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Different types of company structures locally

In general, there are three basic types of company structures in Singapore, and they vary in terms of liability, the number of owners, and the relationships between them:

1. Limited Liability Company (Pte Ltd or LLC)
This is the most common choice for entrepreneurs in Singapore. It is an exempt private company limited by shares.

Pros

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 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 the founders.

You will pay corporate tax (17% maximum) instead of personal tax (up to 22%), and your company is eligible for corporate tax exemptions.

Cons

There are certain requirements that the company needs to fulfil, such as employing a Company Secretary and filing annual returns to ACRA.

 

2. Sole Proprietorship
One individual sets up a business. This option is only for local residents - foreigners must incorporate it under other registration types.

Pros

Cheapest and easiest to incorporate and manage.

Cons

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.

 

3. Partnerships

This entity is formed by at least two partners up to a maximum of 20 individual partners. There are several ways to set it up:

     a. General Partnership (or just Partnership)
         Similar to a sole proprietorship but with more than one owner.

Pros

Cheap and easy to incorporate.

Cons

The liability is unlimited, and the partners are each taxed with personal tax off their individual income.

     b. Limited Partnership

In this entity, partners have different liabilities - one is a general partner and the other is a limited (or dormant) partner. The role of the limited partner is often restricted to funding.

Pros

Allows you to have partners with different forms of involvement in the business.

Cons

The liability is unlimited, and Individual Partners are taxed at personal tax rate (max 22%) and Corporate Partners at corporate tax rate (max 17%).

 

4. Limited Liability Partnership (LLP)
This entity is similar to a Pte. Ltd. This gives owners the flexibility of operating as a partnership while having a separate legal entity like a private limited company.

Pros

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.

Cons

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.

 

You can book a meeting with our Kickstart Manager to find the best structure for your business.

 

Questions? Please let us know here or chat with us during business hours (Mon - Fri, 9.30 AM - 6:30 PM SGT) by clicking on the green chat bubble on the lower right-hand side.