Learn how we simplify the key considerations of choosing a business vehicle - we keep things simple for business owners and focus on what matters most
Written by Ericz Ezekiel Tay
When setting up a business in Singapore, there are various business structures or vehicles to choose from. By understanding your end goals, you can make the right choice from the start of your business to help prevent administrative and legal issues further down the line. In this brief insight, we compare the pros and cons of some of the key business structures.
WHAT YOU NEED TO KNOW
Key considerations. When choosing a structure, depending on your intended ownership and funding requirements, the 4 key considerations you may wish to consider are:
Comparison. We look at 5 main business structures/vehicles and compare the pros and cons below.
Company | Limited Liability Partnership | Limited Partnership | Partnership | Sole-Proprietorship | |
What is this? | A business that is separate and distinct from its shareholders and directors.
Exempt private company - 20 shareholders or less and no corporate shareholder.
Private Company – 50 shareholders or less . | A business consisting of 2 or more persons (no maximum), where their liability is generally limited.
This is generally suitable for professional firms such as accountancy, law and architecture. | A business consisting of 2 or more persons (no maximum), with at least 1 general partner and 1 limited partner (i.e. a 'sleeping' partner who is not involved in the day-to-day operations of the business).
| A business owned by 2 or more persons (maximum of 20 partners).
This is easy to set up. | A business owned by 1 person.
This is easy to set up. |
Liability for Owners | Limited | Limited | Unlimited for general partner and limited for limited partner | Unlimited | Unlimited |
Tax & Profit Extraction | Profits taxed at corporate tax rates.
Profits of the business will need to be distributed to shareholders as dividends. | Profits taxed at partners' personal income tax rates (if individual) / corporate tax rate (if corporation).
Owners entitled to all the profits of the business | Profits taxed at partners' personal income tax rates (if individual) / corporate tax rate (if corporation).
Owners entitled to all the profits of the business | Profits taxed at owner's personal income tax rates.
Owners entitled to all the profits of the business. | Profits taxed at owner's personal income tax rates.
Owner entitled to all the profits of the business. |
Funds Raising & "Investability" | + + + This is a well established and globally recognised structure/vehicle that is familiar to most investors, making it straightforward and attractive.
Shares can be freely transferred. Business can also borrow money and grant security for debt. | + Limited ability to raise capital. Options include borrowing of money and capital contributions from incoming partners. | + Limited ability to raise capital as it is not possible to issue shares or create charges.
Options include borrowing of money and capital contributions from incoming partners. | + Limited ability to raise capital as it is not possible to issue shares or create charges.
Options include borrowing of money and capital contributions from incoming partners. | + Limited ability to raise capital as it is not possible to issue shares or create charges.
Options include borrowing of money and conversion to partnership. |
Regulatory Disclosures | Extensive, must appoint a company secretary within 6 months of incorporation.
Must appoint an auditor within 3 months after incorporation, unless the company is exempt from audit requirements.
Annual returns must be filed. Statutory requirements for general meetings, directors, company secretary, share allotments must be complied with. | Moderate, including annual declaration of solvency/insolvency | Minimal | Minimal | Minimal |
Setup Fees | $315 ($15 name application fee and $300 incorporation fee) | $115 ($15 name application fee and $100 registration fee) | 115 ($15 name application fee and $100 registration fee) for 1-year registration.
$175 ($15 name application fee and $160 registration fee) for 3-year registration. | $115 ($15 name application fee and $100 registration fee) for 1-year registration.
$175 ($15 name application fee and $160 registration fee) for 3-year registration. | $115 ($15 name application fee and $100 registration fee) for 1-year registration.
$175 ($15 name application fee and $160 registration fee) for 3-year registration. |
ACTION REQUIRED
Business owners should carefully consider which vehicle is most suited, considering operational needs and short to mid-term goals, and take both legal and accounting advice from the outset.
Our Corporate team advises founders, startups and new businesses, and offers bespoke advice to businesses at all stages of their lifecycle.
OTHER RESOURCES
Singapore's business landscape thrives on transparency and support. Explore abundant resources from government agencies such as the Accounting and Corporate Regulatory Authority (ACRA) and GoBusiness Singapore for valuable insights and assistance.
Get in touch with Ericz to learn more. We are here to partner with you, offering an unbiased perspective and exploring practical alternatives.