How to choose between Sole Proprietor vs LLP vs Company Private Limited Company in Singapore?
Singapore offers an exceptionally business-friendly environment, making it an attractive destination for entrepreneurs to establish their companies. The streamlined processes and supportive ecosystem make setting up a business in Singapore relatively simple, especially for residents.
See below for a complete comparison of Sole Proprietor vs LLP vs Pte Ltd in Singapore, covering liability, taxation, ownership, ACRA requirements, annual compliance costs, and which Singapore business registration type is best suited for your situation.
3E Accounting can help you incorporate your company within one hour if all required information and documents are in place.
Sole Proprietor vs LLP vs Pte Ltd Singapore: Quick Comparison
|
Feature |
Sole Proprietorship |
LLP |
Private Limited (Pte Ltd) |
| Legal Entity | No | Yes | Yes |
| Owner Liability | Unlimited personal assets at risk | Limited for partners | Limited to paid-up shareholding |
| Foreign Ownership | Allowed by the local manager | Allowed by the local manager | 100% allowed, no restrictions |
| Minimum Members | 1 owner | 2 partners | 1 shareholder and 1 director |
| Corporate Tax Rate | Personal income tax (up to 24%) | Personal income tax (up to 24%) | Flat 17% with start-up exemptions |
| Start-up Tax Exemption | No | No | Yes, 75% on first S$100K for 3 years |
| Investor Ready | No | No | Yes |
| Perpetual Succession | No, dissolves on the death of the owner | No | Yes |
| ACRA Annual Return | Not required | Not required | Required within 7 months after FYE |
| Best For | Freelancers, sole traders, and very small local businesses | Professional partnerships: lawyers, accountants, architects | Growing businesses, foreign founders, investor-ready companies |
For most entrepreneurs, especially foreigners planning to raise investment or scale a Singapore Pte Ltd, it is the clear choice. It provides the best combination of liability protection, tax benefits, and credibility.
Option 1: Private Limited Company
The private limited company is the most popular business entity in Singapore among all types of companies in Singapore. Unlike business entities in Singapore such as a sole proprietorship and limited liability partnership(LLP), a private limited company or a PLC has a separate legal status from its shareholders and directors, who have limited liabilities for the debts and losses of the company. It usually has the words ‘Pte Ltd’ or ‘Ltd’ as part of its name. In many European countries and the US, it is commonly known as a corporation.
For YA 2020 onwards, businesses enjoy a 75% tax exemption on the first $100,000 of normal chargeable income, along with an additional 50% exemption on the next $100,000 of normal chargeable income.
Option 2: Limited Liability Partnership
A limited liability partnership (LLP) is a perfect blend of a partnership and a private limited company. A LLP gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company. This structure is highly suitable for individuals engaged in professional services such as lawyers, architects, accountants and management consultants.
Singapore citizens, residents, and Employment Pass holders can register a LLP. Foreign individuals and companies may also register a LLP but must appoint a local manager. The advantage of such a partnership is that this is a low cost Singapore company setup with limited liability protection.
Option 3: Sole Proprietorship
A sole proprietorship is the simplest form of business entity. It features only one owner who is the decisive authority and responsible for all assets and liabilities belonging to the business. Singapore citizens, residents and Employment Pass holders may register a sole proprietorship.
Foreign individuals and companies may also register a sole proprietorship but must appoint a Singapore resident manager. What’s more crucial to note is that it is a low-cost company set up in Singapore.
Comparison of Business Forms – Sole Proprietor vs LLP vs Company
The following table compares the three entity types (types of companies in Singapore) from a number of different perspectives to further assist you in making a decision that’s appropriate to your needs.
|
Types of Companies Structure |
Sole Proprietorship |
Limited Liability Partnership |
Private Limited Company |
| Suitable For | Individual with low risk. | Professional firms such as accountancy, law and architecture. | Businesses with projected growth, which may require additional funding for expansion. |
| Advantages | Low cost setup. |
Low cost setup with limited liability protection. | New Singapore start-up companies have 75 percent exemption on the first S$100,000 of normal chargeable income (profits) for the first three consecutive years. A further 50 percent exemption is given on the next S$100,000 of chargeable income (profits). For the potential tax saving from setting up a company, you can refer to tax saving for setup company. In addition, the tax reporting for LLP will be more complicated compared to company as the tax is on individual basis. |
| Disadvantages | Personal assets are not protected in sole proprietorship. | Taxed at the individual level and requires paying a personal income tax rate that is higher than the corporate tax rate. | Compliance obligations such as financial reports, AGMs, etc. |
| Ownership | Singapore Residents and Foreigners and corporations allowed only with appointment of a local manager | Singapore Residents and Foreigners and corporations allowed only with appointment of a local manager | 100 percent foreign or locally owned. No foreign shareholding restrictions.- Minimum one Singapore resident director required (We can provide you with nominee services). |
| Separate Legal Entity | No | Yes | Yes |
| Cap on Number of Members | One | Unlimited | Maximum 20 for exempt companies |
| Minimum Setup Requirement | One owner | Two partners | One shareholder and one director (the same individual can be both) |
| Limited Liability | No | Yes. The partners of a LLP will not be held personally liable for any business debts incurred by the LLP. However a partner may be held personally liable for claims from losses resulting from his own wrongful act or omission. But a partner shall not be personally liable for such wrongful acts or omissions of any other partner of the LLP. | Yes |
| Audit of Accounts | No | No | Yes, The Company will enjoy audit exemption if it is fulfilled the small company requirement. |
| Tax Treatment | Taxed at personal income tax rate (max is 24 percent) | The Tax rate for LLP will be higher if business is making profit as the LLP Taxes are determined at your personal income tax rate (maximum 24%) | Taxed at corporate income tax rate (max is 17 percent). |
| Cessation of Business upon Death of a Member/Partner | Yes | No. Any change in the partners will not affect its existence, rights or liabilities. | No. Equity shares go on in perpetuity. |
| Annual Compliance cost | Bookkeeping, Taxation service is required. | Bookkeeping, Taxation service is required. LLP is required to submit Form P to IRAS on an annual basis. Each partners is required to report their LLP income or loss in their Form B as well. | Bookkeeping, Taxation service is required. In addition, you will need the secretarial services and prepare a set of unaudited financial statements which will cost you extra of $535 for each service. However, you will enjoy higher tax exemption and more government grants. |
The information above highlights the key parameters of the three types of business entities that can be incorporated by Singapore residents.