Types of Business Entities in Singapore

Author: Kenneth ([email protected])

Published: Saturday April 3, 2021

Of all the choices you make when deciding on incorporating an entity in Singapore, one of the most important factors is the type of business structure (i.e. legal entity) you choose for your business. Your decision can affect the amount you pay in taxes, the image and perception of your business among your clients and suppliers, the amount of paperwork your business is required to do, the personal liability you face, the ability to borrow money, and the possibility to expand your business.

The following are the main business entity types in Singapore:

Sole Proprietorship

A sole proprietorship is the simplest but the riskiest type of business form in Singapore. From a legal perspective, sole proprietorship is not a separately incorporated entity and therefore the owner and the business are one and the same. The owner personally owns all assets and liabilities of the business. There is no protection of personal assets from business risks and liabilities. As the sole proprietor of a business, you have unlimited liability, meaning that if your business can’t pay all its liabilities, the creditors to whom your business owes money can come after your personal assets. Many entrepreneurs are usually unaware of this enormous financial risk. If the business is sued or can’t pay its bills, the owner is personally responsible for the business’s liabilities; however it is the cheapest and fastest way to setup your company.

Limited Liability Partnership

Among the three types of partnership business entities, LLP is the most recent and most advanced business incorporation structure. It combines the features of partnerships and companies. Registering an LLP gives owners the flexibility of operating as a partnership while enjoying many of the benefits that come with a corporate body like a private limited company.

Private Limited Company

A private limited company is the most advanced, flexible, and scalable type of business form in Singapore. It’s also the most preferred type of Singapore business entity for serious entrepreneurs (as opposed to sole proprietorship or limited liability partnership).

A private limited company is a LLC in which the shares are held by less than 50 persons and are not available to general public. It its a separate legal entity and pays 17% tax on corporate profits. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd. Most privately incorporated businesses in Singapore are registered as private limited companies.