Types of Business Entities in Singapore

The legal formation of the business determines the owner’s liabilities, tax and
corporate laws, and the number of shareholders.  

Currently, there are three basic types of business entities in the country and these are
the sole proprietorship, partnership, and company.  According to AsiaBiz Services,
which is the leading Singapore company that provides business solutions, each of the
business entity has its benefits and disadvantages which must be greatly considered.

This is a short description for each type of the business entity which will guide anyone
who wants to setup a Singapore company:

1. Sole proprietorship/ Sole Trader

This business is owned by only one person who holds personally all its liability for its
debts.  With this legal formation, the owner’s personal assets such as the house and
car can be liquidated to pay off the business-related debts.

Legally speaking, the owner is not a separate entity from his business which means
that he can be directly named in a lawsuit.

In terms of taxation, the owner is subjected to the personal tax rate and is required to
keep accounting records for taxation purposes and to renew his business registrations
every year. Renewals of the business is subject to minimum payment to Central
provident fund into the medisave accounts.  Foreigners who wish to incorporate a sole
proprietorship, must secure a local manager.

2. Partnership

This business entity may consist of two to 20 partners who share the liabilities, debts,
and other risks related to their business.  

In partnership, the individuals are taxed using the personal tax rate; they are required
to renew their business permit every year; and they are not generally required to file
their audited accounts annually.

However, partners can turn their business into a limited liability partnership (LLP) in
which their personal properties are protected from liabilities, debts, and losses related
to their business.
 

In LLP, profits are taxed using the corporate tax rate and that partners are treated as a
separate entity from their business which means that their company can acquire a
property under its name and can be named in a lawsuit.

3. Private Limited Company

A company (also known as corporation) may consist of min one and maximum of 50
owners who are more commonly called as shareholders.  These shareholders enjoy
limited liability which means that their personal assets are protected from business
debts and liabilities.

Another advantage of the Singapore business corporation is that it provides several tax

incentives such as the double taxation treaty with several countries, Single tax tier
system which means that once the tax is deducted at corporate level, the dividends of
each shareholder will come tax free.  Tax incentives such as first 100,000 profit is tax
exempt for the first 3 years.

Asiabiz Services Pte Ltd, has help thousands of local and foreign companies
incorporate in Singapore. Clients who need more information in Company
incorporation matters, taxation, accounting can contact Asiabiz by going to the
following link: http://www.asiabizservices.com/incorporation/