They say that it is easy to incorporate a business in Singapore. However, “they” don’t tell you the intricacies and twists involved in setting up a business in Singapore. In order to incorporate a company in Singapore, the first hurdle you will encounter is selecting a suitable business structure. To a large extent, outsourcing the Singapore company registration process to an external company is the widely accepted option. However, it is necessary to understand the different business structures in Singapore before employing any company that offers business registration services in Singapore.
The various business structures to incorporate a company in Singapore
Foreigners generally do not require any form of government approval to set up a new business in Singapore. Singapore allows approximately 100% foreign ownership, making it the best and most preferred place for foreign entrepreneurs to do business.
To incorporate a bank or financial institution, it is essential to obtain approval from the Monetary Authority of Singapore. Let’s look at the different business structure options entrepreneurs have to incorporate a company in Singapore.
- Representative office: A foreign company that wishes to have a presence in Singapore, but does not intend to conduct any business here, must incorporate their company as a representative office. The corporate environment in Singapore views a representative office as a primarily administrative arrangement designed for non-commercial activities. Therefore, a registered office will not have any type of legal personality separate from its parent company. Please note that Singapore does not allow a Registered Office to conduct any business for the purpose of generating income and making a profit.
- Branch: Foreign companies that are not interested in incorporating a separate company in Singapore under a different name should prefer to incorporate a branch. After establishing a branch, it is possible to conduct business under the name or under the corporate brand of the foreign corporation. A branch incorporated in Singapore is legally considered as an extension of its parent company. Please note that in no way will a branch 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 Incorporation (MAA) for branches. A branch is free to manage its shareholder structure and business activities as directed by the original MAA of the foreign company.
- Subsidiary: A limited liability company that has a foreign company as its main shareholder must incorporate its business as a subsidiary company. A subsidiary company is a resident company of Singapore and is regulated by the laws of Singapore. A subsidiary company has a legal status in Singapore, therefore it 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. In addition, the foreign company is extinguished from the debt obligations and liabilities of the subsidiary company. Note that a subsidiary company is most often registered as a limited liability company in Singapore.
- Incorporated Companies: Singapore offers two main options for incorporated companies; Limited Companies and Limited Companies. A limited liability company can have up to fifty shareholders and also has restrictions on the transfer of shares. In contrast, a limited company has no such restriction and can have as many shareholders as it wants. In addition, the corporation can raise capital by offering shares and bonds to the public. Incorporated companies can register with a minimum capital of S$1 preceded by at least one shareholder, one director and one company secretary. It is okay if the chosen shareholder is an individual or a corporation. None of the shareholders is required to be a permanent resident of Singapore. Please note that shareholders’ liability is limited to the amount, if any, unpaid on shares issued to them. Other than that, S$1 is the fixed par value of shares for each share and no par value or bearer shares are not allowed.
- Limited Liability Company: When two or more partners want to incorporate a company in Singapore, the best option is to register a company as a Limited Liability Company (LLP). Under this partnership entity, ACRA identifies both partners as different personalities who can sue or be sued. Additionally, both partners may own property in their individual names. In an LLP company, the partners are offered the option of operating independently or as a combined entity. Please note that 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 Liability Company: The limited company seems to be a flexible business structure for entrepreneurs who are not interested in taking on any kind of responsibility in business management functions. These entrepreneurs usually transfer the management of the company to a completely different entity. The chosen entity can be an individual or a corporation, with unlimited liability. There are more than one, general, and more than one, limited partners, in a limited partnership. Please note that if general partners choose to participate in the business function, they become liable and their personal assets are compromised. On the contrary, limited partners are only liable for the amount they have contributed.
- Single owner: 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 in incorporating small businesses register their company as a sole proprietorship. The legal requirements establish that sole proprietorships must register all the profit-making activities they carry out on a daily basis. Please note that sole proprietorship is not considered a separate legal entity. The owner and his business are considered one and the same. The entrepreneur or owner is responsible for all debts or liabilities incurred during the course of business.
Deciding on the right business structure for incorporating a company in Singapore is a difficult task. Incorporating a company under the precise business structure is highly necessary when you intend to do business in Singapore. It is strongly recommended that you seek professional help in registering a company in Singapore. Incorporation experts in Singapore will help you understand each business structure, along with its obligations and future implications. Remember that the rules regarding obligations and responsibilities are very strict in Singapore. Only incorporation professionals will be able to guide you in the best way possible. They will help you incorporate your dream business without much risk.