Singapore remains to be a favorite financial destination in Asia Pacific. It is considered a tax haven for individuals and businessmen. Doing business in Singapore is made easy with its attractive political and business landscapes. For new investors, choosing a structure for your enterprise is as important as creating a successful marketing strategy.
Here is a comprehensive comparison of the most common business structures registered in Singapore.
Business Firms
In Singapore, there are two types of business firms that are common: the sole proprietorship and partnership.
Sole Proprietorship
Considered the easiest and simplest form of a business, the sole proprietorship is a one-man show.
Advantages
It allows the sole proprietor complete control to run the business as allowed by laws
It provides full freedom to make decisions concerning profits and re-investments.
The profits earned by a sole proprietorship business are regarded as personal income and therefore, must be declared in the owner’s personal tax returns.
It is easy to dissolve.
Disadvantages
It has unlimited liability and responsibility for all debts accrued by the business. Both personal and business assets are vulnerable. It may be difficult to raise funds, which are limited to personal savings or consumer loans.
Partnerships
A partnership is a business venture by at least two persons. It addresses the common disadvantages of a sole proprietorship such as raising funds and attracting high-caliber employees. There are two types of partnerships practiced in Singapore:
- Limited partnership
- Limited liability partnership
Limited Partnership
The minimum partners required are two and the maximum partners are 20. It has an active partner (general) and a dormant partner (limited). However, both partners are liable and responsible for the business existence. The income is taxed based on a partner’s own tax rate.
Limited Liability Partnership
This business structure is a combination of a private limited company and a partnership. LLP enterprises are proliferating in Singapore since 2005. It has a minimum two partners with unlimited numbers of partners allowed. It is favored most by professionals who form venture because its liability is limited to a specific partner. Hence, all profits and assets of another partner are not affected.
Private Limited Company
The private limited companies are local incorporation in Singapore. It has a general term private limited company at the end of its company name. It has a local director, a minimum of one shareholder and a maximum of 50, and a company secretary. Singapore requires only a minimum of S$1 paid-up capital, which can be maximized anytime after its incorporation. There are four types of private limited company in Singapore:
- Private company – It is a local incorporation where its maximum shareholders are limited to 50
- Exempt private company – Its shareholders numbered below 20 and none of them is a corporation
- Public company limited by shares – It can have more than 50 shareholders and raise its capital by bidding debentures and shares to the public
- Public company limited by guarantee – Its activities are in the nature of non-profit with the objectives of advancing public or national interest such as charity or promotion arts
Advantages of a Private Limited Company
All private limited companies enjoy the following benefits:
- Limited liability
- Corporate tax advantages
- Business continuity
