Choosing the Right Structure for Your Company

Company Structure

Over the years, Singapore has become one of the world’s fastest-growing economies. It is one of Asia’s go-to destinations for businesses and company incorporation.

 

Company Incorporation in Singapore

For company incorporation in the country, one should seek assistance from a reliable company formation service provider. The following factors should be considered before incorporating a company:

  • A company should be incorporated before doing businesses in Singapore. This includes choosing the structure type and getting a corporate bank account.
  • All companies which are established in Singapore must comply with the Singapore Companies Act. It should be registered and be compliant with ACRA (Accounting and Corporate Regulatory Authority).
  • The minimum set-up requirements for company registration includes having at least one Shareholder (regardless corporate or individual entity), one Local Director, one Company Secretary, the initial share capital of at least SGD 1, and a Singapore registered office address.

Singapore company incorporation

Importance of Choosing the Right Business Structure

The company’s structure will have long term effects on a business, so it is important to get it right.

The following are some of the reasons why choosing the right business structure is important:

  • Having the right business structure can protect business’ assets from liabilities.
  • The type of company structure will impact tax rates
  • The amount of paperwork and the distribution of profit

 

The most common business entities in Singapore are the following:

 

Sole Proprietorship

Considered as a “One-Man Show”, this entity is also named as a sole trader. It is run and operated by one person. This structure is suitable for small businesses/ start-up companies.

 

Advantages

  • Such an entity is easier to set up than other business entities.
  • The owner has total control and ownership of the business,
  • Less hassle of operating the business.
  • It can be established by individuals at least eighteen years old and a resident of Singapore.

 

Disadvantages

  • Have liability and functional disadvantages compared to other business entities.
  • The business owner is 100% responsible for the liabilities incurred during the operation of the business.
  • Properties are not owned by the company, but by the proprietor.
  • Profits are taxed based on the personal income tax rate, which is higher than the corporate income tax.
  • Managing a sole business entity is a huge risk – The owner is liable for any debts incurred during business operations. Should there be any litigations involved, claimants/ creditors may have access to their personal bank accounts, property, etc.

 

Limited Liability Partnership

A Limited Liability Partnership is a business structure that operates with two or more partners. This type of entity protects co-partners from liabilities due to the negligence and misconduct of another partner/s.

 

Advantages

  • Business owners are not personally liable in case of damages, unsettled business debts, and other business disputes.
  • Unlimited number of business partners
  • Adjustable tax structure
  • Ease of formation and maintenance
  • No restrictions on profit distribution among business partners


Disadvantages

  • Several tax forms to deal with and manage
  • Difficulty in raising money when planning to set a new business unless personal monetary contributions from the partners
  • LLCs cannot issue shares, thus it is difficult to transfer ownership of the entity

 

Private Limited

A Private Limited Company, a sub-branch of LLC, is the most common type of business entity in Singapore. It is the preferred business structure for most company owners and investors.

 

Advantages

  • Company directors and shareholders will not be held liable for any debts or losses incurred by the company.
  • It qualifies for tax exemptions and is taxed based on corporate tax rate.
  • This structure has the capabilities to raise capital for business development or expansion

 

Disadvantages

  • More overheads and operations expenditures
  • The company must adhere to the stringent rules and regulations of the Singapore Companies Act, ACRA, IRAS, etc.
  • Requires an accountant to handle payroll and other financial aspects of the business

 

Partnership

This structure refers to a mutual legal agreement between two or more people. These individuals form the backbone of the business and are referred to as co-owners, of which each member invests on the company.

 

Advantages

  • This structure allows two to twenty partners
  • Equal start-up costs between partners
  • Equal distribution of tasks and responsibilities
  • An equal share of business expenses and risks
  • Opportunities to develop and grow the business with each partner’s skills and knowledge

 

Disadvantages

  • This structure has the same risks as Sole Proprietorship.
  • Each partner is liable for any debts incurred during business operations. Should there be any litigations involved, claimants/ creditors may have access to their personal bank accounts, property, etc.
  • Each partner can also be held responsible for the liabilities of the other partners

 

Choosing the Best Structure for Your Business

 

company incorporation advisorBusiness owners should give careful thoughts and considerations on which type of structure would suit their business.  it is highly recommended to seek a reliable and experienced advisor and company incorporation service provider to advise you more before the incorporation of your company.

 

Finding the Right Partner for Company Incorporation in Singapore

Corporate Services Singapore can assist you with your business development needs. From registration procedures to providing expert advice in incorporating a business in Singapore, Corporate Services Singapore will be able to guide you.

 

To ensure that you are on the right track with incorporating a company in Singapore, get in touch with us today.

Posted in Company Incorporation.