Different Types of Companies You Can Incorporate in Singapore

Singapore is known for its robust business environment, strategic location in Southeast Asia, and business-friendly policies. The city-state consistently ranks as one of the best places to start a business due to its ease of doing business, tax incentives, and efficient regulatory framework. If you’re looking to set up a business in Singapore, it's essential to understand the different types of companies you can incorporate and the requirements associated with each.

Whether you're an entrepreneur based in Singapore or a foreign investor looking to tap into the Asian market, this guide will walk you through the various company types you can incorporate in Singapore. Each company type comes with distinct characteristics, benefits, and regulatory requirements, and choosing the right one for your business is crucial for its success.

1. Private Limited Company (Pte Ltd)

The Private Limited Company, or "Pte Ltd" in short, is by far the most common business structure chosen by entrepreneurs in Singapore. It is a separate legal entity from its owners, offering limited liability protection to shareholders, meaning personal assets are not at risk if the company incurs debt.

Key Features:

• Shareholders: A Private Limited Company can have between 1 and 50 shareholders, who can be local or foreign.
• Directors: At least one director must be a Singaporean resident (either a Singapore citizen, permanent resident, or an Employment Pass holder).
• Liability: Shareholders’ liability is limited to the amount unpaid on their shares.
• Minimum Capital: The minimum paid-up capital is S$1.
• Tax Benefits: The company benefits from Singapore’s attractive corporate tax rate of 17%, with additional tax exemptions for new businesses.

A Private Limited Company is ideal for most businesses as it provides credibility, protects personal assets, and offers flexible ownership structures.

2. Sole Proprietorship

A Sole Proprietorship is the simplest form of business structure in Singapore. As the name suggests, this type of business is owned and operated by one individual. Unlike a Private Limited Company, there is no distinction between the business owner and the business itself.

Key Features:

• Ownership: The business is owned entirely by the individual.
• Liability: The owner has unlimited liability, meaning they are personally responsible for any debts or obligations of the business.
• Taxation: The business income is taxed as the owner’s personal income, which may be subject to higher rates if profits exceed the individual’s personal tax bracket.
• Capital: No minimum capital requirement.

A Sole Proprietorship is ideal for small-scale businesses or individual entrepreneurs who are just starting out. However, because of the unlimited liability, it may not be the best option for businesses that expect to scale significantly or incur significant risk.

3. Partnership

A Partnership is a business structure where two or more individuals or entities come together to run a business. Partnerships in Singapore can be set up as either a general partnership or a limited partnership.

Key Features:

• General Partnership: All partners share equal responsibility and liabilities for the business. Like a Sole Proprietorship, partners have unlimited liability for the business’s debts and obligations.
• Limited Partnership: In a limited partnership, at least one partner has unlimited liability, while the others (limited partners) have liability limited to their capital contribution.
• Taxation: Business income is passed through to the individual partners, who report it as personal income. Thus, the business itself is not taxed.
• Liability: General partners have unlimited liability, whereas limited partners have liability up to their capital contribution.

A Partnership is suitable for businesses with multiple owners or those seeking to share responsibilities and resources. However, the shared liability in a General Partnership means that it may not be the ideal choice for high-risk businesses.

4. Limited Liability Partnership (LLP)

The Limited Liability Partnership (LLP) structure combines the features of a partnership and a Private Limited Company. It allows business owners to enjoy limited liability while maintaining the flexibility of a partnership.

Key Features:

• Liability: Each partner in an LLP has limited liability, meaning they are not personally liable for the debts of the business beyond their capital contribution.
• Taxation: An LLP is not taxed as a separate entity. Instead, profits are passed through to the individual partners, who report them as personal income.
• Ownership: An LLP requires at least two partners, but there’s no upper limit on the number of partners.
• Capital: No minimum capital requirement.

An LLP is ideal for businesses where partners want to enjoy the benefits of limited liability while retaining the flexibility of a partnership structure. It is especially popular among professional services businesses like law firms, accounting firms, and consultants.

5. Branch Office

A branch office is a business entity that allows foreign companies to operate in Singapore under their parent company’s name. The branch office is not a separate legal entity and is considered an extension of the parent company.

Key Features:

• Ownership: A branch office is fully owned by the foreign parent company.
• Liability: The parent company is fully responsible for the liabilities and obligations of the branch office.
• Taxation: The branch office is subject to corporate tax in Singapore on the income generated within the country. However, it is not eligible for tax exemptions available to Singapore-based companies.
• Capital: No minimum capital requirement.

A Branch Office is suitable for foreign companies that wish to establish a presence in Singapore without setting up a separate legal entity. However, the lack of limited liability means that the parent company assumes full responsibility for the branch office's actions and debts.

6. Representative Office

A Representative Office (RO) is similar to a branch office but is limited in the scope of activities it can undertake. It is intended for foreign companies that want to explore the market in Singapore and carry out market research, promotional activities, or liaison work on behalf of the parent company.

Key Features:

• Ownership: A representative office is an extension of the foreign parent company.
• Scope of Activities: The activities are restricted to non-commercial purposes, such as market research and promotional activities. It cannot engage in revenue-generating activities.
• Liability: The parent company holds full responsibility for the RO’s liabilities.
• Taxation: The RO is not taxed in Singapore since it doesn’t generate any income.

A Representative Office is ideal for foreign businesses that wish to test the Singapore market or build business relationships but do not plan to generate revenue directly from Singapore.

7. Subsidiary Company

A Subsidiary is a company formed when a parent company owns more than 50% of the shares of the new company. While it is a separate legal entity from the parent company, the parent company retains control over the subsidiary.

Key Features:

• Ownership: The parent company must own more than 50% of the subsidiary’s shares.
• **Liability: **The subsidiary is a separate legal entity, meaning the parent company’s liability is limited to the amount of its investment in the subsidiary.
• Taxation: The subsidiary is taxed as a separate entity, subject to Singapore's corporate tax rate.
• Capital: No minimum capital requirement, but the parent company must provide the initial investment.

A Subsidiary is often used by foreign companies that wish to set up a separate legal entity in Singapore while maintaining control over operations. This structure provides the benefit of limited liability while allowing the parent company to have significant influence over the subsidiary's operations.

Conclusion

Choosing the right structure while company registration in Singapore is crucial for ensuring that your business is set up for success. Whether you're a solo entrepreneur looking to establish a Sole Proprietorship, a partnership seeking the flexibility of an LLP, or a foreign company aiming to expand into Singapore with a branch office, Singapore offers a variety of business structures to suit your needs.

Each company type has its own advantages and disadvantages, so it’s essential to consider your business goals, liability preferences, and tax implications before making a decision. If you're unsure which structure best fits your business, consulting a local business advisor or legal professional can provide valuable guidance tailored to your specific situation.

FAQs

1. Can a foreigner register a company in Singapore?
Yes, foreigners can register a company in Singapore. However, they need to appoint at least one local director, who is either a Singapore citizen, permanent resident, or Employment Pass holder.

2. What is the minimum capital requirement to start a company in Singapore?
The minimum paid-up capital for most types of companies in Singapore is just S$1. However, certain companies, such as financial institutions, may require a higher capital investment.

3. What is the difference between a Branch Office and a Representative Office in Singapore?
A Branch Office can engage in business activities and earn revenue, while a Representative Office is restricted to non-commercial activities like market research and promotional tasks.