Singapore is considered the best place in the world to start any business, as the policies of this country are very business-friendly. As per the Index of Economic Freedom of 2021, the economy of Singapore is totally free and is among the top 40 countries within the Asia-Pacific region and has a score of 89.7.
However, before you start your business in Singapore, you need to decide which company structure that you want to have for your company among the following two options:
- Sole-proprietorship or partnership
- Limited liability partnership
Based on that you have to determine your liabilities, taxes, mandatory paperwork, possibilities of future expansion, availability of loans, etc.
Therefore, in this article, we will discuss briefly the various factors that you must consider while you incorporate a company in Singapore. For any details understanding on this matter, however, you can have a discussion with a certain experienced professional.
If you decide to go for a sole proprietorship then it will have a single owner. For opening any company on a sole proprietorship basis, you must meet the following criteria:
- You must be a local citizen
- You must be a permanent resident of Singapore
In this company type, the company owner will take the entire responsibility for all liabilities like taxes and also running of the company. There will be no separate legal entity existing in such type of company.
A sole proprietorship would mean that all the personal assets of the company owner will not remain protected from any possible liabilities or risks involved in the business. If ever a situation occurs, where the business goes into debt and the company owner fails to make payment from the business then the personal assets may be liquidated too.
Many companies that start off as sole proprietorships, later go on to convert it to Pte Ltd as the company grows. It helps in protecting the personal assets of the directors. However, the registration expenses of Pte Ltd are comparatively higher than sole proprietorship firms.
That is one of the main reasons why most small companies start off as proprietorship or partnership companies. Once they develop their business and start growing, they register their firms as Pte Ltd company and engage a corporate secretarial services as is a requirement in Singapore.
Private limited company
As far as a private limited company in Singapore is concerned, generally, this is the preferred business structure. Such a company is typically called private limited (Pte Ltd) company. This form of company will be very flexible and have a scalable company structure. For any private limited company, the shareholders are normally any corporate entities or can also be individual too.
All the assets and liabilities of such companies will be limited to all shareholders. If the company is in trouble and facing a very difficult financial situation like losses or debts, then the shareholder’s personal assets will not be seized. Speak to a reliable accountant in Singapore like Morrison Management for more information.
Which form you should choose?
Sole proprietorship companies are generally more suitable for any small businesses, where there are very few risks. A Pte Limited Company, however, has to comply with several legal requirements. Such companies may offer certain advantages over any sole proprietorship companies as far as tax savings, and protection of assets are concerned.
Any grant institutions may commonly regard more favourably Pte limited companies because such companies have to abide by more stringent requirements and are having greater accountability.
Which company structure will be better for any foreigner?
For any foreigners, setting up any company in Singapore is pretty easy. Therefore, one can see companies from all parts of the world have set up their business in Singapore. Also, it is much easier to register any new business.
However, here we are going to discuss which kind of company structure will be more suitable for any foreign investors. As such, any foreign national is free to set up his business as a sole business too, however, needs to appoint a certain Singaporean resident as a company representative. However, you may need help in GST filing or GST audit in Singapore – so make sure to find a professional like us to handle these for you.
For a foreigner, going to a Pte Ltd company will be a better option to do their business in Singapore because it can affect the following:
- Availability of their funds
- The extent of the liabilities
- Few other aspects.
For any foreigner to do any business in Singapore, the following features can be more favourable as a certain Pte Ltd company:
- There can be 1 to 50 owners or shareholders
- One local resident must be appointed as a company director
- It can have a distinctly separate identity
- They need to pay corporate tax which is between 0 to 17%.
Because a Pte Ltd has more credibility as compared to a single-ownership or partnership corporation, banks, and all other lending institutions will be more willing to lend to it. Additionally, proprietors of these businesses will have an easier time raising funding for expansion.
This article first appeared on https://www.morrisonconsultants.com.sg/blog/difference-sole-proprietorship-pte-ltd-companies. Find out more about starting up a business in Singapore at Morrison consultant.