Business activities in Singapore, a vibrant business center in Asia, are regulated by transparent corporate legislation. Business people in the country can use all the advantages of an open economy, low tax rates, and a favorable business climate. Foreign entrepreneurs wishing to set up companies in Singapore often wonder what form of company ownership they should choose. What advantages does each form of company ownership bring? What form of ownership will suit my business objectives best of all? Below, please find some information about the forms of company ownership available in Singapore.
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Most popular forms of company ownership in Singapore
In the 2019 Ease of Doing Business Index Singapore ranked first. One hundred and ninety countries were assessed for the ease of company formation and structuring there. The taxation systems, the international trade possibilities, and the dispute settlement procedures were also taken into account in the Index. The top rank that Singapore enjoys clearly shows that it is an attractive jurisdiction for an international businessperson indeed.
The fact that doing business is easy in Singapore makes the country extremely popular with foreign investors. International entrepreneurs the ease of establishing a company of a certain ownership form, among other things.
Naturally, every form of company ownership will have not only advantages but disadvantages as well. Besides, each of them will suit a certain type of business. However, some forms of company ownership in Singapore are more recommendable to foreign investors than others are. Please read on to learn the basic information about the forms of company ownership available in Singapore.
The following forms of company ownership are the most popular ones in Singapore:
- Private Company Limited By Shares.
- General Partnership (GP).
- Limited Partnership (LP).
- Limited Liability Partnership (LLP)
- Sole Proprietorship/ Sole Trader.
In addition to that, you can set up a division of your foreign company in Singapore. It can be:
- A branch;
- A subsidiary;
- A representative office.
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Please note that the form of company ownership is going to affect the taxes, the image, the bureaucracy involved in registering the company, and the money raising opportunities.
Let us discuss the main advantages, the most important disadvantages, and the requirements that every form of company ownership listed above has to meet.
A Private Limited Company in Singapore
An LLC in Singapore shall be owned by at least 50 shareholders. The company shares cannot be listed on a stock exchange and if the company wants to go public, the form of ownership has to be changed. The name of the company shall end in Private Limited or Pte Ltd. Both physical persons and legal entities can act as company shareholders. This is the most flexible and easily scalable form of company ownership in Singapore.
The liabilities of the LLC shareholders are limited by their respective contributions to the charter capital.
This form of company ownership has the following main advantages:
- An LLC is a legal entity that is detached from its owners and directors. It can purchase assets and have liabilities, make business agreements, and file lawsuits.
- The shares of the LLC are easily exchangeable between the owners. They can be sold, given as a gift, inherited, and so on.
- It is simple to increase the LLC charter capital by issuing new ownership shares and selling them to the interested investor.
- An LLC is potentially attractive for investors who may prefer putting money in a company whose owners’ liabilities are limited by their contributions to the charter capital.
- An LLC will enjoy higher standings in the eyes of its business partners, clients, and bankers in comparison to partnerships and sole proprietorships. This means that this form of company ownership has a higher growth potential.
- The company liquidation procedures are relatively simple due to the limited liabilities of its owners.
If you set up a company with this form of ownership in Singapore, it will be subject to a 9% corporate tax in case its annual profit does not exceed 300,000 Singaporean dollars. If it does, the corporate tax rate is 17%.
We must also add that there is no capital gains tax in Singapore. The one-layer taxation system allows distributing the dividends between the company owners – after the corporate tax has been paid – without paying any extra taxes.
Partnerships in Singapore
To form any kind of partnership in Singapore, at least two partners are required. The following types of partnerships can be set up in the country:
- General Partnership (GP);
- Limited Partnership (LP);
- Limited Liability Partnership (LLP).
All partners in a GP will have unlimited liabilities. An LP shall have at least one General Partner with an unlimited liability while all other partners can have limited liabilities. An LLP is a legal entity detached from its owners whose liabilities are limited.
The maximum number of partners that a GP can have in Singapore is twenty. There are no restrictions as to the maximum number of partners in an LP or an LLP.
Partners forming a partnership are taxed on their personal income as private individuals unless they form an LLP and establish a separate corporate entity. If they do, the company is subject to corporate tax.
Please note that a partnership in Singapore will have less access to the tax incentives that are available to private limited liability companies. At the same time, this form of company ownership is less expensive to set up and to maintain. So if you are planning to start a small-scale business with a partner in Singapore, this form of company ownership will probably suit you.
