Which Business Structure Is Best for You?(types of companies in singapore )
Whether your business goals are domestic or global, Singapore is the place to get started. The first step in registering a new company in Singapore is to research the different types of businesses available. Each legal form for conducting business is based on a unique set of tenets and has its own set of advantages and disadvantages.(types of companies in singapore )
As a Singaporean business registration service provider, WLP Group operates out of the Lion City. When it comes to assisting business owners with Singapore company registration, WLP Group has a large team of experts with a combined 5+ years of experience.
Business entities are the backbone of any new venture in Singapore, as they define the legal structure of a company. This will be decided at the formation of the company. In this piece, we’ll look at the three most prevalent legal structures for establishing a corporation in Singapore. There are three main business structures: the sole proprietorship, the partnership, and the limited liability company. We’ll talk about how to determine which legal form is best for your company’s needs.
Ownership Restricted to One Person(types of companies in singapore )
A sole proprietorship is a business structure held by either a single individual or a single Singaporean corporation. In 2016, sole proprietorship registrations accounted for 41.6% of all businesses, according to data compiled by Hawksford Quarterly. As one of the least complicated ways to get a company up and running in Singapore, it allows for the smooth conduct of any and all business activities (Sovereign Group).
One kind of sole proprietorship is a firm in which the sole proprietor is the service it provides, as in the case of a personal training business controlled by a trainer who also serves as the business’s sole employee. Here, he is in charge of the company’s operations and must ensure that it complies with all laws and regulations imposed by ACRA. According to the ACRA (Accounting and Corporate Regulatory Authority), there are three main components of a single proprietorship:
- In Singapore, a sole proprietorship does not exist independently from its owner legally. The preceding scenario illustrates how a personal trainer can properly record all of his or her business transactions for legal purposes.
- Owners of businesses take on unlimited personal responsibility. That’s why the owners of a single proprietorship are on the hook for any debts or losses of the business.
- The owner’s name can be used in legal proceedings.
There are many advantages to starting a business as a sole proprietor in Singapore.
First, having complete authority over the company.
a. You can make business choices independently of other people. In the day-to-day operations of your company, you have complete autonomy.
Two: The Initial Setup
a. It’s one of the cheapest and least time-consuming ways to launch a company in Singapore. In Singapore, most new businesses begin as one person operations and eventually “upgrade” to the status of a limited liability company (LLC) or public company.
No revenue sharing(types of companies in singapore )
For starters, there won’t be anybody else to split your earnings with but you (i.e., no stockholders).
The Downsides of Being a Solo Entrepreneur(types of companies in singapore)
1. Lack of a legally distinct entity
a. This is a crucial consideration while forming a business in Singapore.
2. Not qualified for corporation tax breaks
a. A sole proprietorship cannot obtain rewards and incentives like private limited enterprises. Income tax is paid out of one’s own pocket.
These are the key considerations for anyone contemplating about starting a sole proprietorship in Singapore. Before you can legally start your business, ACRA needs several documentation from you. Since forming a company in Singapore is now a fully automated, one-day operation, this city-state has become a popular destination for those looking to start businesses quickly.
Partnership(types of companies in singapore )
A partnership is the optimal business structure for entrepreneurs who wish to collaborate with one or more individuals, whether they be friends, family members, or other acquaintances. A company might have anything from two to twenty owners. According to ACRA, a partnership has the following legal standing:
- There is no distinction between it and the owner, as there is with a sole proprietorship.
- There is still the possibility of unlimited responsibility.
- It has the same legal rights and liabilities as its partner.
Partnerships and single proprietorships are extremely similar. Profits can be split, and decision-making can be spread across more people when you form a partnership.
Organizational Structures for Singaporean Partnerships
In Singapore, you can create one of three distinct forms of partnerships:
1. Cooperation in the Community
The difference between this and a sole proprietorship is the inclusion of two to twenty people. A group of five family members can decide to start a business. The two share equal responsibility for running the company.
2. Limited partnership
Businesses can expand with the help of limited partners by forming a limited partnership, where the general partners can bring in additional investors. Given that general partnerships in Singapore have unlimited liability, most small and medium-sized businesses starting out will opt instead to form a limited partnership. On the other hand, limited partners are only liable to what they have invested in the business, and have no power over the administration of the business.
3, A limited liability company
The legal structure of a Limited Liability Partnership (LLP) combines the advantages of a partnership and a corporation. This is common in multi-professional offices when multiple doctors work together. Professionals in the medical, legal, and financial sectors are included in this category. As opposed to a sole proprietorship, a limited liability partnership (LLP) is not personally responsible for the company’s debts or obligations. They have only themselves to blame for their actions. As a result, the owners’ exposure is mitigated. Yet they miss out on the many advantages that come with forming a limited liability business.
Therefore, keep in mind that there are specific prerequisites before you embark on company registration in Singapore. Partners must be at least 18 years of age, be Singapore citizens, and international partners need to nominate a Singapore resident as a manager.
Joint Stock Company
Government data from Singapore indicates that a third of the half-million businesses there are private limited firms. The shareholders of a private limited company, which operates as a limited liability company, can be either natural persons or legal entities. Hawksford Singapore Pte Ltd is an example of a Singaporean private limited company name.
The preceding data begs the question: Why do so many Singaporean enterprises opt to form a PLC?
A few of the benefits of setting up shop in Singapore as a limited liability corporation are outlined below.
1. A legally distinct entity with protected assets
In the eyes of the law, the company is an entity distinct from its owners and management. The company will then be able to enter into contracts, buy assets, and take on debt without any outside interference. Thereby, it all stops at the corporation. Each shareholder’s liability is limited to the initial investment made in the company.
The Tax Breaks
Singapore’s tax rate for PLCs is quite low, ranging from 9 percent to 17 percent. The single-tier tax structure in Singapore means that dividends are exempt from taxation for businesses. Dividends are paid to shareholders after corporate income taxes have been paid.
Thirdly, it’s simple to change hands.
The sale of stock is a simple and quick way to accomplish this goal. No single member’s participation is essential to the company’s survival. Success like this is sustainable for the company’s future.
Capital can be raised either issuing extra shares to present shareholders, or bringing in new shareholders by selling your own shares. This will avoid the diluting of ownership within the company among present investors.
This could be enticing in theory. Setting up a private limited company in Singapore does not come without its drawbacks, though.
1. Stringent rules
Companies in Singapore, for instance, are governed by the terms of the Companies Act. Businesses in this situation will be subject to more stringent controls from the government.
2. It’s a pain to liquidate.
It may be challenging to locate purchasers interested in purchasing shares to your firm due to the legal formalities involved. If you need to quickly dissolve the business, this presents a challenge.
3. The need for thorough accounting and auditing is complex.
Complete and accurate accounting statements, such as an income statement, balance sheet, and statement of cash flows, as well as records of all financial activities, are required. Additionally, Singaporean private limited firms require to submit annual or monthly audits to the country’s income tax authorities. Any infraction of tax laws will result in a heavy charge for your business, thus it is imperative that your accounting crew use extreme caution when keeping the books.