Once you decided to register a company in Singapore, it is essential that you know the type of business entity that you want to incorporate. Your decision can influence the amount you pay in taxes, the image, and insight of your business among your clients and suppliers, formalities for your business is required to do, the personal accountability you face, the ability to have a loan of money, and the possibility to expand your business.
- Limited Liability Company
A Limited Liability Company (LLC) is a company limited by shares i.e. its liabilities are limited to the amount of share capital. LLC is a business entity registered under the Singapore Companies Act and a separate legal entity from its members. In a LLC, the liabilities of the owners are limited to the assets in the company and their individual assets are protected from business liabilities. A Singapore LLC can be of the following types:
Private Limited Company (Pte. Ltd.): This type of LLC is the first choice for a lot of business entities in Singapore. The shareholders are not held accountable for company debt that surpasses share capital contributed. The company’s shares belong to 50 people or even much less. These shares are often owned by a business entity or an individual and are not available to the public at large. It is a preference for many because it is easier to manage. Shares can easily be transferred; it has easier means to raise capital and offers a more credible image.
Public Limited Company: Different from a private limited company, the shares of a public limited company are often accessible to the general public. These companies will be found on the stock exchange. The number of shareholders is at a minimum of least 50 people. Given that these types of companies engage the public at large, there are more rules and regulations that evade exploitation and the mistreat of public funds. This option is best for large businesses.
Public Company Limited by Guarantee: Nothing like a Public Limited Company and a Private Limited Company, this kind of company is set up for non-profitable reasons. It is a public company formed along the principle of limiting the liability to the amount that members add to the assets of the company. This set up is general with non-profit organizations.
- Sole Proprietorship
This is the simplest type of company and it’s simple to integrate company in Singapore as Sole Proprietorship. It is, however, the riskiest considering that likes of LLC, the holder of a Sole Proprietorship company is seen as part of the company. They are thus; more responsible to bear risks that happen from the business. Personal assets and those of the company are under the owner’s name, meaning they are not protected. If the business is in debt, then personal assets are legally not away from the reach of creditors. This sort of company is best suitable for solo entrepreneurs. It is significant that the risks concerned in working such a company are clearly understood before departing for registration.
- Partnership
A partnership company does not be officially on its own without its partners. Membership ends upon death, leaving or insolvency. There are three types of partnership structures in Singapore: general partnership, limited partnership, and limited liability partnership.
General partnership: This business structure is alike as sole proprietor. The business partners are personally liable for the business liabilities and debts. The partners share liability as one is held accountable for the actions of a fellow partner. It is not the finest business structure in Singapore as it contains a lot of risks.
Limited partnership: A limited partnership consists of general partners and limited partners. There is no maximum value on the number of the partners. A general partner, who may be either a corporation or an individual, will be personally liable for all the debts and liabilities while it remains a general partner. Meanwhile, a limited partner will not be liable for the debts and other liabilities of the partnership beyond the amount of their agreed contribution.
Limited Liability Partnership (LLP): The LLP business structure is highly suitable for chartered professionals who decided to work together. This model combines a partnership entity that protects co-partners from liabilities that may arise from determined misconduct or gross negligence of one partner or a group of partners.
While individual partners are legally responsible for their own misconduct or gross negligence, the partner’s liability is not restricted if such acts occur under the partner’s management or control. In addition, the partnership is not relieved from the liability of other partnership obligations.
There are safeguards within the Singapore Limited Liability Partnership Act to minimize misuse and provide protection to all partners such as its legal freedom and right perpetual succession.