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Comparison of Business Entities and Structures in Singapore

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Your choice of business entities and structures for your business matters. Selecting the best choice for your company will give you the best possible head start and affect how you conduct your business in the long run.

Before proceeding, make sure you have submitted an online application to register your business name.

As a top business hub in Asia and the world, Singapore has one of the most efficient frameworks and systems for setting up a business. It’s tremendously fast and easy to set up and operate a business, and the entire process can sometimes take less than a week.

In this post, we will share four main types of business entities and structures, factors to consider when selecting one, and the rules and regulations you are most likely to face.

Lastly, we will also provide a detailed comparison of the different types of entities and structures available for businesses in Singapore.

What are Business Entities?

Business entities, also known as business structures, are formed under Singapore’s law to engage in business activities, philanthropic work, or other allowable business activities. The legal responsibilities, advantages, and disadvantages differ and will depend on the type of business entity chosen.

Types of Business Entities and Structures in Singapore

1. Sole-Proprietorship (one owner) or Partnership (two or more owners)

A business can be a sole proprietorship with one owner or a partnership consisting of two to twenty owners. Business owners are personally liable for the debts and losses of the business.

2. Company

A company usually has the words Pte. Ltd. or Ltd as part of its business name. One of the advantages of owning a company is that the shareholders have limited liability. his means that they are not personally liable for the debts and losses of the company.

3. Limited Liability Partnership

For a Limited Liability Partnership or LLP, it is a partnership with a minimum of two partners, and they have limited liability.

4. Limited Partnership

In a Limited Partnership or LP, there is a need for a general partner and a limited partner. While the general partner is personally liable for the debts and losses of the LP, the limited partner enjoys limited liability.

This is also known as limited liability.

Factors to Consider When Choosing a Business Entity and Structure

Every business is unique and has different needs. Having answers to the following factors will allow you to determine the ideal entity and structure for your business.

  • How much capital are you prepared to invest?
  • Are you able to finance your business solely, or do you need finance from other persons?
  • What risk are you prepared to take?
  • Would you prefer limited or unlimited liability?
  • Would you like to own the business by yourself or together with other people?
  • Is the business entity easy to close?

Rules and Regulations on Choosing a Business Entity and Structure

If you are finally ready to decide on a business entity and structure, make sure to adhere to the following guidelines:

  • You are at least 18 years old
  • All business entities and structures must have at least one person residing in Singapore
  • For the Limited Liability Partnership (LLP) and Limited Partnership (LP), there is a requirement that the owner or partner’s Medisave must be paid up with the CPF Board at all times
  • Comply with all requirements for registration
  • Comply with post-registration requirements

Different Types of Business Entity and Structure

1. Sole-Proprietorship (one owner) or Partnership (two or more owners)

Definition: A business owned by one person

Owned By: One person

Legal Status:

  • Not a separate legal entity
  • Owner has unlimited liability
  • Can sue or be sued in individual’s own name
  • Can also be sued in business name
  • Can own property in individual’s name
  • Owner personally liable for debts and losses of business


Yearly Statutory Obligations:

  • Yearly renewals (one year or three years)
  • CPF Medisave Top-Up required for Self-employed Persons before they can renew sole-proprietorship


Registration Requirements:

  • Age 18 years or above. Singapore citizen/Singapore permanent resident/EntrePass holder
  • If owner not resident in Singapore, he must appoint an authorized representative who is ordinarily resident in Singapore
  • Self-employed persons must top up their Medisave account with the CPF Board before they register a new business name, become a registrant of an existing business name, or renew their business name registration
  • Undischarged bankrupts cannot manage the business without approval from the Court or the Official Assignee


Set Up Fee:

  • $115 ($15 name application fee and $100 registration fee) for 1-year registration
  • $175 ($15 name application fee and $160 registration fee) for 3-year registration


Taxes:
Profits taxed at owner’s personal income tax rates

Continuity in Law: Exists as long as the owner is alive and desires to continue the business

Closing the Business:

  • By Owner – Cessation of business
  • Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct

2. Partnership

Definition: An association of two or more persons carrying on business in common with a view to profit

Owned By:

  • Between 2 and 20 partners
  • A partnership of more than 20 partners must incorporate as a company under the Companies Act, Chapter 50 (except for professional partnerships)


Legal Status:

  • Not a separate legal entity
  • Partners have unlimited liability
  • Can sue or be sued in firm’s name
  • Can also be sued in business name
  • Cannot own property in firm’s name
  • Partners personally liable for partnership’s debts and losses incurred by other partners


Yearly Statutory Obligations:

  • Yearly renewals (one year or three years)
  • CPF Medisave Top-Up required for Self-employed Persons before they can renew partnership


Registration Requirements:

  • Age 18 years or above. Singapore citizen/Singapore permanent resident/EntrePass holder
  • If owner not resident in Singapore, he must appoint an authorized representative who is ordinarily resident in Singapore
  • Self-employed persons must top up their Medisave account with the CPF Board before they register a new business name, become a registrant of an existing business name, or renew their business name registration
  • Undischarged bankrupts cannot manage the business without approval from the Court or the Official Assignee


