Business Structures in Singapore

Deciding on the company structure and constitution is typically one of the first key decision any aspiring business owner needs to make. The structure and constitution would have significant implications to considerations over ownership, liabilities, compliance requirements and cost.

Private Company

A private company is the most common business entity for setting up a business in Singapore. A private company limited by shares must have not more than 50 shareholders, and the right to transfer shares of the company must be restricted. Shareholders of a company would generally only be liable for the company’s debts up to the amount of share capital they have subscribed.

An exempt private company must not have more than 20 shareholders, of which no corporation holds beneficial interest in the company’s shares. An exempt private company must prepare its balance sheet and profit and loss account annually, but it need not submit these documents with its annual return. An exempt private company is also permitted to make loans to its directors and to companies in which its directors are interested.

Public Company Limited by Shares

Any company which is not a private company is a public company. The number of shareholders of a public company can be more than 50. A public company is generally subject to more regulations than a private company, such as the requirement that it must register a prospectus with the Monetary Authority of Singapore before making any public offer of shares and debentures.

Sole Proprietorship

A sole proprietorship is a business that is owned by an individual or a single corporate entity. A sole proprietorship is not a separate legal entity, and the owner of the sole proprietorship is personally liable for any debts or liabilities incurred in the name of the business without limitation. A sole proprietorship may generally carry out any type of business activity in Singapore except for those business activities which are required by statute to be conducted by a corporate entity, such as banking, finance and dealings in securities.

Partnership

1. General Partnership A general partnership is a business consisting of at least two but less than 20 partners. The partners of a partnership may either be natural persons or corporate entities. Similar to a sole proprietorship, a general partnership is not a separate legal entity, and thus the partners of the partnership will be jointly liable to creditors for all debts and liabilities incurred in the name of the partnership without limitation.
2.  Limited Partnership (LP) A LP is a partnership which consists of at least one general partner and one limited partner. A LP does not have a separate legal identity from the partners. A general partner is responsible for the actions of the LP and is liable for all debts and liabilities of the LP. A limited partner is not liable for debts and liabilities of the LP beyond his agreed contribution, provided he does not take part in the management of the LP. Both the general partners and limited partners may be either natural persons or corporate entities.
3. Limited Liability Partnership (LLP) A LLP provides the opportunity of operating as a partnership while having a separate legal identity like a private limited company. Partners of a LLP shall generally not be personally liable for the debts and liabilities incurred in the name of the LLP except in certain exceptional circumstances, such as when an obligation arises as a result of the partner’s own wrongful act or omission. However, a partner would not be personally liable for the wrongful act or omission of any other partner of the LLP.