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Types of Business Entities in Singapore

Are you looking to invest in one of the world’s top financial hubs? Singapore has been ranked second in the world’s ease of doing business. You can register a business and start operating in less than 3 days. It is also one of the friendliest investment places for foreigners. What kind of business entities can you form in Singapore?

Business Entities in Singapore

There are 7 kinds of business entities allowed in Singapore;

#1 Sole proprietorship/ sole trader

This business entity is owned by one person. The owner has an absolute say in the business. A sole proprietor takes all profits but also bears all losses. The business is not a separate legal entity from the owner; the owner bears all legal responsibility of the business. To register a sole proprietorship, you have to be older than 18 years.

A sole proprietorship can be registered by a Singaporean, a foreigner holding a permanent resident visa, or a foreigner with an EntrePass. You must have an updated account with Medisave. You must continue paying timely contributions to avoid the early cancellation of the business.

It is possible to register a sole proprietorship without being physically in Singapore. However, you must appoint a Singaporean representative. You must also engage a filing agent who can be a corporate secretary, accounting, or law firm.

Foreigners residing in Singapore should seek approval from the Ministry of Manpower before registering a sole proprietorship. If they do not have a SingPass or CorpPass, they should engage the services of a filing agent.

#2 Ordinary Partnership

This business entity is owned by at least 2 people and a maximum of 20 people. The business is not a separate legal entity. The partners have unlimited liability, meaning they are held legally and financially responsible for the business dealings. The partners pay income tax.

A partnership can be registered by a foreigner and Singaporean. Foreigners must hold a permanent residency visa, employment pass, or dependent visa. Foreigners must appoint a local filing agent.

#3 Limited Partnership

This type of partnership has a minimum of two partners and a maximum of twenty. One partner should be a general partner, while one should be a limited partner. The general partner runs the business while the limited partner puts up the capital.

The limited partner bears financial responsibility up to the limit agreed upon. The general partner bears unlimited liability. A corporation can be a partner. Foreigners can also be part of a partnership. A local manager is to be appointed in case all the partners reside outside Singapore.

#4 Limited liability partnership

A limited liability partnership limits the financial and legal responsibilities of the partners. The partner can be an individual or a corporation. Foreigners can also be part of this type of business. A local manager must be appointed.

A limited liability partnership combines features of an ordinary partnership and that of a company. The partners pay individual income tax and are not exempt from tax like companies. Personal relief is available when applicable. Corporate tax relief is also available if the corporate partner is eligible. The business is a separate legal entity from the owners.

#5 Private Limited Company

This is also known as a private company limited by shares. A private company is owned by a maximum of 50 people. Shareholders can be individuals or corporations. Foreigners can also be shareholders.

A private company is a separate legal entity from the shareholders. The liability of the shareholders is limited to the number of shares. The company must have a local director. A foreigner can also be a director after obtaining an employment pass. A private company must appoint a company secretary within 6 months and an auditor within 3 months.

An Exempt Private Company has a maximum of 20 shareholders. It cannot have a corporation as a shareholder. Approval must also be done by the Ministry of Trade.

#6 Public Company Limited by Shares

A public company has more than 50 shareholders. The business can raise money from the public by issuing shares or debentures. A public company must also register its prospectus with the Monetary Authority of Singapore (MAS).

#7 Public Company Limited by Guarantee

This type of company is formed to carry out non-profit activities, for example, promoting art. The company has members instead of shareholders. The members guarantee to pay a fixed sum to cover the company’s liability in case it is wound up.

Company formation in Singapore

Companies are registered by the Accounting and Corporate Regulatory Authority (ACRA). The process can be handled by a filing agent. The steps to registering a company are;

• Choosing a company name – A name search should be done with ACRA. The name is submitted via ACRA’s online portal-BizFile. It should not be vulgar or intended to demean other people or cultures.
• Appointing directors, company secretary, auditors, and other key personnel- The company must appoint at least 1 director who is a resident in Singapore. Foreigners can also be directors but they have to obtain a Letter of Consent from the Ministry of Manpower. They also have to obtain an Employment Pass. The list of significant shareholders holding more than 25% of shares should be submitted to ACRA. They also have to submit background checks.
• Registering shares and shareholders – The minimum issued capital should be $1. Ordinary shares give shareholders voting rights and the rights to share in dividends. Preferential shares give the shareholders more preference over ordinary shares. The preferences are stated in the company’s constitution or resolution.
• Register an address – An address where all the company’s correspondences are addressed must be provided. A residential address can be used by service companies e.g. lawyers, or consultancies.
• Submit the application on BizFile – The prepared documents should be submitted via ACRA’s online portal called BizFile. The Certificate of Incorporation is usually issued within 3 days if the documentation is proper. The company must also pick its financial year ending and beginning. This is to determine the date for annual tax returns. The company must also appoint an auditor within 3 months.

Setting up a Company in Singapore

Singapore is one of the most coveted investment destinations in the world. Foreign investors are attracted by the highly developed infrastructure, financial institutions, and a stable political environment.

Singapore also has highly developed human resources. The country’s educational system is ranked number one in the world. Foreigners’ rights are well protected and defended by an efficient arbitration system. With such an attractive business environment, Singapore will continue attracting investors from around the world.