Set Up Fee:

  • $115 ($15 name application fee and $100 registration fee) for 1-year registration
  • $175 ($15 name application fee and $160 registration fee) for 3-year registration


Taxes:
Profits taxed at partners’ personal income tax rates

Continuity in Law: Exists subject to partnership agreement

Closing the Business:

  • By the partners- Cessation of business
  • Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct

3. Limited Partnership

Definition: A partnership consisting of two or more persons, with at least one general partner and one limited partner

Owned By:

  • At least 2 partners
  • One general partner and one limited partner


Legal Status:

  • Not a separate legal entity
  • General partner has unlimited liability
  • Limited partner has limited liability
  • Can probably sue or be sued in firm’s name
  • Cannot own property in firm’s name
  • General partner personally liable for debts and losses of the LP
  • Limited partner not personally liable for the debts or obligations of LP beyond amount of his agreed contribution


Yearly Statutory Obligations:

  • Yearly renewals (one year or three years)
  • CPF Medisave Top-Up required before they can renew LP


Registration Requirements:

  • At least one general partner and limited partner. Both can be individuals (at least 18 years old) or body corporate (company or LLP)
  • If all general partners are ordinarily resident outside Singapore, they must appoint a local manager who is ordinarily resident in Singapore
  • Self-employed persons must top up their Medisave account with the CPF Board before they register as a partner of a new LP, become a registered partner of an existing LP, or renew their LP registration
  • Undischarged bankrupts cannot manage the business without approval from the Court or the Official Assignee


Set Up Fee:

  • $115 ($15 name application fee and $100 registration fee) for 1-year registration
  • $175 ($15 name application fee and $160 registration fee) for 3-year registration


Taxes:
Profits taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation)


Continuity in Law:

  • Exists subject to partnership agreement
  • If there is no limited partner, the LP registration will be suspended and general partners are deemed registered under the Business Registration Act
  • Once a new limited partner is appointed, the registration of the LP will be restored to “live” and general partners’ registration under the Business Registration Act ceases


Closing the Business:

  • By general partner – Cessation of business or dissolution of LP
  • Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct

4. Limited Liability Partnership

Definition: A partnership where the individual partner’s own liability is generally limited

Owned By:

  • At least 2 partners
  • No maximum limit

Legal Status:

  • A separate legal entity from its partners
  • Partners have limited liability
  • Can sue or be sued in LLP’s name
  • Can own property in LLP’s name
  • Partners personally liable for debts and losses resulting from their own wrongful actions
  • Partners not personally liable for debts and losses of LLP incurred by other partners

Yearly Statutory Obligations:

  • Annual declaration of solvency/insolvency must be lodged by one of the managers stating whether the LLP is able or not able to pay its debts during the normal course of business
  • No statutory requirement for general meetings, directors, company secretary, share allotments, etc

Registration Requirements:

  • At least two partners, who can be individuals (at least 18 years old) or body corporate (company or LLP)
  • At least one manager ordinarily resident in Singapore and at least 18 years old
  • Undischarged bankrupts cannot manage the business without approval from the Court or the Official Assignee

Set Up Fee: $115 ($15 name application fee and $100 registration fee)

Taxes: Profits taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation)

Continuity in Law: The LLP has perpetual succession until wound up or struck off

Closing the Business:

  • Winding Up – Voluntarily by members or creditors, compulsorily by the High Court
  • Striking off

5. Company

Definition: A business form which is a legal entity separate and distinct from its shareholders and directors

Owned By:

  • Exempt Private Company – 20 members or less and no corporation holds beneficial interest in the company’s shares
  • Private Company – 50 members or less
  • Public Company – can have more than 50 members


Legal Status:

  • A separate legal entity from its members and directors
  • Members have limited liability
  • Can sue or be sued in company’s name
  • Can own property in company’s name
  • Members not personally liable for debts and losses of company


Yearly Statutory Obligations:

  • Must appoint a company secretary within 6 months of incorporation
  • Must appoint an auditor within 3 months after incorporation, unless the company is exempt from audit requirements
  • Annual returns must be filed. Statutory requirements for general meetings, directors, company secretary, share allotments must be complied with


Registration Requirements:

  • At least one director ordinarily resident in Singapore, at least 18 years old
  • If a foreigner wishes to act as a local director of the company, he can apply for an EntrePass from the Ministry of Manpower
  • Undischarged bankrupts cannot be a director and cannot manage a company without approval from the Court or the Official Assignee


Set Up Fee:
$315 ($15 name application fee and $300 incorporation fee)

Taxes: Profits taxed at corporate tax rates

Continuity in Law: A company has perpetual succession until wound up or struck off

Closing the Business:

  • Winding Up – Voluntarily by members or creditors, compulsorily by the High Court
  • Striking off

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