Singapore Company Registration Guide (2023) | Piloto Asia

Types of Business Entities in Singapore

When it comes to your new company formation, the most significant decision you’ll ever make is to what type of business structure (or legal entity, if you will) you choose for the company. Your decision can affect various aspects of the business, ranging from tax rates to credibility to liability. 

Each business structure will have its own pros and cons, so it’s up to you to decide which one will meet your needs.

Private Limited Company

Piloto Asia recommends companies to register as a private limited company. A Pte Ltd company is an LLC (limited liability company) where shares are held by 50 individuals or less. These shares cannot be publicly traded and are only available to other members of the company.

Most of the privately registered companies are registered as Pte Ltd, including us Piloto Asia. Shareholders of the company can be individuals or corporate entities, or a mix of both.

Pte Ltd company is also the ideal choice because of its flexibility, robustness, and scalability. 

Sole Proprietorship

A sole proprietorship is the simplest form of business structure, but also the riskiest, in Singapore. From a legal standpoint, a sole proprietorship is not equivalent to a separately registered business entity, meaning the owner and business are treated equally. 

The owner owns all the assets and liabilities of his or her business. There are no forms of protection offered to personal assets from various business liabilities and risks. 

What this means is that because you’re registered as a sole proprietor, your liability is unlimited. If the owner can’t pay the business debt incurred, the creditors will come after your personal assets. Example creditors include banks, utility providers, suppliers etc. 

But a lot of entrepreneurs are unaware of this specific financial risk. When it comes to registering your Singapore companies, we advise against registering as a sole proprietor unless the company needs to register as one. 

Partnership

A partnership structure addresses the sole proprietorship’s limited ability to expand. A partnership is made up of two or more people who co-own the business and has no legal existence separate from the partner, meaning a partnership can be dissolved through death, retirement, and incapacity of a partner, and insolvency. 

Like sole proprietorship, partnerships are ideal only for specific situations. 

In Singapore, there are three types of partnerships:

1 – General partnership

A general partnership is formed by a minimum of 2 persons and a max of 20 persons. Partners pay their tax as personal income tax based on the share of income from their partnership. 

Like sole proprietorship, partners have unlimited liability, so personal assets aren’t protected in debts and insolvency cases. Partners can be held liable for the actions of the other partners.

2 – Limited Partnership

A limited partnership is an alternative form of the general partnership structure. The limited partners’ liabilities are limited to their initial investment in the partnership, be it capital or property. But limited partners cannot participate in the business management process. This makes it difficult for companies like us to recommend to our clients. 

3 – Limited Liability Partnership

LLP or limited liability partnership is a more recent and more advanced form of partnership than Limited Partnership and General Partnership. 

As LLP, owners have the flexibility of operating as a partnership but also enjoying the benefits of a corporate structure like a Pte Ltd. Like the other partnerships, LLP requires at least two partners at all times during the business is in operation. 

LLP’s are meant for professional service providers such as accountants, architects, and law firms where two or more professionals build a joint practice in their field. When you register as an LLP, ACRA might require additional vetting from other agencies before your company is registered. 

Public Limited Company

A public limited company is another form of LLC, but they may offer their shares to the public instead of a private limited company. They’ll also need at least 50 shareholders to start with. They are also subject to closer scrutiny by the Singapore government because they’re involved with raising funds from the public. 

Public limited companies are also listed on the stock exchange when they meet the requirements and desire to do so. A PLC is outside the scope of our services since the PLC structure is for large businesses. 

Public Company Limited by Guarantee

A public company limited by guarantee is another type of business structure that is meant for non-profit organizations.  

Foreign Company Registration Options

If a foreign company wants to set up their business in Singapore, they can have the option of registering as a Singapore subsidiary office, representative office, and branch office.

1. Subsidiary Company: Registering as a subsidiary company means that the company takes up a private limited company structure in Singapore, and the parent company is its shareholder. For small and medium-sized foreign companies, a Singapore subsidiary company is the ideal choice for company registration.

2. Branch Office: Branch office is the extension of the parent company. Because it’s not a separate legal identity, this means that the branch office’s liability extends to the parent company. 

3. Representative Office: A representative office registered in Singapore means that it’s in the country for a temporary arrangement for conducting market research activities. It does not have any legal status in Singapore and cannot engage in any activities that yield profit.