When planning for a new company registration in Singapore, you must plan the structure of your business. Although each business structure has its benefits and drawbacks, none are superior to the others. Your specific business should be considered when selecting a business structure, as well as your needs for managing taxes, distributing income, and minimizing liability.
And that is why TNPL makes sure that these business owners have the best structure and strategic setup possible for their particular industry.
Several factors will influence you depending on the business structure you pick. It will affect your capacity to raise money from various sources, how much tax you pay, and the risk or responsibility associated with your assets. This makes picking the appropriate structure when setting up a business a top responsibility.
3 Most Common Business Structures in Singapore
We have analyzed the benefits and drawbacks of the three primary business forms in Singapore—sole proprietorships, partnerships, and limited companies—to assist you in making this choice.
Private Limited Company
The most sophisticated, adaptable, and expandable sort of business structure in Singapore is a private limited company. This entails registering your firm with Companies House as a limited company.
The owner and the limited corporation are two distinct legal entities under this form. As a result, the company is its own “legal person” and is in charge of its finances. The limited corporation is owned and controlled by those who hold company shares.
Pros:
Registration of private limited company in Singapore is a definite benefit of the limited company structure. The business’s losses and debt are not your responsibility as the owner. This is a significant benefit since it enables you to conduct business without endangering your lifestyle, your family, or your property.
Your professional position and reputation will improve if your firm is set up as a limited corporation. The operations, ownership structure, and internal management may be the same, but limited corporations are regarded more favorably than sole proprietors or partnerships, and you’ll come across better as a limited company.
Cons:
Setting up a private limited company in Singapore is a little more challenging than starting up as a single proprietor (Note: not if you register a new company in Singapore with us).
If you want to organize your firm as a limited company, Companies House will require legal incorporation, which carries a registration charge. Any modifications you make to your company information must be communicated right away to Companies House. Moreover, you are required to submit an annual confirmation statement to the Companies House attesting to the veracity of specific information kept on public records.
Annual accounts and a Business Tax Return must be delivered to IRS. The accounting standards for this kind of firm are significantly more difficult and time-consuming.
Sole Proprietorship
A sole proprietorship is a company that has one owner. A sole proprietor is also a natural individual, and not a corporation who completely owns and operates this kind of company. It is common for a sole proprietorship to be excused from the obligations of incorporation and registration.
The law effectively views your company and you, the business owner, as a single entity. This implies that you may use your personal tax filing information to file all tax returns.
To set up a sole proprietorship company in Singapore, you just need to start operating. You’re halfway there if you set up a home office with a laptop, VoIP home phone, and other tools. Your sole proprietorship will be operational as soon as you begin offering your goods or services.
Pros:
This structure has the distinct advantage of allowing you to make every choice by yourself, giving you total control over the business. As a sole proprietor, you are regarded as an independent contractor, and as such, any profits are wholly yours.
Cons:
Absolute power entails total accountability. The personal responsibility of sole proprietorship owners is unrestricted. It implies that any debts, losses, and legal actions are your exclusive responsibility. You’ll be required to use personal assets to pay creditors if the company collapses.
Partnership
By enabling two or more persons to start and co-own a firm, the partnership form of business structure aims to alleviate the restricted expansion limitation encountered by a sole proprietorship.
If the thought of starting a business alone intimidates you or if you have a specific, knowledgeable partner in mind who would be advantageous to the firm, a partnership structure could be right for you. Depending on how many shares each partner owns in the firm, different partners will have different obligations and liabilities.
Pros:
The absence of formality while conducting a partnership firm as opposed to a limited corporation is one of the key benefits.
In general, partnerships have an easier accounting procedure than limited firms. Although the partnership firm is exempt from filing a Corporate Tax Return, you must still keep track of your revenue and spending.
The partnership can be established orally or in writing, as agreed by the parties. Work in a business partnership instead of going it alone as a solo proprietor to enjoy the companionship and support of your coworkers.
Cons:
Being a part of a partnership prevents you from acting autonomously. To make decisions, you must consult your spouse or at the very least, run all decisions by them.
A partnership is an extension of your and the other partners’ legal relationships. Legally and financially, every partner is liable for the company. You won’t be taken into consideration independently from your business if it has legal issues.