Types of business entities in Singapore

Before making decisions in Singapore company incorporation, all of entrepreneurs do not skip this step of choosing type of business entities. In fact, there are many business entities in Singapore which have some effects on the image, perception and the tax that you can pay.  Hence, you should read to the article of ACE Global Accountant below to gain an overview of the various types of business entities in Singapore and the differences between them to make right decision in choosing business entities for your new incorporated Singapore company.

TYPES OF BUSINESS ENTITIES IN SINGAPORE

DESCRIPTIONS

SOLE PROPRIETORSHIP

– Key factors: it suits for small businesses. It is owned and run by an individual who must be a resident in Singapore and at least 18 years old. The sole proprietorship is not considered as a separated legal entity. The fact is foreign individual and company CANNOT register this type of business entities in Singapore.

– Taxation: the profits of a sole proprietorship is taxed based on the personal income tax rate.

PARTNERSHIP

-Key factors: it is formed by a minimum of 2 persons and maximum of 20 persons. Foreign individuals or companies are allowed to be partners. Besides, it is not considered as a separate legal entity and all partners are personally liable for the partnership’s debts and losses, even if the debts and losses are incurred by other partners.

-Taxation: Similar to a sole proprietorship, the tax rate imposed will be that of the partner. If the partner is an individual, the personal income tax rates will apply; If the partner is a company, corporate tax rates will apply.

LIMITED PARTNERSHIP (LP)

-Key factors: it is required at least two partners but no maximum number of partners. There is one partner who will be the general partner. The general partner has unlimited liability and personally liable for all debts and losses. Hence, a limited partner will not be liable for the debts and other liabilities of the partnership beyond the amount of his/her agreed contribution.

-Taxation: the tax rate imposed will be that of the general partner. If the general partner is an individual, the personal income tax rates will apply; If the general partner is a company, corporate tax rates will apply.

LOCAL PRIVATE COMPANIES

Main points: this type of business entities is treated as an separate entity from the members, it means the company is considered  as a “person” in law. It is required one or more individuals who must be a Singaporean or foreigner owning Employment Pass/ Permanent Resident in Singapore registers as a director of the company. This business entities includes three main types:

  1. Private Limited Companies:

-Key factors: it is required at least one director and one shareholder, and the maximum of shareholder is fifty. It’s name will end with Private Limited or Pte. Ltd. Moreover, the shareholders of a private limited company can either be individuals or corporate entities or both.

-Taxation: a private limited company can qualify for tax exemption schemes and is taxed at the effective corporate tax rate of 17%.

2. Exempt Private Limited Companies

-Key factors: A subtype of a private company, an exempt Private Limited Company has less than 20 members, none of them being corporate entities. Should the companies turnover exceed S$5million it will no longer be deemed exempt. The status is not specially conferred, it is simply a status by operation of law

3. Gazetted Exempt Private Companies

-Key factors: Government-owned companies which have been declared Exempt Private Company by the Minister Gazette.

LOCAL PUBLIC COMPANIES

Here are two main types:

  1. Company Limited by Share

-Key factors: The number of shareholders can be more than fifty members and the company may raise capital by offering shares and debentures to the public. A public company must register a prospectus with ACRA before making any public offer of shares and debentures

2. Company Limited by Guarantee

-Key factors: Companies limited by guarantee are usually formed for non-profit making purpose. This type of company is more commonly used for trade associations, charitable bodies, clubs, proffesional and learned societies, some religious bodies and the like, rather than commercial undertakings.

Foreign Company Registration Options

The options for foreign companies

  • Branch Office: A branch office is registered in Singapore as an extension of its parent company and not as a separately incorporated entity. The liabilities of a branch office extend to its parent company.
  • Representative Office: A representative office is registered in Singapore as a temporary arrangement for conducting marketing research activities. A representative office does not have any legal status and cannot be engaged in any profit yielding activities.
  • Subsidiary Company: A subsidiary company is a private limited company incorporated in Singapore with the parent company as its shareholder. For small to medium-sized foreign businesses, a subsidiary company is the most preferred choice of registration in Singapore.

Which types of business entities in Singapore a foreign company or individual should choose?

A private limited company will be the most popular for a foreign company or individual to set up in Singapore because it is advanced and flexible type of business form in Singapore.

  • Separate legal entity
  • Limited liability
  • Ease of incorporation
  • Ease of raising capital
  • Ease of transfer of ownership
  • Tax exemption schemes

For more questions related to Singapore company incorporation, contact us for a quote.

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