One of the most important steps before you can incorporate a company is checking out the different types of companies in Singapore and deciding which one is best for your business.
Choosing the appropriate business structure is crucial for entrepreneurs looking to establish themselves in Singapore’s competitive business environment.
However, with numerous available options, navigating the legal requirements and selecting the most suitable among the types of companies in Singapore can take time and effort. This guide offers a detailed analysis of the types of companies in Singapore.
Whether you’re considering a sole proprietorship or a private limited company, this article provides valuable insights to help you make informed decisions that align with your unique business needs.
Common Types of Companies in Singapore
There are different types of companies in Singapore to consider while starting a business. Sole proprietorships, partnerships and private limited companies are some of the most frequently employed business structures.
Here is a closer examination of each of these three business categories:
One of the most common types of companies in Singapore is a sole proprietorship. This refers to a company which is owned and operated by one person, a single company, or a limited liability partnership. There are no partners, unlike other kinds of enterprises.
A sole proprietorship is not considered a distinct legal entity from the business owner in terms of standing. It means the owner is personally responsible for any debts or losses incurred by the company.
Also, because a sole proprietorship is not an independent legal entity, it can only bring or receive a lawsuit in the owner’s name.
Finally, a partnership is also one of the common types of companies in Singapore.
A partnership is a business structure that necessitates at least two partners, which can be either individuals, companies, or limited liability partnerships. In a general partnership, a maximum of 20 partners are allowed
However, this cap doesn’t apply to professional partnerships formed to practice a profession that requires specific qualifications mandated by law. These professional partnerships are allowed to have more than 20 partners.
For instance, engineers, architects, and lawyers registered under the Professional Engineers Act, Architects Act, and Legal Profession Act can form such professional partnerships. These firms can also opt to register under the Limited Liability Partnerships Act.
The legal status of a partnership does not constitute a distinct legal entity from its owners. As a result, the partners bear personal liability for all the partnership’s debts and losses. The partnership may bring legal action or be sued in the name of its partners.
Private Limited Company
Another one of the common types of companies in Singapore is a private limited company (PLC). This kind of company structure is a separate legal entity that conducts business independently of its owners.
It enables the business to enter into agreements with third parties in its own name without the directors or shareholders personally being involved. The company can also possess assets and property in its own name and bring or defend legal actions on its own behalf.
The PLC’s legal position is unaffected by internal restructuring or staff changes. As a result, business operations can carry on as usual. Also, PLCs can establish legal ties with their members or directors, which might be advantageous in some circumstances.
Types of Companies in Singapore for Foreign Businesses
A foreign company looking to expand its business operations in Singapore must select from the many types of companies in Singapore to establish a legal presence here.
Although there are alternatives, branches, representative offices, and subsidiaries are the most often utilized types of business structures. Let’s examine each of these three categories of businesses in more detail:
One choice for a foreign business looking to establish a local presence in Singapore is to create a subsidiary. It means that the subsidiary, which will be governed by the statutory and disclosure requirements of the Companies Act, has only one shareholder, the foreign firm.
The subsidiary and the overseas parent company will each have their own legal identities. The most common form to establish a subsidiary in Singapore is a private limited company. This structure offers similar benefits and liabilities as a locally incorporated private limited company.
As shareholders of the foreign parent company, they can enjoy the advantages of having a local presence in Singapore while limiting their liability.
Foreign businesses exploring Singapore as a potential business hub can consider setting up a Representative Office (RO). With an RO, foreign entities can evaluate the business landscape in Singapore before establishing a permanent establishment.
Kindly note that an RO is considered a temporary set-up for the assessment of the business environment, with activities such as conducting market research and survey with no legal status. Therefore, it cannot engage in any trading or business activities which yield a profit.
Upon approval, a foreign commercial entity’s RO can operate in Singapore for one year. If the RO wishes to continue its operations in Singapore, it can apply for an extension of up to three years, subject to approval on a case-by-case basis.
After the extension period, ROs must register their operations with Singapore’s Accounting & Corporate Regulatory Authority (ACRA).
To operate in Singapore, a foreign company may establish a branch office.
In contrast to a subsidiary, a branch office of a foreign company must appoint a locally resident-authorized representative. The foreign branch is also subject to the statutory and disclosure requirements of the Companies Act.
Moreover, all foreign companies are also required to submit their financial statements when filing annual returns with ACRA. This includes the financial statements of their Singapore branch offices.
Additionally, all Singapore Branches must prepare an audited profit and loss account following the Accounting Standards, which accurately represents the profit or loss resulting from their operations in Singapore.
They must also provide an audited statement that reflects their assets and liabilities arising from their operations in Singapore and submit these documents to ACRA.
6 Factors to Consider when Choosing a Company Structure for your Business
Companies must consider factors to determine the best structure for their business needs, including capital investment, number of owners, liability and responsibility, risk, advantages and disadvantages, and ease of closure.
