How to Make a Business Work in Singapore
When a company is incorporated, it is important for the business to choose the right business structure. Your choice can affect your business’s image and reputation with customers and banks, as well as its administrative processes, taxes, personal liabilities, and ability to grow. We’ve given you an overview of the different types of business structures to help you choose the right one for the success of your business. This is the first step in the Singapore company incorporation process. Each entity has different rules and tax rates that depend on how it is set up and who owns it.
If you have questions about a good business entity for your company incorporation, you can also talk to our professional staff.
Company with limited liability
A Private Limited Company is the most flexible and advanced type of business structure in Singapore. It is a locally incorporated company. It is also the most popular way to set up a business in Singapore because it protects the owner’s personal assets from the company’s debts and has tax breaks and exemptions.
The name of a private limited company must end with “Private Limited” (Pte Ltd). There can be no more than 50 shareholders. Even though 100% foreign ownership is allowed, the company must have a local director who is a Singapore citizen, resident, or Employment Pass (EP) holder.
There are different types of this business structure. They are Private Limited Company, Exempt Private Limited Company, Public Limited Company by Shares, and Public Limited Company by Guarantee.
Features in Brief
Shareholders’ personal assets are safe.
Ownership can be transferred, and new shareholders can be added so that the business can get more money to grow.
Strong business reputation, professional commitment, and vision.
When a business looks more professional, banks and other financial institutions are more likely to give it money.
The holding pattern is a situation in which a business keeps running even if its owners change.
has a corporate tax rate that is very competitive and effective
For a new Singapore company, the first SGD 100,000 in taxable income each year for the first three years is tax-free.
For the first three years, a new Singapore company can pay a tax rate of no more than 8.5% on taxable income from SGD 100,001 to SGD 300,000.
17% of taxable income over SGD 300,000 is taxed at a low flat rate.
Capital gains and dividends pay no taxes.
Procedures in the Singapore Companies Act are looked at regularly to help businesses grow and new ones start up.
Single-Ownership
One person owns a Sole Proprietorship, which is a type of business structure. The Sole Proprietor, or owner, is in charge of all of the business’s assets and debts and has the final say on how they are handled. The Sole Proprietor is not a separate legal entity from the business. This means that the Sole Proprietor is fully responsible for all of the business’s losses and debts. Tax breaks and exemptions are not given to sole proprietorships like they are to private limited companies.
As a Sole Proprietor, you can be a Singapore citizen, Singapore Permanent Resident (PR), Employment Pass (EP), or Entrepreneur Pass (EntrePass) holder. People and businesses from other countries can also sign up, as long as a local manager is named.
Features in Brief
The business and its owner are not two separate legal entities.
Sole Proprietor is fully responsible for all debts and losses that happen during business.
Profits from a sole proprietorship are considered income of the person who owns the business and are taxed at the rate for personal income.
Not permanent and can’t be sold in parts because the business ends when the owner dies.
Sole Proprietorship is not a legal entity, so it can’t sign up another business.
The Sole Proprietorship’s registration number is on all business documents, like letterheads, invoices, bills, and other bills.
Investors often don’t want to work with non-incorporated entities, so there aren’t as many ways to get money or grow.
Any changes to the business’s information must be sent to the Registrar within 14 days of when the change happened.
Registration must be renewed every year for a sole proprietorship.
Partnerships
A partnership makes it easier for more than one person to start and own a business than a sole proprietorship. With this way of running a business, you and your partner can agree on how to get capital, talent, and strategic assets. But partnerships don’t get the tax breaks and breaks from taxes that Private Limited Companies do.
Under the Singapore Companies Act, a business can only have up to 20 partners. Any business with more than 20 partners has to register as a Private Limited Company.
Partnership in general
A General Partnership is similar to a Sole Proprietorship in that all partners are personally responsible for all debts and liabilities that come up during business. Partners should talk to a lawyer and have them write up a Partnership Agreement that spells out each partner’s role, responsibilities, and share of the profits. Each partner can also be blamed for what the other partner does.
So, this setup is not a popular choice for Singaporeans and people from other countries who want to start a business.
A Limited Partnership firm can be set up by Singapore citizens, Singapore Permanent Residents (PR), and Singapore Employment Pass (EP) holders. People from outside the country can form a Limited Partnership, but they must hire a local manager to run the business.
Features in Brief
Not a legal entity that is separate from the partners
With ACRA, setting up is quick and easy.
Not required to have ACRA check their books or file annual returns.
More money and resources for business growth, since loans may be easier to get based on the total assets of all partners.
Every partner is responsible for the whole business.
A partner can be held responsible for the loss that another partner caused.
Profits are taxed at the personal income tax rates of the partners if they are individuals or at the corporate tax rate if they are a corporation.
There are no tax breaks or exemptions.
Not forever, because when one partner dies, the partnership ends automatically.
All partners must agree on business decisions for the partnership.
Source: types of companies in singapore , nature of business list singapore