Sole Proprietorship/ Sole Trader in Singapore
A Sole Proprietorship/ Sole Trader is a form of company ownership that will suit a person who wants to do business alone. It is fast and easy to set up a sole proprietorship in Singapore but the company owner will have unlimited liabilities: the company assets and his/ her personal assets will not be separated. The sole proprietor can be sued as a physical person or as a business owner if his/ her company is sued.
There are some more details that you have to know about the Sole Proprietorship/Sole Trader from of company ownership if you are thinking of setting one up in Singapore:
- The sole proprietor income is taxed at the personal income tax rate.
- Singapore applies the progressive income tax rate and the tax can be from 0% to 17% depending on the amount of annual income.
- A Sole Proprietorship is not eligible to tax incentives available to LLCs in Singapore.
- In addition to the age requirement (the sole proprietor has to be older than 18) there is another important requirement: only a legal resident of Singapore can set up a company of this form of ownership in the country. Besides, the prospective sole proprietor cannot have been involved in a bankruptcy procedure before.
- When a sole proprietor is registered, the managing director has to be specified. Normally, it will be the person in whose name the company is registered.
We would like to stress that it is virtually impossible to register a sole proprietorship in Singapore unless the company founder legally resides in the country.
Legislation governing companies of different forms of ownership in Singapore
Every company registered in Singapore shall submit the Annual Financial Report to the Accounting and Corporate Regulatory Authority (ACRA) in the country. The Report shall contain the following information:
- The company type, the Unique Entity Number (UEN), the registered office address, and the company officers information (director, secretary, shareholders);
- The financial information in XBRL format and the finance indicators;
- The ownership structure of the company: the number of ownership shares, the number of shareholders, the issued share capital, and the amount of the paid-up share capital;
- The date of the Annual General Meeting, if a shareholders’ meeting has been held;
- The reporting period.
Please note that the Financial Report can be handed in by the company officer (director/ secretary) or by the authorized agent in Singapore.
The Report has to be signed by the company director or secretary and submitted within 30 days since the date when the AGM was held.
As far as the taxes are concerned, some forms of company ownership allow making use of numerous interesting benefits for resident companies. The following fiscal documents have to be submitted to the Inland Revenue Authority of Singapore (IRAS):
- Information about the Estimated Chargeable Income (ECI) – within three months after the end of the financial year, annually;
- Form CS or Form С for the corporate income tax calculation.
Please note that the Singaporean-based company does not have to submit an ECI report if the income has not exceeded 1 million Singaporean dollars.
Forms of company ownership for foreign companies in Singapore
Can you register a subsidiary of your foreign company in Singapore or a branch? Yes, the local legislation permits this. Moreover, you can have access to some tax benefits available to LLCs in Singapore.
We highly recommend that you should begin by establishing a representative office in the country if you are a foreign entrepreneur wishing to explore the business opportunities in Singapore. This will allow conducting market research, bringing your company name to the country, and testing the demand for your products at the local market. Your representative office will not be eligible to engage in any business activities in Singapore, however, on its own rights.
Subsidiary companies can engage in business activities in Singapore but they are considered non-resident companies in the country and thus, they are not eligible to any tax benefits available to local companies.
Please request a detailed personal consultation with InternationalWealth experts on any issue related to setting up a business company in Singapore. We will be happy to assist you in establishing a business structure with the most suitable ownership form in the country. In addition to that, we will gladly help you set up a corporate bank account in Singapore. Please contact us by email, live chat, or a messenger. We always respond quickly!
What forms of company ownership are available in Singapore?
The most popular form of company ownership in Singapore is a private limited company. The local legislation also allows registering general and limited partnerships in the country as well as sole proprietorship and foreign company branches, subsidiaries and representative offices (the latter type of business structure cannot engage in business activities in Singapore).
What form of company ownership is eligible for tax benefits in Singapore?
A private limited company will give you access to the largest number of tax incentives available in Singapore. Partnerships and sole proprietorships are not so attractive in this respect.
Can I register a foreign company branch or a subsidiary in Singapore?
Yes, the Singaporean legislation allows foreign companies to establish presence in the country. However, non-resident companies (non-resident for tax purposes) do not normally qualify for the tax benefits that are available to resident companies in Singapore.