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What Are the Forms of Incorporation Available in Singapore?
There are different forms of incorporation. The main three (3) that we’ll touch on would be a sole proprietorship, limited liability partnership and company. The Accounting and Corporate Regulatory Authority (ACRA) is the national regulator in Singapore. The ACRA is a statutory board under the Ministry of Finance (MoF). It regulates the business entities, public accountants and corporate service providers in Singapore. It also plays the role of a facilitator for the development of business entities and the public accountancy profession. With its main purpose to provide a regulatory environment for the abovementioned stakeholders, it seeks to monitor compliance with disclosure requirements and regulate public accountants’ performance of statutory audit.
Different Forms of Incorporation
There are three main types of incorporation in Singapore.
1. Sole Proprietorship (Business ABC)
This is usually owned by one person. A sole proprietorship is not a separate legal entity and the owner has unlimited liability. This carries the meaning that the entity’s liability has no limit and covers the owner’s assets as well. This makes the owner personally liable for the debts and losses of the business. This entity can sue and be sued in both the individual’s own name and also their business name. The registration requirements are that the individual has to be a Singaporean citizen or permanent resident and 18 years old and above. In the event the owner is not a resident in Singapore, he must appoint an authorized representative who is a resident in Singapore. There are two terms of registration, 1-year and 3-years, a required registration fee of $115 and $175 respectively. The profits will be taxed at the owner’s personal income tax rates.
2. Limited Liability Partnership (ABC LLP)
An LLP is a partnership where the individual partner’s own liability is limited. In order to establish this entity, a minimum of two (2) partners is required with no maximum limit. The LLP is a separate legal entity from its partners. All partners have limited liability and cannot be held personally liable for wrongful commission or omission of the other partners, which means that their liabilities is limited only to the capital contributed by them to the LLP. Beyond being able to sue and be sued in its own name, the LLP can also have direct ownership of properties. Individual partners cannot be held personally liable for debts and losses incurred by the other partners. There must be at least 2 partners who can be individuals or body corporate, of which at least 1 must be at least 18 years of age and having Singapore residency. A registration fee of $115 is required. The profits are taxed at partners’ personal income tax rates for individuals and corporate tax rate if it’s a corporation.
3. Company (ABC Pte Ltd)
A company is a business form which is a legal entity separate and distinct from its shareholders and directors. There are 3 types of companies, an exempt private company, private company and public company. An exempt private company requires 20 members or less and no corporate holding beneficial ownership. Comparatively, a private company can have up to 50 members and a public company can have more than 50 members. The members have limited liability. A company can sue or be sued and can also own property in its own name. The members are not personally liable for the debts and losses of the company. There must be at least one shareholder and one director (of whom is to be a Singapore resident or Singapore PR and at least 18 years of age). An incorporation fee of $315 is required. The profits will be taxed at corporate tax rates.
Depending on the type of activities your business will be undertaking, after incorporation, there might be some licenses you might need to apply for. A business license is a permit issued by a Singapore government agency that allows you to conduct a specific type of business. These licenses are required to assist the relevant government authorities pay closer attention to businesses in these industries for a multitude of reasons. These industries are such as for hotels, security services and appraiser services. Some businesses require more than a basic operating license. They may need specific permits, and besides that regulations vary by industry and profession. It is important for entrepreneurs to understand the licensing rules related to their business. Failure to comply can lead to expensive fines and jeopardize the future of a business.
Many new entrepreneurs may be unaware of their need to register for the relevant business license. The Singapore Government has provided GoBusiness Licensing as a convenient one-stop website for businesses to search and apply for the right license.