Establishing a Successful Business in Singapore
When it comes to forming a firm, choosing the correct business structure is critical to its success. Your decision may have an impact on your company’s image and reputation among clients and banks, administrative procedures, taxes, personal obligations, and capacity to grow operations. To assist you in selecting the best business entity for your firm’s growth, we’ve offered an overview of the many types of business structures available to begin your Singapore company incorporation process. Each entity is subject to varied regulatory and tax rates based on its structure and ownership.
If you have questions concerning an appropriate business entity for your company incorporation, our skilled staff is also available for assistance.
Limited Liability Company
A Private Limited Corporation, a domestically incorporated company, is Singapore’s most adaptable and modern business structure. It is also the most popular business form in Singapore since it protects the owner’s personal assets from the company’s responsibilities and provides tax breaks and exemptions.
A private limited company’s name must include the suffix “Private Limited” (Pte Ltd). The maximum number of stockholders is 50. While this structure allows for 100% foreign ownership, the firm must have a Singapore citizen/resident or Employment Pass (EP) holder as a local director.
This company form has several varieties, including Private Limited Company, Exempt Private Limited Company, Public Limited Company by Shares, and Public Limited Company by Guarantee.
Shareholders’ personal assets are protected.
Transferable ownership and the nomination of additional shareholders to permit the injection of additional cash for business growth
A solid foundation of business reputation, professional commitment, and vision
A more professional business image increases the likelihood of receiving loans from banks and other financial organizations.
Perpetual existence with uninterrupted business operations regardless of shareholder or holding pattern changes
The corporation tax rate is highly competitive and effective.
For the first three years, a new Singapore company pays no tax on its first SGD 100,000 taxable income.
For the first three years of a new Singapore company, the maximum tax rate is 8.5% on taxable revenue from SGD 100,000 to SGD 300,000 each year.
On taxable income above SGD 300,000, there is a low flat tax rate of 17%.
Capital gains and dividends are tax-free.
Regular evaluations of Singapore Enterprises Act procedures to improve business growth and start-up companies
The sole proprietorship
A sole proprietorship is a sort of business organization in which just one person owns the company. The Sole Proprietor (i.e. owner) has final authority and accountability for the business’s assets and obligations. Because the Sole Proprietor is not a separate legal entity from the business, he or she is fully liable for the company’s losses and debts. Sole proprietorships do not benefit from the tax breaks and exemptions available to Private Limited Companies.
As a Sole Proprietor, any Singapore citizen, Singapore Permanent Resident (PR), Employment Pass (EP), or Entrepreneur Pass (EntrePass) holder can apply. Foreign persons and companies are welcome to register as well, as long as a local resident management is recruited.
The owner’s business is not a separate legal entity.
All debts and losses incurred during the course of business are totally borne by the sole proprietor.
Profits from a sole proprietorship are taxed at the personal income tax rate of the individual who owns the entity.
Because the business stops with the death of the owner, it is neither perpetual nor transferable in part.
Because a sole proprietorship is not a legal entity, it cannot register another business enterprise.
All letterheads, invoices, bills, and other business papers must have the Sole Proprietorship’s registration number.
Investors are frequently hesitant to deal with non-incorporated businesses, therefore capital injection and expansion alternatives are limited.
All modifications to the business’s particulars must be filed with the Registrar within 14 days of the change.
The registration of a sole proprietorship must be renewed annually.
A partnership, unlike a sole proprietorship, allows two or more people to start and co-own a business. With this corporate structure, you and your partner can mutually acquire finance, talent, and strategic assets. Partnerships, on the other hand, do not benefit from the tax breaks and exemptions available to Private Limited Companies.
The number of partners in a business is capped at 20 under the Singapore Companies Act, as all partnerships with more than 20 partners are obliged to register as a Private Limited Company.
Partnership in general
Because all partners are personally liable for any obligations and liabilities incurred throughout the course of business, a General Partnership functions similarly to a sole proprietorship. Partners should consult with a lawyer to draft a Partnership Agreement that defines each partner’s position, obligations, and profits. Each partner may also be held liable for the activities of another.
As a result, this structure is not popular among foreigners and Singaporeans wishing to incorporate a firm.
A Limited Partnership firm may be registered by Singapore residents, Singapore Permanent Residents (PR), and Employment Pass (EP) holders. Foreign individuals can form a Limited Partnership, but they must pick a local manager to administer the business.
There is no independent legal entity from the partners.
ACRA allows for quick and simple setup.
They are not obligated to examine their accounts or submit annual returns to ACRA.
More resources and funding opportunities for business expansion, as loans may be easier to obtain depending on the total assets of all partners
All partners are totally responsible for the company.
A partner might be held liable for the loss of another partner.
Profits are taxed at the partners’ personal income tax rates if they are individuals, or at the corporate tax rate if they are corporations.
There are no tax breaks or exemptions.
Partnerships are not permanent since they are automatically terminated when one of the partners dies.
Partnership decisions must be agreed upon by all partners.