One of the key decisions you need to make when starting up a business is to consider the type of business vehicle to conduct your new business.
Your decision will influence the ease of business formation and exit, business ownership transfer, how much taxes you need to pay, the extent of personal liability you are potentially exposed to, the set of rules applicable to your business, the amount of administration and paperwork you need to perform, the general public perception of your business and the ability to obtain loans and borrowings.
We will discuss and compare the benefits and shortcomings of the 4 most common forms of business structures used to conduct business in Singapore.
| Features of Business Entity | Company (PTE LTD) | Limited Liability Partnership (LLP) | Partnership | Sole Proprietorship |
| General Information | One of the most popular business vehicles to conduct businesses. | A hybrid of model incorporating the benefits of both a company and a typical partnership. | The most basic form of business vehicle to conduct business for two or more owners. | The most basic form of business vehicle to conduct business for a single owner. |
| Suitability of Business Entity | Suitable for carrying almost all trades, vocations and professions. | Suitable for carrying a profession like law firms, accountancy firms, architect firms | Suitable for small scale business models with comparatively low risk and returns. | Suitable for small scale business models with comparatively lowrisk and returns. |
| Ease of Business Formation
Typically formed within the same day (Exceptions occur when registration is submitted for additional approval, which may delay the process by up to 14 working days) |
Relatively easy to incorporate a Singapore registered company
Typically formed within the same day (Exceptions occur when registration is submitted for additional approval, which may delay the process by up to 14 working days) |
Relatively easy to form a LLP.
Typically formed within the same day (Exceptions occur when registration is submitted for additional approval, which may delay the process by up to 14 working days) |
Easiest form of business formation for two or more owners.
Typically formed within the same day (Exceptions occur when registration is submitted for additional approval, which may delay the process by up to 14 working days) |
Easiest form of business formation for single owner.
Typically formed within the same day (Exceptions occur when registration is submitted for additional approval, which may delay the process by up to 14 working days) |
| Business Formation Requirements | Requires minimum of one local director and one shareholder (can be the same person).
Requires the appointment of a local company secretary within 6 months from date of incorporation. For Private Companies, (PTE LTD) Maximum of 50 shareholders. PTE LTD may be exempted from audit if they qualify as a Small Company. (Read More) Public Companies > than 50 shareholders |
Requires at least 2 partners to form a LLP.
Requires at least one local manager Partners can be individuals aged 18 years or above, or body corporates (LLP, PTE LTD) |
Requires at least 2 partners,capped at a maximum of 20 partners.
Are Singapore citizen/ Singapore permanent resident/ Employment Pass/ Dependent Pass holder Self-employed persons must top up their Medisave account with the CPF Board before they start, enter or renew a Partnership |
Single Owner
Age 18 years or above. Is a Singapore citizen/ Singapore permanent resident/ Employment Pass/ Dependent Pass holder Self-employed persons must top up their Medisave account with the CPF Board before they start or renew a Sole Proprietorship |
| Legal Identity of Business Entity | A company has its own legal identity separated from its members.
Has the ability to conduct all business activities including entering into contracts and hold assets and liabilities, sue and be sued in its own name. |
A LLP has its own legal identity separated from its partners.
Has the ability to conduct all business activities including entering into contracts and hold assets and liabilities, sue and be sued in its own name. One partner can commit the partnership to a business contract without the consent of the other partner. |
Not a separate legal entity
Partners has unlimited liabilities Cannot own property under name of partnership Can sue or be sued in partnership’s name |
Not a separate legal entity
Owner has unlimited liabilities Cannot own property under name of sole proprietorship Can sue and be sued in owner’s name. Can also be sued in sole proprietorship business name |
| Liability Exposure of the Business Owner | Owners have limited liability to the extent of unpaid shares held by them.
Personal assets of the members of the company are protected |
Partners personally liable for debts and losses resulting from their own wrongful actions
Partners not personally liable for debts and losses of LLP incurred by other partners |
Partners are personally liable for debts and losses of the partnership (regardless of who incur the debts and losses) | Owner personally liable for debts and losses of Sole Proprietorship |
| GST Implication | Compulsory registration if taxable supply of this Company exceeds $1M over last 12 months. | Combine turnover of all partnership businesses with the same composition of partners. | Combine turnover of all partnership businesses with the same composition of partners. | Combine the turnover of all your sole proprietorship businesses plus any income derived from your trade, profession or vocation. |
| Taxation | Taxed at corporate tax rate
The company can enjoy tax benefits available only to corporate entities. In general, business profits taxed at the corporate level is lower than if they were taxed at the personal level. Dividends declared are not subjected to any further tax as Singapore has a single tier tax system. |
Profits are taxed at respective partners’ personal income tax rates (or at corporate tax rate if the partner is a corporate partner). | Profits are taxed at respective partners’ personal income tax rates. | Profits taxed at owner’s personal tax rates |
| Tax Filing Form | ECI & Form C | Form P + Form B of respectivepartners | Form P + Form B of respectivepartners | Form B |
| Regulatory Commitments | For Exempt Private Limited Companies (Companies that qualifies as a Small Company) –
For Private Limited Companies NOT Exempted,
For ALL private limited companies,
|
Submission of Annual declaration of solvency, to be lodged by one of the managers stating whether the LLP is able or not able to pay its debts during the normal course of business | Annual Renewal of Business Registration | Annual Renewal of Business Registration |
| General Perception of Business by the Public | Conveys more trust and credibility. | As this business form is common in specific fields of profession (example Audit firms, Legal Firms), conveyance of trust and credibility within these professions is easy. | Comparatively, conveys the least trust and credibility. | Comparatively, conveys the least trust and credibility. |
| Capital Funding Opportunities | Avenues for capital funding include equity funding from new member, business loans and venture capital funding.
In general, obtaining a financing scheme from banks is relatively easier compared to other forms of businesses. |
Capital funding is generally limited to new injection from partners.
Financing from banks can only be obtained via pledging of the personal assets of the partners. |
Financing from banks can only be obtained via pledging of the personal assets of the business owner. | Financing from banks can only be obtained via pledging of the personal assets of the business owner. |
| Business Succession & Transfer of Business | The company has perpetual succession until it is wound up or struck off.
Addition and removal of members does not affect the continuity of the company. Business ownership can be transferred by way of share sale and purchase. Assets and other proprietary information are maintained within the company. |
The LLP has perpetual succession until it is wound up or struck off.
Addition and removal of partners does not affect the continuity of the LLP. |
Exists subject to partnership agreement. | The sole proprietorship will cease when the owner exits the business.
Business transfer is cumbersome as assets and related licenses and permits held have to be transferred/re-applied to or by the new owner separately. |
| Business Exit | Business exit is potentially more time consuming. The directors can choose to either strike off or wind up the business.
Strike off is the most efficient way of exiting a business so long as the company is able to fully dispose its assets and liabilities prior to the strike off. |
Business exit is potentially more time consuming. The partners can choose to either strike off or wind up the business.
Strike off is the most efficient way of exiting a business so long as the company is able to fully dispose its assets and liabilities prior to the strike off. |
Cessation of business by owners
Registrar may cancel the business registration if no renewal is made |
Cessation of business by owner
Registrar may cancel the business registration if no renewal is made |
| Government Set Up Fees | S$315 | $115 | $115 | $115 |
ContactOneSERVICE PACKAGE |
PACKAGE STARTS FROM $600 |
$468 |
$328 |
$288 |
| (inclusive of Government Fee + 12 month secretary support + Company Start Up Kit) | (inclusive of Government Fee) | (inclusive of Government Fee) | (inclusive of Government Fee) | |
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