Business Structures that You can Use to Incorporate company in Singapore

Last modified: December 11, 2015

singapore-Business-Structures

If you are worried that the incorporation of company in Singapore is a complex task, rest assured. It is a straightforward process involving completion of only 2 procedures.

During the first procedure, you select a suitable name for the proposed company and get it approved from the Company Registrar of Singapore. It means you apply to the Accounting and Corporate Regulatory Authority (ACRA) of Singapore using BizFile portal. During second procedure, you apply to the ACRA for registering your company.

Before you get to the company incorporation stage, you need to choose a suitable business structure for the company. Your choice can affect the tax compliance, audit compliance, branding of your company as well as plans for its expansion in future.

The business structure underlying a business entity also dictates things like who will own the company, the maximum number of shareholders, who will be liable to the losses or the debts accrued during the business activities of the business. That is why the choosing the right business structure to incorporate company in Singapore, is a serious matter. For a complete novice in business matters, it is better to take assistance from the Singapore incorporation services.

SMALL Company

The ACRA has introduced the concept of Small Company on 1 July 2015. Now, the businesses need to qualify as the small company to get audit exemption.

Only businesses established as the private company can qualify as a small company. And,

They must complete at least 2 of the following 3 requirements for immediate past 2 successive FY (financial years),

  • Total annual revenue is $10m or less
  • Total assets are $10m or less
  • The number of employees is 50 or less

If a business ceases to be a private company, it stops being considered as the small company. It can also happen if it fails to meet the 2 of the 3 requirements for 2 financial years in a row.

Singapore Incorporation for Singapore Residents and Foreign Individuals

The Singapore citizens, permanent residents, and foreign individuals who want to open company in Singapore have following choices.

Private Limited Company (PLC)

The private limited company is a form of Limited Liability Company (LLC), where the liability of its owners (shareholders) is limited to the amount they have invested in company’s shares.

  • It can have as many as 1 – 50 shareholders.
  • Both, individuals and corporate can own shareholding in a PLC.
  • A PLC exists as an artificial person.
  • It has separate legal existence from its owners.
  • It is responsible for its own losses and debts.
  • A PLC can sue or be sued in its own name.
  • It can buy or develop properties for its own use, under its own name.
  • It has perpetual existence and its existence does not depend on the continuation of the membership of its members.
  • Singapore allows foreigners to own 100% shares in the PLC.
  • That is why this business structure is a favorite of entrepreneurs in Singapore.

A private limited company is a very flexible business structure that scales well with the rising demands of the business.

Exempt Private Company (EPC)

An exempt private company is similar to a private limited company. The difference lies in the fact that it cannot have more than 20 shareholders. The Singaporeans use to prefer this business structure to incorporate their business. The EPCs having annual revenue equal to S$5 Million or less used to get audit exemption.

Sole Proprietorship

This is the most basic and easy to incorporate business structure in Singapore. It is most useful to the newbie entrepreneurs who want to get trading experience.

  • The sole proprietor is the sole decision maker in the business and does not depend on anyone else.
  • A sole proprietorship has no separate legal existence, which makes the owner responsible for its debts and losses.
  • The owner also pays personal income tax on the income generated by the business.
  • Raising funds for the expansion of a sole proprietorship is a rather difficult.
  • The image of the sole proprietorship totally depends on how well connected its owner is.

Limited Liability Partnership (LLP)

This is yet another business structure that the Singaporeans can use to start their business.

  • An LLP must have at least 2 partners, which can be individuals or corporate.
  • As many as 20 professionals and corporate can come together and form an LLP.
  • An LLP combines the best features of a private limited company and general partnership.
  • An LLP limits the liability of partners. Still they are liable for the debts and losses to the LLP, arising out of the mistakes, ignorance, actions, or inactions.
  • It is a separate legal entity and can sue or be sued in its own name.
  • An LLP can own, hold, and develop properties under its own name.
  • The individual partners pay personal income tax on the income received from the LLP.
  • The corporate partners pay corporate income tax on the income from the LLP.
  • An LLP as a business entity is not required to pay corporate income tax.

Singapore Public Limited Company

A private limited company cannot offer its shares to the public. Its shareholding is exclusive. This limits its ability to raise a large amount of capital. Singapore Public limited companies can offer their shares to the common investors and may get listed on stock exchanges. These companies must have at least 50 shareholders. The public limited companies need to follow strict audit compliance requirements.

Singapore Public Company Limited by Guarantee

There are businesses that are established to conduct business activities and generate profit. On the other hand, public companies limited by guarantee are incorporated for the non-profit purposes.

Options for Foreign Company Registration

During the last 2 decade, Singapore has progressed and achieved the distinction of being a financial hub of the Asia-Pacific region. Its geographical location plays an important role in its emergence as the major trading center in Asia. It also enables it to act as a major entrepot of Asia.

Singapore income and corporate tax rates are lower than that are applied by the most countries. It is one of the reasons, why foreigners think of it as an investment destination. Both, individual investors and corporate come and establishes their businesses in Singapore. They can use following three business structures to do so.

Singapore Subsidiary Company

The foreign corporate can start their business activities by incorporating a Subsidiary Company.

  • It has all the attributes of the private limited company.
  • They can own it 100%. It has separate legal existence from its owner i.e. the foreign-registered company.
  • The liabilities of the debts and losses of Subsidiary company is its own.
  • It is a locally registered Singapore company.
  • It qualifies for all the tax exemption, incentives, and rebates that the Singapore taxation system awards to the local businesses.

Singapore Branch Office

A Singapore branch office of a foreign-registered company is considered as the extension of its parent company.

  • It must have name corresponding to the name of its parent company.
  • The liability of its debts and losses lies with the parent company.
  • For tax purposes, it is considered as the non-resident Singapore Company.

Singapore Representative Office

Some of the foreign corporate like to research the market, they are interested in.

  • In Singapore, they set up a representative office to do so.
  • This business entity conducts market research and surveys. It then sends the data to its parent company.
  • The liability of the debts and losses of the representative company lies with the parent company.
  • The Singapore Company law prohibits this company from conducting any business activities.

Singapore offers great opportunities to the investors, entrepreneurs, and professionals. It offers affordable personal and corporate income tax rates and a great working environment.

Politically, it is a stable country with least corruption. It has exceptionally advanced infrastructure, including links to the outside world. It is a competitive market and having a locally established partner can be beneficial to a new entrant.