Sole Proprietorship

A sole-proprietorship is an ideal for Small Businesses.

It also known as the sole trader or a “one-man show” according to laymen, is a type of business entity that is owned and run by an individual, and in which there is no legal distinction between the individual and the business.

The owner is entitled to all the profits and losses. He is also personally liable for any obligations or debts incurred by the business. Self-employed persons must top-up their Medisave account in Singapore before they register a new business name.

Partnerships

There are three different of Partnerships in Singapore:

 

First one is General Partnership, which is an alternative for Small Businesses with more than One Owner made up of 2 to 20 people.

It is not a separate legal entity from the business owners. The partners are personally liable for all the debts and losses of the partnership. It can sue or be sued in the partners’ names.

Second one is a Limited Partnership (LP). It is a partnership consisting of a minimum of two partners, with at least one general partner and one limited partner. A LP does not have a separate legal entity from the partners, it cannot sue or be sued or own property in its own name. For example, fund and investment company.

 

Third one is a Limited Liability Partnership (LLP). It gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company.

This means that the LLP is seen as a body corporate and has a legal personality separate from its partners. The LLP has perpetual succession, which means any change in the partners of a LLP will not affect its existence, rights or liabilities. For example, law firm and audit firm.

Local Companies, it is the most common type of company in Singapore

A local company is the most favoured business structure for Singapore business formation and suitable for foreign investor to setup in Singapore.

• The company needs a director, shareholder, company secretary as the basis structure.
• It is a separate legal entity from the business owners
• The company can buy property in its own name.
• Since the company is a separate legal entity from the business owners, which will keeps the shareholders out of the courts of law.
• The company has perpetual existence. It is not tied to any particular member or shareholder.
• The shareholders are not responsible for the loss or debt incurred by the company.
• Singapore allows 100% foreign ownership.
• Transfer of ownership is easy.
• It can audit exemption if the criteria is met (no audit require).

In general, to setup a local company has more credibility than a sole proprietorship or a partnership in the eyes of investors, banks, financial institutions, suppliers, & customers. The perception matters when a local company goes to the market for securing loans for its expansion would be easier as well.

A Singapore local company is considered as tax resident. It gets access to all tax benefits and incentives schemes for the local entities which go along in reducing its operating costs and tax payable.

The fourth type of company can be setup a Foreign Company as a Branch in Singapore

Foreign company is a company, society, corporation, association, or any other body formed outside Singapore. Under the foreign law, which allows the company to be incorporated, it is not separate entity and the company will be able to hold property.

A foreign company can set up a branch office in Singapore. A foreign company is required to engage the services of a Registered Filing Agent to submit an online application for setting up a branch office.

The last type of company will be Non-Trading Representative Office

This is a form of foreign ad-hoc company which only operates for a short term, for example like one to two years. It is usually to start exploring business ventures, market surveys, or trade leads in Singapore. The goal is always to test the waters before establishing the company. Please take note that the Representative Office will not allow to do any business related activity but only a research purpose and to open a bank account will be difficult as well.

I hope so far my information is clear. Now I would like to continue with the comparison chart between the Local Company and Foreign branch

Local Company will be suitable for overseas investor to explore business opportunity in Singapore.

As for Branch, it will be more suitable for overseas Headquarter to create brand awareness in Singapore or having contract signed in Singapore and require branch to look after the project.

The liability for local company is separate legal entity distinct from its parent company and the liability is limited to subsidiary

The liability for Branch is NOT a separate legal entity but an extension of parent company

The allowed activities for local company can be the same or different from the parent company

The allowed activities for branch must be the same as the parent company

The tax for local company will be taxed as Singapore resident entity, local tax benefits are available

The tax for branch will be taxed as non-resident entity, local tax benefits are NOT available

The local company must appoint one local director and local resident secretary

The branch must appoint at least one local authorised representative.