Finance

Company Formation and Types of Companies in Singapore

Foreign investment is one of the major drivers of the Singapore economy. Voted and acknowledged as one of the best countries to start a business, Singapore is known for its legal and business policies which are friendly for both locals and foreigners. Besides that, Singapore is known for its consistent policies and stable governance for businesses and corporations alike.

Considerations for starting a business

As a foreigner, starting a business in Singapore is quite easy. All you need to do is to have the relevant documents and credentials and you can start talking to the right agencies. You must however know for sure what type of company you need to register for. This is because your first registration will determine how you will run your business in the short, middle and long run. Below are the types of companies you can form in Singapore.

Register a Business Trust

One of the options that you can consider is to register a business trust. This is a platform that will be running your business operations. The head of your business is what is called a trustee-manager. The responsibility of the trustee-manager is extremely important. You will be taking care of the business and steering it to grow. It is also your responsibility to ensure that investors are coming in who normally hold some form of economic interest in the business.

Branch Office

If you have a company in your home country, then you could possibly establish a branch office in Singapore, sometimes referred to as a foreign branch. Registration here means you will establishing an extension of your main company. This means that your branch office is not an independent entity where assets and costing would be considered based on the directions of the parent company.

Subsidiary – Foreign

This type of company is different from a branch office. Forming a foreign subsidiary company in Singapore means your organization is a private limited firm. The main difference here is that your foreign subsidiary is regarded as a separate and independent firm here by itself. In most cases, the parent company are the main shareholders of this firm but the Singaporean arm will need to bear all the liabilities and assets involved.

Sole Proprietorship

This is one of the riskiest forms of business registration. What it means is that the business owner (youself) has ownership of everything the company holds. This includes profits and losses. It is a known fact that sole proprietorships are good if you are a one-man show company and if you are doing a small business. However, it also means that you will be bearing all the risks and losses should they occur. In other words, if your fail to pay your creditors, they have the right to sue and claim your assets.

Partnership company

A partnership company is an ideal choice if you do not want to increase your business risk. The main idea behind such a company is that you enter into the business with a trusted party. However, the terms and conditions must first be discussed and finalized before the business starts. This is because a majority of partnership companies often end in legal disputes. All parties in the partnership must be well aware of the risks involved before signing the papers, particularly in the risks and liabilities involved. For partnership companies, it can involve between 2 and a maximum of 20 persons in the contract.

Note about Sole Proprietorships and partnerships

It must be noted that sole proprietorship and partnership companies are not corporate companies. This means that they are not required to declare their annual accounts for taxation purposes. However, the registrations (sometimes referred to as business license) would need to be renewed each year.

Limited Partnership company

This type of company involves what is known as a general and limited partner. Unlike standard partnership companies, there are no limit set to the number of partners in this type of company. The general partner is one who is responsible for the liabilities of the company. A limited partner is one who does not or only have some limited risks (sometimes called sleeping partners).

Limited Liability Partnerships

Limited Liability Partnerships or LLPs are actually a combination of partnership companies and private limited companies, particularly on their benefits. Basically, you get the best of both worlds if you register for such a company. The liability of partners are limited where they can only contribute a maximum amount to the company.