Selecting the right business structure is important to incorporate a company in Singapore
They say that it is easy to incorporate a company in Singapore. However, “they” don’t tell you the complexities and twists and turns involved in starting a business in Singapore. To incorporate a business in Singapore, the first hurdle you will come across is selecting a suitable business structure. To a large extent, outsourcing the Singapore company registration process to an outside company is the widely accepted option. However, it is necessary to understand the different business structures in Singapore before hiring any company that offers business registration services in Singapore.
The various business structures for incorporating a company in Singapore
Generally, foreigners do not require any kind of government approval to set up a new company in Singapore. Singapore allows approximately 100% foreign ownership, making it the best and preferred place for foreign entrepreneurs to do business.
To incorporate a bank or financial institution, it is imperative to obtain an approval from the Monetary Authority of Singapore. Let’s take a look at the different options for business structure entrepreneurs to start a business in Singapore.
- Representative office: A foreign company that wishes to have its presence in Singapore, but does not intend to do any business here, must set up its company as a representative office. Singapore’s business environment regards a representative office as an administrative arrangement, primarily designed for non-commercial activities. Therefore, a registered office will not have any type of legal personality separate from its parent company. Please note that Singapore does not allow a registered office to conduct any business for the purpose of generating income and making a profit.
- Branch: Foreign companies that are not interested in forming a separate company in Singapore under a different name should prefer to incorporate a branch. After incorporating a branch, it is possible to conduct business under the name or corporate brand of the foreign corporation. A branch incorporated in Singapore is legally considered an extension of its parent company. Please note that in no way will a branch be considered a subsidiary company owned by a foreign parent company. The Singapore Companies Act does not prescribe any special or separate Memorandum of Association Article (MAA) for branches. A branch is free to manage its shareholder structure and business activities as directed by the original MAA of the foreign company.
- Subsidiary: A limited liability company that has a foreign company as its main shareholder must incorporate its business as a subsidiary company. A subsidiary company is a Singapore resident company and is regulated by the laws of Singapore. A subsidiary company has a legal status in Singapore, therefore it is treated as a different company than its foreign counterpart. In this option, the liability of the foreign company is limited to the capital stock it has invested. In addition, the foreign company is derecognized from the debt and liability obligations of the subsidiary company. Please note that more often a subsidiary company is registered as a limited liability company in Singapore.
- Anonymous Societies: Singapore offers two main options for incorporated companies; Private Stock Companies and Public Companies. A limited liability company can have up to fifty shareholders and also has restrictions on the transfer of shares. In contrast, a corporation has no such restriction and can have as many shareholders as it wants. In addition, the corporation can raise capital by offering shares and bonds to the public. Incorporated companies can be registered with a minimum capital of S $ 1 proceeded by at least one shareholder, a director, as well as a secretary of the company. It is okay if the chosen shareholder is an individual or a corporation. None of the shareholders is required to be a permanent resident of Singapore. Note that the liability of the shareholders is limited to the amount, if any, unpaid of the shares issued to them. Other than that, S $ 1 is the fixed par value of the shares for each share and no par value or bearer shares are allowed.
- Limited liability company: When two or more partners want to incorporate a company in Singapore, the best option is to register a company as a limited liability company (LLP). Under this association entity, ACRA identifies both partners as different personalities who can sue or be sued. In addition, both partners can own properties in their individual names. In an LLP company, partners are offered the option of operating independently or as a combined entity. Note that although the minimum number of partners required to form an LLP is two, there are no limitations on the number of partners an LLP can have.
- Limited liability company: The Limited Partnership appears to be a flexible business structure for entrepreneurs who are not interested in assuming any type of responsibility in business management functions. These entrepreneurs usually transfer the management of the company to a completely different entity. The chosen entity can be an individual or a corporation, with unlimited liability. There are more than one, general and more than one, limited partners, in a limited partnership. Please note that if general partners choose to engage in the business function, they become liable and their personal assets are compromised. On the contrary, limited partners are liable only for the amount they have contributed.
- Single owner: Sole proprietorship is the simplest and easiest business structure to incorporate into a company in Singapore. Individual ownership is widely preferred by foreign and local entrepreneurs as their chosen business structure. More often, investors with less capital and big dreams and investors interested in incorporating small businesses register their business as a sole proprietorship. The legal requirements establish that sole proprietorships must register all the profit activities they carry out on a daily basis. Please note that sole proprietorship is not considered a separate legal entity. The owner and his business are considered one and the same. The entrepreneur or owner is responsible for all debts or liabilities incurred during the course of the business.
Deciding on the right business structure for company incorporation in Singapore is a difficult task. Incorporating a company under the precise business structure is very necessary when you intend to do business in Singapore. It is strongly recommended that you seek professional help in registering a business in Singapore. Incorporation experts in Singapore will help you understand each business structure, along with its obligations and implications going forward. Remember that the rules regarding responsibilities and liabilities are very strict in Singapore. Only onboarding professionals will be able to guide you in the best possible way. They will help you incorporate your dream business without much risk.