Types of business entities

One of the first steps of setting up a business in Singapore is deciding on the type of business entity.

The following table provides a comparison over the main forms of business entities:

Information is correct at the time of publication. The decision on the type of business entity is often a complex, multi-faceted one and it warrants the detail assessment of various factors. Henceforth, the information is presented “as is” only, and does not constitute any professional advice. Readers are urged to assess the suitability to their specific situation.

Sole Proprietorships and General Partnerships

All sole proprietorships and partnerships must be registered with the Accounting And Corporate Regulatory Authority (“ACRA”) under the Business Registration Act, Cap 32. ACRA must be notified of any changes in the particulars of the proprietor, manager or partners of business firms within the prescribed timeline.

Sole proprietorships and general partnerships are not corporate bodies; i.e. sole proprietors and partners of partnerships have unlimited liability for the debts and obligations that arise from the businesses.

Limited Liability Partnerships

A Limited Liability Partnership (LLP) must be registered with ACRA under the Limited Liability Partnerships Act 2005.

An LLP is essentially a partnership with limited liability. It is a body corporate and has a legal personality separate from that of its partners. The partners of an LLP have limited liability for the debts and obligations incurred by the LLP. An LLP has perpetual succession and any change in the partners of an LLP will not affect its existence, rights and liabilities. An LLP can sue and be sued in its own name. It can acquire, own, hold and develop property and incur debts.

Limited Partnerships

A Limited Partnership (LP) is not a separate legal entity. An LP must have at least two partners with at least one general partner and one limited partner. A general partner is liable for all debts and obligations of the LP whilst a limited partner is not liable for the debts and obligations of the LP beyond his agreed contribution. Limited partners do not take part in the management of the LP and have no authority to bind the LP.

An individual or a corporation may be a general partner or a limited partner.

Companies

A limited liability company is the most common form of business entity in Singapore. A limited company is incorporated under the Companies Act 1967 under “Companies” and “Foreign Companies” and registered with ACRA. A limited company may be limited by shares or limited by guarantee. A company may be registered as a private company if it does not have more than 50 shareholders and its Articles of Association restrict the right to transfer shares. Otherwise, the company must be registered as a public company.

A company is a body corporate and has a separate legal personality from its shareholders. The company can sue and be sued in its own name. It can own property and incur debts. The liability of the shareholders, if any, is limited to any amount unpaid on their shares. When the shares are fully paid-up, the shareholders have no further liability to contribute towards the debts of the company.

Foreign Companies

A foreign company that wishes to establish a place of business or carry on business in Singapore may set up a branch. A subsidiary is a new legal entity incorporated under the Companies Act 1967 under “Companies” and “Foreign Companies” whilst a branch is an extension of a company incorporated elsewhere (i.e. the head office). A foreign company or a branch is to be registered with ACRA under the Companies Act 1967 under “Companies” and “Foreign Companies”.

Whether an overseas corporation is deemed to be carrying on business through a branch in Singapore depends on the nature of the activities proposed. To determine whether the proposed activities will require the registration of a Singapore branch, it is advisable to obtain advice from professionals.

Representative Offices

A foreign company may establish a representative office in Singapore to undertake market research and feasibility studies on behalf of the parent company. A representative office is not permitted to engage in business, conclude contracts, and open or negotiate any letters of credit. Approval for the establishment of a representative office must be obtained from International Enterprise Singapore.