure. There are also more informal partnerships which still carry the unlimited liability of general partnerships.

      3. Private Limited Company

More complex and formal than the above entities, private limited companies require registration with the Accounting and Corporate Regulatory Authority (ACRA). Owners enjoy limited liability protection and can conveniently transfer ownership stakes. However mandatory compliance obligations like documentation, reporting and audits can incur higher costs.

      4.Limited Partnership (LP)

Limited partnership comprising at least two partners, including one general partner and one limited partner, that does not have a separate legal body from the partners. A general partner is accountable for the LP's conduct and liable for any debts and liabilities. A limited partner is not personally liable for the LP's debts and liabilities beyond his agreed-upon contribution if he does not participate in business management.

     5. Limited Liability Partnership (LLP)

LLP is a relatively new type of entity that combines the characteristics of both partnerships and companies. This type involves two or more partners (individuals, businesses, or another LLP) entering into an agreement to conduct business under particular terms and conditions that are mutually agreed upon by all partners. The responsibility of each partner is limited to the amount of his or her contribution. A minimum of two partners are necessary, however the number of partners is unlimited.


Types of EntityOwnershipLegal StatusLiabilitiesAnnnual Compliance
Sole proprietorship - A sole proprietorship is a business that is owned by one individual. The sole proprietor has complete control over the business's operations. 
- At least 1 locally resident authorised representative.
- Singapore Residents - Foreigners and corporations allowed only with the appointment of a local manager.
Not a separate legal entity : the owner and the company are the same. Owner has unlimited liabilityExempted from yearly audit and is not required to file annual financial statements with ACRA.
Private Limited Company (Pte.Ltd)- Minimum 1 Director and 1-50 shareholders. Ownership is transferable.

Separate legal entityLimited liabilityNeed to filing of financial statements with ACRA. Need to filing of annual return.
Limited Partnership (LP)- A partnership consisting of 2 or more partners where at least 1 partner is a General Partner (GP) and 1 is a Limited Partner (LP). No limit on numbers of partners.
- At least one stakeholder, with a maximum of fifty. Shareholders might be either individuals or companies.
Not a separate legal entityLimited partners have limited liabilityExempted from filing of financial statements with ACRA. No need to filing of annual return.
Limited Liability Partnership (LLP)- A limited liability company is a partnership where the partners’ liabilities are generally limited. No limit on numbers of partners.Separate legal entityPartners are personally liable for debts and losses caused by their own actionExempted from filing of financial statements with ACRA. No need to filing of annual return.

What Are the Key Requirements for Starting a Business in Singapore?

1. Business Structure

The first key decision is finalising an appropriate business structure that aligns to your commercial objectives. Common options like sole proprietorships, partnerships, private limited entities and foreign branches have different regulations and paperwork.

2. Company Name Approval

Once you decide the business structure, check if your proposed name is available for registration, check name availability and secure formal approval under Singapore's Accounting and Corporate Regulatory Authority (ACRA). Registering your company with ACRA (Accounting and Corporate Regulatory Authority) marks a pivotal step in establishing your business presence in Singapore. The process is made accessible through the user-friendly BizFile+ portal. This verification must be done before incorporation.  

3. Company Incorporation Documents

Work with a corporate services provider to prepare every important information and documents based on your entity type. Such as listed below:

  • Company registration forms
  • Memorandum & Articles of Association
  • Particulars of shareholders, directors, company address
  • Paid-up capital records
  • Annual return filing

4. Appointment of Directors

For private limited companies, appoint at least one director who is Singapore resident. Directors or business owner must be at least 18 years old, not bankrupt, and not convicted of any malpractices.

5. Appointment of Company Secretary

Within six months of incorporation, every company in Singapore is required to appoint a qualified company secretary. The company secretary must be a natural person residing in Singapore, ensuring adherence to legal and compliance matters. This is for business entities that required to appoint a cosec such as Pte Ltd. Sole proprietorship and limited liability partnership (LLP) are not required to appoint corporate secretary.

