Types of Business Entities & Companies in Singapore
“Ideas are worthless. Intentions have no power. Plans are nothing, unless they are followed with action. Do it now!”
– Michael E Angier
Singapore is very pro-business in both its tax regime and its variety of business organization types that may be registered in Singapore. Types of business structures are:
An enterprise owned and run by one person (the sole proprietor) and has no legal distinction between the business owner and the business entity. This person is entitled to all the profits of the business and is personally liable, without limit, for all its debts and obligations.
If a person runs a business under his or her own full name as per NRIC, then no name registration is required. However, if a business is intended to be run in any other name, then the Business Name registration is a legal requirement.
Profits are taxable in the hands of the owner at the personal income tax rate. The owner must keep proper accounts and file Form B1 for taxes.
Singapore citizens or permanent residents above the age of 18 can set up such a business on their own by registering under the Business Names Registration Act with ACRA. They must first ensure that the proposed name is available and that personal medisave payments are up to date.
Foreigners residing overseas are required to appoint at least one locally resident Authorized Representative for the establishment. They must also engage the services of a registered filing agent for the setting up of this business.
Singapore resident foreigners on various passes are not permitted to register a sole proprietorship business. They are encouraged to setup a company or a limited liability partnership and applying for an Entrepass or employment pass.
A partnership is a business owned by 2 to 20 partners.
Partners aged 18 and above can combine some or all their resources, skill or industry with the object of making a profit. In case, if none of the partners are Singapore residents, they must appoint a Singapore resident partner as their Authorised Representative.
The partnership must keep proper accounts and renew the registration annually. Partnerships themselves do not need to pay taxes, however they need to file an annual income tax return in Form P to IRAS.
Partners carry the burden for all debts and liabilities of the general partnership and can be sued personally and jointly. All partners are required to declare their share of income while filing their Personal Income Tax.
A limited partnership consists of general partner(s) and limited partner(s). There is no limit on the number of the partners.
Passively run businesses may take up this model, with the main advantage for limited partners is that their personal liability for business debts is limited.
In Singapore, with at least one limited liability partner, this business must also have one general partner. If none of the partners are Singapore Ordinary residents, then the company is required to appoint a locally resident manager (Authorised Representative) to the entity.
The general partner (a corporation or an individual), is responsible for all actions, including reporting, liability of debts, and other obligations of the organization. Meanwhile, a limited partner will not be liable for the debts and other liabilities of the partnership beyond the amount of his/her agreed contribution.
All partners are required to declare their share of income while filing their Personal Income Tax as part of their Singapore tax returns.
The establishment itself has no legal standing. The general partners therefore can sue or be sued for culpability.
Any foreigner who wishes to set up a LP must engage (as per law), the services of a Registered Filing Agent to submit an application on behalf. If they wish to be the locally resident partner, they must seek prior approval from Ministry of Manpower(MOM).
LLPs give owners the flexibility of operating as a partnership whilst giving them limited liability. It combines the benefits of a partnership with those of private limited companies. Liability of the partners are limited to the amount they contributed to the LLP. The partners are not personally liable to the obligations of the LLP.
With limited liability for partners, and a lower cost of compliance, this simpler structure of partnership suits some ventures.
Partners can be resident individuals and corporate bodies, either local or foreign, to set up such an entity. If all the partners are foreigners, then a local Singapore resident must be appointed as their Authorised Representative.
Partners are legally liable for their own negligence, wrong doings; and are exempt from any liability arising out of oversight of other partners. The LLP is a corporate body and has legal personality separate from its partners. The LLP has perpetual succession. Any change in the partners of an LLP does not affect its existence, rights or liabilities.
Foreigners residing overseas must engage the services of a Registered Filing Agent to set up this entity. They must also seek approval of Ministry of Manpower(MOM), in case they wish to manage the entity while residing in Singapore.
The company is treated as an entity separate from the members that make up the company and as a "person" in law.
One or more individuals (at least one Director must be a Singaporean, Singapore Permanent Resident or EntrePass Holder) may incorporate a company by registering under the Companies Act. A company may be limited by shares, limited by guarantee or unlimited. For companies limited by shares, shareholders may be individuals or corporate entities, and need not be of local residency.
In Singapore, the main types of companies are:
Private Limited Companies – Companies limited by shares pursuant to and governed by the Singapore Companies Act. The shareholders cannot be held personally liable for the debts of Limited Companies, with their liability limited to the amount of shares that have been issued to them which they may not have fully paid for. The number of shareholders is limited to fifty or less.
Exempt/Deemed Exempt Private Limited Companies – A subtype of a private company, an exempt Private Limited Company has less than 20 members, none of them being corporate entities. Should the company’s turnover exceed S$5 million, it will no longer be deemed exempt. This ‘exempt’ status refers to exemption from ‘statutory audit’ and it is not specially conferred, it is simply a status by operation of law. A company may also be exempt from ‘statutory audit’ if it qualifies as a small company. However, the word ‘exempt’ does not refer to a tax exemption in this case. For information about tax exemption for companies, please check our Singapore Tax FAQ page.
Gazetted Exempt Private Companies – Government-owned companies which have been declared Exempt Private Company by the Minister’s Gazette.
Company Limited by Share - 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 and MAS before making any public offer of shares and debentures.
Company Limited by Guarantee - 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, professional and learned societies, some religious bodies and the like, rather than commercial undertakings.
A foreign company is permitted to incorporate a wholly owned Singapore resident subsidiary. This entity will act just like any other Singapore company. All local compliance laws would apply to this Subsidiary. They must have a Singapore resident Authorised Representative and engage the services of a Registered Filing Agent for this purpose.
A foreign company can set up a branch office in Singapore. A foreign company is required to engage the services of a Registered Filing Agent to submit an online application for setting up a branch office.
For Registering a Branch of a Foreign Company, it must have at least one Authorised Representative who is ordinarily resident in Singapore. Being “ordinarily resident in Singapore” means the authorised representative’s usual place of residence is in Singapore. A Singapore Citizen, Singapore Permanent Resident or an EntrePass holder can be accepted as a person who is ordinarily resident here.
A Representative Office is an interim entity from which foreign companies that are keen on exploring the viability of doing business in Singapore can test the market before committing to any investment decisions. They are not permitted to enter into any business transactions on their own or on behalf of their parent company.
DISCLAIMER: Whilst every effort has been made to ensure that the information provided is correct and up-to-date, no warranty is given that it is free from error or omission. Information given is of a general nature, and may not be applicable in a specific situation or for individual circumstances. Accordingly, we disclaim liability for any act done or omission made on the information provided and any consequences for any such act or omission. For specific legal or tax advice, you should seek professional assistance from a legal firm or tax consultancy, respectively.
PB Corporate Services - Company Formation Specialists in Singapore