There are three basic types of company structures in Singapore, and they vary in terms of liability, the number of owners, and relationships between them:
Limited Liability Company (Pte Ltd or LLC) - The most common choice for entrepreneurs in Singapore. It’s an exempt private company limited by shares.
There can be from 1 to 20 individual shareholders and as many directors as you need;
A Pte Ltd or LLC is a legal entity that is separate from its founders, thus limiting your liability. This means that the debts, the risks, and the responsibilities are made in the company’s name, not in yours;
You will pay corporate tax (17% maximum) as opposed to the personal tax (up to 22%), and your company is eligible for corporate tax exemptions.
There are certain requirements that the LLC needs to fulfill, such as employing a Company Secretary and filing annual returns to ACRA.
Sole Proprietorship - A business set up by one individual. This is only an option for local residents: foreigners have to incorporate under another registration type.
Cheapest and easiest to incorporate and manage.
The business is not a separate legal entity but is an extension of the entrepreneur. Hence, the entrepreneur is personally liable for all business risks;
All revenues of the business will be considered and taxed as individual income. This is usually cheaper than Pte Ltd for lower revenues, but more expensive for higher revenue buckets.
Partnership - Formed by minimum 2 to maximum 20 partners. There are several ways to set it up:
General Partnership (or just Partnership) - Similar to Sole Proprietorship, except there is more than one owner.
Cheap and easy to incorporate.
The liability is unlimited, and the partners are each taxed with personal tax off their individual income.
Limited Partnership - Partners have different liabilities: one is a general partner and the other is limited (or dormant) partner. The role of the limited partner is often restricted to funding.
Allows you to have partners with different forms of involvement in the business.
The liability is unlimited, and Individual Partners are taxed at personal tax rate (max 22%) and Corporate Partners at corporate tax rate (max 17%).
Limited Liability Partnership (LLP) - A partnership similar to Pte Ltd.
An LLP creates a separate legal entity, thus limiting the partners’ liability;
Requirements for compliance activities are low, for example, there’s no need to file annual returns.
Individual Partners are taxed at personal tax rate (max 22%) and Corporate Partners at corporate tax rate (max 17%);
An LLP is not eligible for corporate tax exemptions.