It’s a known fact that Singapore is one of the best places to set up your business. Based on the 2020 World Bank Doing Business report, Singapore has consistently ranked as one of the top countries on the ‘Ease of Doing Business’ Indicator. This just proves that Singapore business incorporation is the next best move for small businesses.
From its strategic location and politically stable environment to its free trade agreements, both local and foreign founders can benefit greatly from setting up shop in the Lion City. Once you’ve decided to take the leap, it’s time to rough out the details and choose your preferred business structure.
When it comes down to deciding on your entity type for Singapore business incorporation, there are various considerations to factor in:
While this is not the complete and extensive list of considerations, asking yourself these questions are a starting point.
In Singapore, there are four main types of business structures: Sole Proprietorship or Partnership, Limited Partnership (LP), Limited Liability Partnership (LLP), and Company.
But in this context, we will be focusing on three entity types and why they are the best options for small business owners looking to incorporating their companies.
For owners still feeling apprehensive about diving straight into company incorporation in Singapore, Sole Proprietorship is a good place to start. Sole proprietors have complete ownership of the business and don’t need to make decisions based on the requirements of legal partners or shareholder decisions.
Should you decide to change your business strategy at any point, you have the liberty to do so without additional permission. This flexibility allows owners to experiment before committing to the regulations required of larger-scale business entities. While it may be the simplest business structure there is in the country, it is only best suited for individual entrepreneurs that don’t carry any risks.
One major downside to this business structure is how it’s not seen as a separate legal entity from its owner or proprietor. Although it is still seen as a business firm in the eyes of Singapore Company Law, the owner will be personally accountable for liabilities incurred during the course of the business—from debts to losses. If you have a stable flow of income and want to keep your business small, this may be the business structure for you.
Unlike a sole proprietorship, a private limited company is a more formal business structure that offers liability protection for its owners. As a Limited Liability Company (LLC), this is considered a separate legal entity from its partners and owners. In the event of a financial hurdle, a shareholder’s liability is only limited to their investment in the business, leaving their personal assets untouched.
Private limited companies are the preferred choice among all the LLCs as it is the most advanced, flexible, and scalable business structure. They are often seen as more credible in the eyes of clients, financial institutions, as well as potential investors. Other benefits include reasonable tax rates and perpetual succession.
If your goal is to expand your small business in scale and operation, incorporating your company as a private limited company would be the best option.
A Limited Liability Partnership (LLP) is a form of partnership that is highly favoured by business owners. The biggest advantage of this business structure is how it combines the features of a company and partnership. It allows partners to enjoy a balance between reduced liability exposure, management control, and flexible roles within the organisation. Similar to an LLC, the liability of each shareholder is only limited to their investment in the company. Perpetual succession is also in the cards.
However, since they are less regulated than private limited companies, LLPs are also seen as less credible with only moderate public perception. On top of that, there is also a lack of tax exemptions and benefits and a tedious ownership transfer process.
For business owners engaged in professional services who are seeking just the right amount of control, an LLP is the way to go.
Since they’ve only ever run their business on a personal and small-scale basis, the idea of engaging company incorporation services in Singapore may seem daunting for small business owners. But there are a variety of benefits associated with registering your business.
The decision on whether it’s time to incorporate lies solely on where your business is currently. If you’re still new to the entrepreneurial journey, waiting it out and focusing on your business growth can be a viable option. Since certain fees and compliance requirements are to be maintained, ensure that your business has the necessary financial resources beforehand.
At the same time, incorporating early to reap the benefits is not the worst idea as well. You’ll experience greater ease in acquiring funding, increased credibility among clients and investors, and enjoy possible tax advantages during the early stages of your business.
Are you set on incorporating your Singapore-based business? If you nodded your head with enthusiasm, it’s time to get started with Aspire.
With Aspire Kickstart, register your company in just ten minutes with a completely digital process. Select the package that suits your needs best and get an Aspire Business Account for free.
Managing your business expenses and registering your Singapore-based business all at once? It’s like hitting two birds with one stone.