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All You Need To Know About Choosing Business Structures in Singapore

You may have thought about incorporating your business more than once if you are a business owner in Singapore looking to legitimize your company. As soon as you have gotten ACRA approval for your business name, you then need to decide which business structure your company should operate under.

Choosing the right business structure

There are 5 different business structures you can park your business under:

  • Sole proprietorship

If you are embarking on a solo business venture, this might be the best structure for your business to operate under. This business structure can be owned and managed by an individual, company or a limited liability partnership (LLP). There are no partners for this business structure.

A sole proprietorship is not a separate legal entity from its owner. The owner also has unlimited liability (they are personally liable for all the debts and losses of the business), and can sue, or vice versa in the owner’s name.

  • Partnership

If you have at least one partner, this business structure might be right up your alley. The majority of these types of businesses are owned by 2 to up to 20 partners in a general partnership. They may be individuals, companies or limited liability partnerships (LLPs).

Like a sole proprietorship, a partnership does not have its own legal personality. The partners’ debts and losses are their personal responsibilities, and they can sue or be sued in the proprietors’ names.

  • Limited Partnership (LP)

Described as a vehicle for conducting business in Singapore, a limited partnership consists of one general partner and one limited partner.

LPs can neither sue nor be sued on their own behalf, as they are not legal entities separate from their owners.

A general partner or a limited partner can be either an individual or a corporation. A general partner is liable for debts and liabilities, while a limited partner is not liable for debts beyond their contribution if they are not involved in the management of the LP.

  • Limited Liability Partnership (LLP)

LLPs are considered corporations and have a separate legal personality from their partners. An LLP is not affected by the changing of its partners, its rights and obligations remain the same

As well as purchasing and holding property in its own name, an LLP can also sue and be sued within the company’s name.

The partners of an LLP are generally not liable for the business debts they incur. However, in some cases, a partner may face liability for losses resulting from his wrongful conduct.

It is the responsibility of LLPs to keep accounting records, profit and loss accounts, and balance sheets that reflect the company’s transactions and financial standing. LLPs must also file an annual declaration with the Registrar declaring whether or not their debts can be paid. Public access to this information will be available.

  • Private Company Limited by Shares (Pte Ltd)

Up to 50 shareholders can be part of a private company limited by shares. A private company is one whose articles restrict its members from transferring their shares.

The company is a separate legal entity from its owners, and it can sue and be sued in its own name, while the company’s board and shareholders are not liable for the company’s debts.

Directors and shareholders are limited in their liability to the company. They are not obligated to fulfill their obligations once their shares have been paid up, and their assets are protected from the creditors’ claims.

For private limited companies, owning property is possible. Furthermore, it is eligible for local tax deductions and incentives due to its tax residency.

General considerations

It is important to consider your current circumstances and business goals when choosing a business structure.

Each business structure comes with their own advantages and disadvantages. Some key considerations you will need to factor in include:

  • Number of business owners
  • Liability
  • Obtaining capital investment
  • Long-term business plans

Whether you are unsure of which business structure best suits your needs, or if you need assistance incorporating your business, Ares Strategy has got you covered. Offering a wide range of business incorporation services, we help you streamline the legitimization process of your business. Contact us today to find out more.

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