18 Apr Selecting Appropriate Business Structure Is Important To Incorporate a Company in Singapore
They say, it is easy to incorporate a business in Singapore. However, ‘they’ fail to tell you the complexities and twists involved in setting up a business a Singapore. To incorporate a company in Singapore, the first hurdle you will come across is selecting an appropriate business structure. To a great extent, outsourcing the process of Singapore company registration to an external firm is the widely accepted option. However, it becomes necessary to understand the different business structures in Singapore before you employ any firm offering Singapore company registration services.
The Various Business Structures to Incorporate a Business in Singapore
Usually, foreigners do not require any type of government approval to set-up a new business in Singapore. Singapore allows about 100% foreign ownership, which makes it the best and preferred location for foreign entrepreneurs, to do business.
For incorporating a bank or a financial institution, getting an approval from the Monetary Authority of Singapore is a must. Let us check out the different options for business structures entrepreneurs have, for incorporating a company in Singapore.
- Representative Office: A foreign company willing to have its presence in Singapore, but does not intend to carry out any business activities herein, should incorporate their company as a representative office. Singapore corporate environment considers a representative office as an administrative arrangement, primarily, designed for the non-commercial activities. Therefore, a registered office will not have any kind of separate legal status from its parent company. Please note, Singapore does not allow a registered office to perform any business activities with the motive of generating revenue and earning profits.
- Branch: Foreign companies not interested to incorporate a separate company in Singapore with a different name, should prefer to incorporate a branch office. After incorporating a branch office, it is possible to carry out business activities under the name of or under the corporate brand of the foreign corporation. A branch office incorporated in Singapore is legally considered as an extension of its parent company. Please note, in no way, a branch office will be considered as a subsidiary company owned by a foreign parent company. The Singapore Companies Act does not prescribe any special or separate Memorandum of Article of Association (MAA) for the branch offices. A branch office is free to run its shareholder structure and business activities as directed by the original MAA of the foreign company.
- Subsidiary: A private limited company having foreign company as its major shareholder should incorporate its business as a subsidiary company. A subsidiary company is a resident company of Singapore and is regulated by Singapore laws. A subsidiary company has a legal status in Singapore, therefore, is treated as a different company from its foreign counterpart. In this option, the liability of the foreign company is limited to the share capital it has invested. Besides, the foreign company is terminated from the obligations of debts and liabilities of the subsidiary company. Please note, more often a subsidiary company is registered as a limited liability company in Singapore.
- Incorporated Companies: Singapore offers two major options for incorporated companies; Private limited companies and Public companies. A Private limited company is allowed to have as many as fifty shareholders and also bears restrictions on share transfer. On the contrary, a public limited company does not have such a restriction and can have as many shareholders as they want. In addition, the public limited company is allowed to raise capital by offering shares and debentures to the public. Incorporated companies can be registered with a minimal capital of S$1 proceeded by at least one shareholder, one director, as well as one company secretary. It is all right if the chosen shareholder is either an individual or a corporation. Either of the shareholders is not required to be a permanent Singapore resident. Please note, the liability of shareholders is limited to the amount, if any, unpaid on the shares is issued to them. Apart from that, S$1 is the fixed par value of shares for each share and no-par-value and bearer shares are not permitted.
- Limited Liability Partnership: When two or more partners want to incorporate a company in Singapore, then registering a business as a Limited Liability Partnership (LLP) company is the best option. Under this partnership entity, ACRA identifies both partners as different personalities who can sue or be sued. Additionally, both the partners are allowed to own property in their individual names. In an LLP company, partners are offered an option to function either independently or as a combined entity. Please note, 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 Partnership: Limited Partnership seems to be a flexible business structure for entrepreneurs not interested to take any kind of responsibility for business management functions. Such entrepreneurs usually hand over their management of company to an entirely different entity. The chosen entity can be either an individual or a corporation, enjoying unlimited liability. There are more than one, general and more than one, limited partners, in a Limited Partnership company. Please note, if general partners choose to participate in the business function they become liable, and their personal assets are pledged. On the contrary, limited partners are liable only for the amount they have contributed.
- Sole Proprietorship: Sole proprietorship is the simplest and easiest business structure to incorporate a company in Singapore. Foreign and local entrepreneurs widely prefer sole proprietorship as their chosen business structure. More often, investors with less capital and big dreams and investors interested to incorporate small businesses register their company as a sole proprietorship firm. The statutory requirements state that, the sole proprietorship companies will have to register all their profiteering activities carried on the daily basis. Please note, sole proprietorship is not considered as a separate legal entity. The owner and his business both are considered as one and the same. The entrepreneur or the owner is held accountable for all the debts or liabilities incurred during the course of business.
Deciding on the right business structure to incorporation of company in Singapore is a tough task. Incorporating a company under the precise business structure is very much necessary when you are intending to do business in Singapore. It is highly recommended that you seek professional help for registering a business in Singapore. The incorporation experts in Singapore will help you understand each business structure, along with its obligations and implications in future. Remember the rules pertaining to liabilities and responsibilities are very strict in Singapore. Only incorporation professionals will be able to guide you in the best possible way. They will assist you in incorporating your dream business without much risk.