Overview of company types in Singapore
Singapore's strategic location, its excellent business infrastructure, favourable tax regime, and the country's high scores in economic and business freedom indexes are some of the most important factors contributing to the country's appealing image for foreign investors.
If you are one of the hundreds of entrepreneurs that every year launch a business venture in the thriving Singaporean market, this section will help you become familiar with the different types of business structure available in Singapore.
Under Singaporean law, sole propietorships are not considered independent legal entities. This means that anyone looking to start up a business in Singapore under this type of company structure is fully accountable for the business' debts and liabilities. Sole propietorships offer no protection of the owner's personal assets, as once the propietorship is registered, any assets become the company's property. Any profits derived from a sole propietorship will be taxed under the personal tax regime, and no tax incentives are available to owners of sole propietorships.
General partnerships are similar to sole propietorships in their structure and limitations, although they allow for the co-ownership of a business. All partners are equally liable for the company's debts and liabilities.
Limited Liability Partnerships
These are considered separate legal entities and partners are only liable according to the amount they invested in the partnership, whether their investment consisted of property or capital. Any profits generated by LLPs are considered personal income and are taxed as such. No corporate tax incentives apply, and foreigners need to appoint an intermediary in order to register the LLP.
Limited Liability Companies
Private Limited Company
These are legal entities constituted by at least one owner and one shareholder. The number of shareholders is limited to 50. The minimum value of the company shares is S$1, and the company's liability is limited to the shares value, offering protection to the personal assets of the owner and the shareholders. No capital gains tax applies, and annual profits of up to S$300,000 are taxed at 9 per cent. Whenever profits exceed S$300,000, a tax cap of 17 per cent is applied.
Public Limited Company
Public Limited Companies must consist of a director, a secretary, and at least 50 shareholders that make their shares available to the general public on the stock exchange. Government approval is required to set up this type of company, and special rules apply regarding the company's audits, tax regime, and annual general meetings.
Small and medium-sized foreign companies can establish their presence in Singapore by opening a subsidiary. This arrangement offers personal asset protection, as well as resident legal and tax status. Shares can be wholly owned by the parent company.
Alternatively, it is possible to open a branch office, which is not considered an independent legal entity and does not enjoy the tax incentives offered to resident companies.
The third type of arrangement available to foreign companies is the representative office, which is considered a short-term solution for companies who intend to test the waters in the local market before establishing a subsidiary or a branch office.