Choosing and Comparing the Different Types of Business Entities and Structures in Singapore

Web Design & Web Development Company in Singapore

Comparison of Business Entities and Structures in Singapore

Comparison of Business Entities and Structures in Singapore

So you have registered for a business name in Singapore and not sure of the different types of business entities and structures to go with?

Being a top business hub in both Asia and the World, we have one of the most efficient frameworks and systems when setting up a business in Singapore.

In Singapore, it’s tremendously fast and easy to set-up and operates a business, and the entire process can sometimes take less than a week.

While registering your business, you need to invest in a website. Design Start can bring your business online with affordable web design prices.

In this article, we will share and compare the 4 main types of business entities and structures in Singapore.

We’ll also share tips on the factors to consider when choosing a business entity and structure.

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 1 owner or a partnership consisting of 2 to 20 owners.

Business owners are personally liable for the debts and losses of the business.

This is also known as unlimited liability.

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.

This means that they are not personally liable for the debts and losses of the company.

3. Limited Liability Partnership

For Limited Liability Partnership or LLP, it is a partnership with a minimum of 2 partners and they have limited liability.

4. Limited Partnership

In 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.

Detailed Comparison on Each Type of Business Entity And Structure

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

 Sole-Proprietorship
DefinitionA business owned by one person
Owned ByOne 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
TaxesProfits taxed at owner’ 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

 Partnership
DefinitionAn 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 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
TaxesProfits 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

 Limited Partnership
DefinitionA 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
  • No maximum limit.
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
TaxesProfits 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

 Limited Liability Partnership
DefinitionA 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)
TaxesProfits 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

 Company
DefinitionA 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)
TaxesProfits 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

SOURCE: ACRA

Factors To Consider When Choosing A Business Entity And Structure

Every business is unique and has different needs. You should consider the following factors to determine the ideal entity and structure for your business.

  1. How much capital are you prepared to invest?
  2. Are you able to finance your business solely or do you need finance from other persons?
  3. What risk are you prepared to take?
  4. Would you prefer limited or unlimited liability?
  5. Would you like to own the business by yourself or together with other people?
  6. 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

  1. You are at least 18 years old.
  2. All business entities and structures must have at least 1 person residing in Singapore.
  3. For business, Limited Liability Partnership(LLP) and Limited Partnership(LP), there is a requirement that the owner or partner’s Medisave must be paid up with a CPF Board at all times.
  4. Comply with all requirements for registration.
  5. Comply with post-registration requirements.

If you want to build a website for your new business but don’t have the capacity to do an effective job it might be time to reach out and seek help from a website design agency like Design Start here in Singapore.