[vc_row][vc_column][vc_column_text]For aspiring and soon-to-be entrepreneurs, we have put together a 2-part guide that provides an overview of the various types of business structures in Singapore and the differences among them. Each of the various types of structures is subjected to different regulatory and tax regimes reflecting their organisation and ownership. Part 1 will help you to understand your needs and preferences to narrow down which business structure will be more suited and we’ll also cover 3 of the 5 types of business structures, highlighting their characteristics. Part 2 will be covering the last 2 types of business structures and their characteristics.
One of the first decisions to be made when setting up a local company is deciding which legal structure the company should take. There are some questions to ask which will help you choose the most suitable business structure:
- How many owners are there in the business?
- How management decisions are made in the business? This is important if you are not the sole owner of the business.
- Do you want personal or limited liability?
- What are the types of records and accounts you have to keep for each type of business structure? You need to make sure you have the means and resources to comply.
- Do you want to pay personal or corporate tax rates?
- How do you plan to raise funds?
- How easy is it to close the business?
All businesses must be registered with the , the statutory board under the Ministry of Finance of the Singapore Government, who is the national regulator of business entities and public accountants in Singapore. There are 5 business structure types for registration, find out which of these will best suit your business:
Business Structure Type #1 – Sole Proprietorship
A sole proprietorship is a business firm with only one owner. It is the simplest and most flexible business structure.
Characteristics
- Owned by one person or one company.
- The sole proprietorship is not a legal entity; can sue or be sued in owner’s name.
- Owner is personally liable for debts and losses of business.
- Profits are taxed at personal income tax rates.
Set-Up & Admin
- Set-up and administration requirements are the simplest and least complicated.
- Renew registration annually.
Business Structure Type #2 – Partnership
A partnership is a business firm owned by more than one individual or company. In Singapore, partnerships cannot have more than 20 owners.
Characteristics
- Owners can be individuals or companies; minimum of 2 owners and a maximum of 20.
- The partnership is not a legal entity; can sue or be sued in owners’ names.
- Partners are personally liable for the debts and losses incurred by the business and/or other partners.
- Profits are taxed at each partner’s personal income tax rates.
Set-Up & Admin
- Quick and easy to set-up and administer.
- Renew registration annually.
- Draw up a Partnership Agreement that defines the role, responsibilities and profits due to each partner. Partnerships are automatically dissolved when a partner exits or dies. The remaining partners will have to form a new partnership.
Business Structure Type #3 – Limited Liability Partnership (LLP)
LLP combines the limited liability features of companies with the operational flexibility of partnerships and is primarily meant for professionals to build a joint practice (e.g. accounting firms, law firms etc.).
Characteristics
- The partners can be individuals or companies; minimum of 2 partners, no limit on number of partners.
- The LLP is a legal entity; can only sue or be sued in business name.
- Partners have limited liability; the personal assets of each partner are protected and will not be accountable for the acts of other partners.
- For tax purposes, each partner will be taxed on his or its share of the income from the LLP. Where the partner is an individual, his income from the LLP will be taxed at his own personal income tax rate. Where the partner is a company, its income from the LLP will be taxed at its own corporate tax rate.
Set-Up & Admin
- Quick and easy to set-up and administer.
- One time registration.
- Need to make an Annual Declaration that the LLP can pay its debts.
Stay tune for Part 2 where we will be covering the last 2 types of business structures![/vc_column_text][vc_alert style=”rd_solid_alert” animation=”rda_bounceIn” title=”Contact us for a non obligatory discussion!”]For enquiries on financial solutions for your business, contact us at +65 6654 7799, email us at capital@ethozgroup.com.[/vc_alert][rd_cf7 id=”10016″][/vc_column][/vc_row]
