The type of company determines the company's responsibilities, taxation, and your relationship with other business partners. Below we will use some simple examples to illustrate to you.
What types of companies are there in Singapore?
There are 3 basic types of companies for you to choose from:
They vary in terms of responsibility, number of owners, and relationship between partners. Below we introduce their main features, advantages and disadvantages for your reference, so that you can choose the most suitable type of company for you.
Limited liability company (private limited company or limited liability company)
A limited liability company is the most common choice for Singaporean entrepreneurs. It is a private limited company with limited liability in accordance with the shares held. The company can have 1 to 20 individual shareholders (only natural persons, not companies) and the directors you need (the number depends on your needs). A limited liability company is a separate legal entity from its owner, so your related responsibilities are limited (as its name implies). In other words, debts, risks and responsibilities are assumed in the name of the company, not in your own name. This also means that you need to pay corporate tax (up to 17%) instead of personal income tax (up to 22%), and your company is eligible for tax exemption.
The disadvantage is that a private limited company needs to meet certain requirements, such as hiring a company secretary and submitting an annual report to ACRA.
Example: You want to open a cake shop, plan to borrow from a bank, equip a food preparation area, hire a few chefs, and provide a large event service. You Incorporated " Paradise Cake Pte Ltd " .
Sole proprietorship is an enterprise established by an individual, not an independent legal entity: all risks are borne by the owner of the enterprise. For example, you must go to a bank loan in your own name and pay off the debt yourself. The advantage is that it is easy to create and manage. Since the sole proprietorship only needs to pay personal income tax, the sole proprietorship in the initial stage of the company may be more cost-effective than the private limited company. Owned enterprises is not suitable for foreigners: Foreigners can only registered private limited company.
Example: You want to open an online cake shop. You don’t need any employees and you plan to handle everything in your kitchen.
- Liability : Only private limited companies and limited liability partnerships provide separate legal entities and limited liability. Choose another company form, you will face personal risk.
- Taxation : Only private limited companies pay corporate tax and can apply for tax exemption. For other forms of companies, you need to pay personal income tax. After your turnover reaches a certain amount, it is more beneficial for you to pay corporate tax.
- Compliance requirements : Private limited companies need to hire a company secretary and submit an annual report to ACRA. The work of the company secretary can be outsourced to agents.
- Financing : Independent legal entities are more conducive to applying for loans and attracting investment.
In short, private companies (Pte Ltd) are preferred. The foreign company registered in Singapore must be a private limited company. Owned enterprises is an alternative to choose a slightly higher risk in the early establishment of the company to maintain it may be easier and more cost-effective. A partnership is more suitable for a few partners who do not want to set up a private limited company.