Here are the factors to consider when selecting among the types of companies in Singapore:
1. Capital Investment
One of the most important things to consider when selecting a business structure is the amount of capital investment. While specific arrangements, such as sole proprietorships or partnerships, call for just modest capital, others, such as PLCs, may require significant inputs.
2. Number of Owners
Another factor to consider is the number of owners the business will have. For example, forming a partnership or PLC may be the best option if there are only a few owners. Do note that if the company has a foreign director, setting up a PLC would be the better option.
3. Liability and Responsibility
Liability and responsibility are also essential factors to consider. For instance, sole proprietorships offer no protection against personal liability, while PLCs provide the most protection.
Another element that businesses must consider is risk, particularly for companies working in high-risk sectors like construction. These firms might benefit more from legal entities like PLCs that provide protection from personal liability.
5. Advantages and Disadvantages
It’s also crucial to consider each business structure’s advantages and disadvantages. For instance, sole proprietorships are easy to establish and run, but the owner is responsible for all obligations.
In contrast, PLCs offer the greatest level of security but are more difficult to set up and manage.
6. Ease of Closure
Finally, the ease of closure is another factor to consider. Sole proprietorships can be dissolved quickly, while PLCs require more formal procedures.
Private Limited Company – The Overall Most Ideal Company Structure
The most popular and widely used company structure in Singapore is the Private Limited Company (PLC). Among all the types of companies in Singapore, private limited companies are the country’s most common type of privately incorporated business.
A private limited company has fewer than 50 shareholders and does not offer its shares to the general public. Additionally, “Private Limited” or “Pte Ltd” is the typical suffix at the end of a private limited company’s name in Singapore.
Here are some of the reasons why a PLC is the overall ideal company structure in Singapore:
Limited Liability Protection
The amount each member agrees to invest as capital to the firm is the maximum amount they are liable to pay toward the company’s obligations.
Separate legal entity
Private limited companies have legal identities distinct from their shareholders and directors. It can acquire assets, incur debt, sign contracts, file lawsuits, and be sued in its name.
Ease of raising capital
Because limited companies allow for a distinction between personal and corporate assets, raising funds for expansion or other objectives is more straightforward and is therefore preferred by investors and banks.
One technique to raise capital is adding new shareholders or issuing additional shares to current shareholders.
Benefits and incentives concerning taxes
A Singapore private limited company is a particularly effective tax entity. The effective corporate tax rate for Singapore businesses is a flat 17% of its chargeable income.
Singapore’s single-tier tax system also allows shareholders to receive dividends tax-free once corporate income has been taxed.
How We Can help – SJH Advisory’s Company Incorporation Services
Incorporating a company in Singapore can be complex and time-consuming, especially for first-time business owners. At SJH Advisory, we are committed to providing expert guidance and support to ensure the incorporation process is smooth and hassle-free.
We offer comprehensive company incorporation services in Singapore. Our experienced professionals will work closely with you to understand your business needs and objectives and provide you with a personalized incorporation plan.
Our services include handling all the necessary paperwork, liaising with government authorities, and ensuring you comply with all legal requirements.
We will also analyze the different types of companies in Singapore and help you choose the most appropriate company structure for your business, providing you with valuable insights into the Singapore business landscape.
Contact us today to learn more about our company incorporation services and how we can help you incorporate your company in Singapore.
Types of Companies in Singapore - Frequently Asked Questions
When incorporating a company, business owners can choose from the seven different types of companies in Singapore.
These are exempt private companies, a private company limited by shares, a public company limited by shares, a public company limited by guarantee, an unlimited private company, an unlimited exempt private company, and an unlimited public company.
It is important to note that when submitting a company name application, business owners must specify the relevant company type. There are different types of companies in Singapore and each one has its unique features and requirements.
It is crucial to carefully consider which kind of company is most suitable for the business needs before deciding.
Business owners have several options for selecting a business structure in Singapore. The four main types are sole proprietorship (one owner) or a partnership (two or more owners), limited partnership (LP), limited liability partnership (LLP), and company.
Among all the types of companies in Singapore, private limited companies are the most commonly incorporated type of business. Typically, these companies end their names with “Private Limited” or “Pte Ltd” in Singapore.
Foreigners wishing to register a business in Singapore can engage a registered filing agent to submit the online application.
“Ltd” is short for “Limited.” After registering a limited company, the business owner can choose whether to use “Ltd” or “Limited” as a suffix in the company name on the certificate of incorporation.
These terms are interchangeable, meaning a company can use either one after registration, regardless of what is printed on the certificate. Limited liability partnerships use “LLP” as their suffix, while public limited companies use “LIMITED”.
The appropriate choice of company structure is determined by various factors such as the nature and size of the business, director(s) & shareholder(s) structure, concerns about personal liability, tax implications, and other related considerations.
Seeking the advice of a corporate services provider is advisable to determine the most suitable among the many types of companies in Singapore.