6. Paid-Up Capital and Business Bank Account

While there is no mandatory minimum paid-up capital requirement, it's crucial to decide on an initial capital amount for your company. Open a corporate bank account in Singapore, and ensure the deposit aligns with your business plan.


7.  Registered Office Address

A physical office address is mandatory for business registration. This address will be used for official correspondence. It's important to note that a P.O. Box is not accepted as a registered office address. If you're looking to register a business address in Singapore, Altomate is your trusted partner. Contact us for seamless and efficient solutions tailored to your business needs.

8. Obtain Necessary Licenses and Permits

Depending on the nature of your operations, you might find yourself in need of specific licenses or permits to ensure compliance with regulatory frameworks. To navigate this intricate landscape seamlessly, engage with the relevant authorities, understand the specific requirements pertinent to your industry, and diligently obtain the necessary approvals. This proactive approach not only demonstrates your commitment to regulatory compliance but also establishes of your business activities. So, whether you're venturing into finance, healthcare, or any other industry, securing the essential licenses and permits becomes a strategic step towards a successful and legally.

9. Register for tax

Specifically, if your annual turnover surpasses a predefined threshold, it becomes imperative to register for the Goods and Services Tax (GST), a pivotal component of the tax landscape. Beyond GST, there might be other tax categories applicable to your business, depending on its nature and activities. Engaging in this meticulous registration process demonstrates your commitment to upholding financial regulations and ensures that your business is well-positioned within the comprehensive tax framework of Singapore. By proactively addressing tax obligations, you not only stay on the right side of the law but also set the stage for a financially resilient and compliant business journey.

What Are the minimum Requirements for owner to Register ?

Here are the minimum requirements an owner needs to register a company in Singapore:

  • At least one shareholder, which can be a person or a corporate entity.
  • One local resident director; he or she may be a Singapore resident or citizen, a holder of an employment pass or a dependent pass.
  • One business secretary who lives in Singapore and legal person
  • An initial paid-up capital of at least S$1, or its equivalent in any major international currency
  • A physical registered office address in Singapore; PO boxes are not accepted.

Factors to Consider When Choosing the Right Structure

  1. Liability Protection: Assess the level of personal liability you're comfortable with. Singapore companies like Private  Limited and LLP offer limited liability, shielding personal assets.
  2. Business Objectives: Consider the long-term goals of your business. If you plan to raise capital through investors, a Pte Ltd structure might be preferable.
  3. Tax Implications: Different structures have varied tax treatments. Consult with a tax professional to understand the tax implications and benefits associated with each entity.
  4. Ease of Compliance: Evaluate the administrative requirements and ongoing compliance obligations. Some structures, like sole proprietorships, may have simpler compliance processes.
  5. Flexibility: Assess the flexibility each structure offers in terms of management, decision-making, and changes in ownership. This is particularly crucial for partnerships and LLPs.
  6. Costs: Consider the setup and maintenance costs associated with each structure. While some entities might have lower initial costs, ongoing compliance may vary.

Decision Making Tips For Your Business

  1. Professional Counsel: Consult legal and financial experts who specialise in Singaporean business structures. Their guidance ensures your decision aligns with legal norms and financial best practices.

  2. Scalability Check: Anticipate the growth trajectory of your business. Opt for a structure that facilitates scalability and aligns with your future expansion plans.

  3. Industry Adherence: Research the prevalent business structures within your industry. Understanding what has worked well for similar businesses provides valuable insights.

  4. Long-Term Viability: Choose a structure that not only suits your current needs but also adapts to your evolving business aspirations.

    By navigating these considerations, you can make a well-informed decision, selecting the business entity that best suits your objectives and sets the stage for your success in Singapore.

Conclusion

Choosing the right business entity in singapore is a critical decision that impacts your business's liability, taxation, and regulatory obligations. Consider your business goals, size, and industry before making a decision. Seeking professional advice can provide valuable insights tailored to your specific needs, ensuring a solid legal and financial foundation for your venture in Singapore. Especially when to decide either you suitable to open sole proprietorship, Private Limited Company (Pte.Ltd), Limited Partnership (LP) , Limited Liability Partnership (LLP) or other company entity.

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