Kinds of Business Entities in Singapore

Singapore is a strategic location to many international companies that operate their businesses, the following are the different kinds of business entities in Singapore:

1. Limited Liability Company

A Limited Liability Company (LLC) is a company limited by shares i.e. its liabilities are limited to the amount of share capital. LLC is a business entity registered under the Singapore Companies Act and a separate legal entity from its members. In a LLC, the liabilities of the owners are limited to the assets in the company and their personal assets are protected from business liabilities.

A Singapore LLC can be of the following types:

A) Private Limited Company

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.

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).

B) Public Limited Company

A public limited company is a LLC that may offer its shares to 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. Usually a public limited company is listed on a stock exchange. Public limited companies are outside the scope of this article as they are meant for large businesses.

2. Public Company Limited by Guarantee

A public company limited by guarantee is a type of business entity meant for non-profit purposes. For more details, refer to setting up a non-profit entity in Singapore.

3. Foreign Company Registration Options

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.

A) 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.

B) 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.

C) 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. For further details about these choices, refer to foreign company registration options in Singapore.

4. Sole Proprietorship

A sole proprietorship is the simplest but the riskiest type of business form in Singapore. From a legal perspective, sole proprietorship is not a separately incorporated entity and therefore the owner and the business are one and the same. The owner personally owns all assets and liabilities of the business. There is no protection of personal assets from business risks and liabilities. As the sole proprietor of a business, you have unlimited liability, meaning that if your business can’t pay all its liabilities, the creditors to whom your business owes money can come after your personal assets.

5. Partnership

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.

Partnerships in Singapore can be of three types:

A) General Partnership

A general partnership is not a very attractive way to structure a business in Singapore because a) like a sole proprietorship, partners are personally liable for the debts and liabilities of the business; b) each partner can be held responsible for the actions of another partner.

B) Limited Partnership

The concept of 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, such partners are unable to participate in the management of the business in a limited partnership.

C) Limited Liability Partnership (LLP)

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.

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. 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.

A LLP must have at least two partners at all times. An LLP is not suited for a business that carries a trade.

Source: www.guidemesingapore.com