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Types of Business Entities in Singapore

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Singapore has advanced business legislation and a wide range of entities developed to cater to the needs of any business idea. This place was praised by the World Bank for several consecutive years for the easiness the registration and business operations are made here with. The country is famous not only for effective, business-friendly legal system and top-notch intellectual property security but also for a flash registration procedure (takes 1 day) that is free of any corruption and red tape.
Whether you seek for saving on taxes or a premium protection for business risks, whether you need a full-scale plenipotentiary company or just a representative office, Singapore has comfortable options for you: Private Limited Company, Subsidiary, Representative Office, Branch Office, and others. The choice of legal entity is crucial as it will define the track your company will be moving down (image, liability, buying power, tax mode, and so on), so at first, it’s important to ensure that this track matches your business goals and priorities.
In our guide, we will not only disclose the peculiarities of Singapore’s the most used legal entities but also give you hints how your business can win either by saving on taxes or by enjoying more benign filing requirements.

Private Limited Company

If you are seeking for the legal form that would allow your business to grow and enjoy the widest range of powers without exposing your personal assets to risks, the Private Limited is for you. This legal form belongs to Limited Liability firms whose peculiarity is in limiting owners’ business liabilities to the firm’s share capital. Pte Ltd (Private Limited) is preferred by serious businesses aimed at expanding and international influence.

Features and Advantages of Private Limited Company

Share capital. The government sets no minimum and maximum bars for the share capital: setting up a firm is possible even if you have only 1 SGD for the share capital. There are also no nationality restrictions for the share capital as well. The firm is authorised to produce more shares by drawing in new investors/shareholders.
Legal status & powers. The company has an own legal entity which is separated from its shareholders. The company is amenable to law on its behalf and responds for its actions with its share capital, not with its owners’ personal property. This feature allows the Private Limited to buy its own property, go law, receive loans and enter into contracts absolutely independently and use this freedom for development and growth.
Image. As a firm with a limited liability, the Pte Ltd is more appealing not only to suppliers and clients but also to bankers and investors. If you plan to receive loans or involving new investors, it is crucial for your company to have a limited liability and a detached legal status that gives full play for bold business actions.
Ownership/membership. The maximum of 50 shareholders (individuals) can be involved. As the ownership/membership is based on holding shares, it can be easily passed through selling these shares. This way, despite its membership being transient, the company continues to exist.
TaxingOn top of enjoying one of the planet’s lowest corporate tax rates (17%), the Private Limited as a legal form preferred by the government is granted plenty of tax rebates. New Pte Ltd companies having no more than 20 shareholders enjoy 100% discount for the first earned (during the first 3 years) 100k SGD and 50% discount for the next earned 200k SGD. All other companies enjoy such rebates:

  • If the normal changeable income isn’t more than 300k SGD, the Pte Ltd gets 75% exemption for its first 10k SGD of income and 50% exemption for the rest (up to 290k SGD). This way, the firm can save up to 152.5k SGD.
  • During 2016-17 years of assessment, a company can get a one-time rebate of 30% (but no more than 20k SGD per the accounting period).

Singapore doesn’t impose the capital gain tax on the revenue if the corporate tax was already paid from this income. No dividend tax is applied as well.
Annual filing. Most Private Limited companies must file their tax return (using the Form C) and audited accounts yearly on the “preceding year” principle: for the fiscal year that ends in the preceding calendar year. November, 30 is the deadline for such filing. Each company decides about its financial year on its own. 3 months after its accounting period ends, the Estimated Chargeable Income must be filed. The Pte Ltd must maintain its documentation (bank statements, financial transactions, source documents, and so on) for each accounting period during 5 years. Lots of companies still can avoid messing with annual filing. Exempts are companies containing no more than 20 shareholders (with no corporate body holding major of the shares) and those whose sales turnover is less than 5 million SGD.

Registration Requirements

  • If a Private Limited company is being set up by a foreign founder, the government insists on the appointment of 1 local director and 1 secretary (the Singaporeans/PRs) who are real persons aged 18 and older. Incorporation in Singapore doesn’t require relocation of a founder, but if he wishes to hold the reins in the Pte Ltd, he needs to shift to Singapore using one of the available business passes: EP or EntrePass.
  • New company ought to have a unique name. It shouldn’t be obscene or imitate other Singaporean company’s name. The suggested name must be checked by an incorporation consultant beforehand.
  • New firm must have a real address in Singapore.
  • Registration doesn’t require a physical presence of founders/directors.
  • Although the registration is brief and usually takes a day or so, the preparations (developing a strategy, name check, obtaining the physical address, and paperwork) will take additional time (up to 1 week).

Subsidiary Company

If you already have a successful business overseas and seek for expanding your operations to Singapore, consider opening a Subsidiary which will allow you to control the activity of your new Singaporean firm and secure your personal property at the same time. The Subsidiary has the same “limited liability” nature as the Pte Ltd does, but the difference is that the Subsidiary has one major shareholder – its parent firm.

Features and Advantages of Subsidiary Company

Share capital. A foreign firm wishing to establish a Subsidiary in Singapore doesn’t have to form an impressive paid-up capital: 1 SGD is enough for the registration. There is no highest limit, as well as nationality restrictions. In the future, the Subsidiary can produce more shares and draw in new investors/shareholders. The parent company holds the major part of the Subsidiary’s shares.
Legal status & powers. The Subsidiary’s legal entity is detached from its shareholders (parent firm), and, therefore, the firm is amenable to law on its own behalf and responds for its actions (and failures) with its share capital, not with assets of the parent firm and other shareholders. A detached legal status allows the Subsidiary to buy its own property, go law, receive loans and enter into contracts on its own behalf, not on behalf of the parent firm.
Image. Thanks to its limited liability, the Subsidiary has a very appealing image not only for suppliers and clients but also for investors and bankers. In terms of image, the Subsidiary is the most beneficial among all form of establishing a presence in Singapore.
Ownership/membership. The Subsidiary has 1 major shareholder (parent company) and can have up to 49 other. Membership can be passed by selling the shares. This way, the Subsidiary is a steady business formation despite the transient nature of its membership.
Taxing.The Subsidiary enjoys the same tax benefits as the Private Limited: low corporate tax rate (17%), exemptions, and rebates. New Subsidiaries that have no more than 20 shareholders get the 100% discount for the first earned 100k SGD (during the first 3 years) and the 50% discount for the next earned 200k SGD. Older Subsidiary companies can benefit from such rebates:

  • If the normal changeable income is 300k SGD or less, the Subsidiary pays taxes only for 25% of its first 10k SGD of income and then for 50% of the rest of the income (up to 290k SGD). This way, the Subsidiary can save up to 152.5k SGD.
  • During 2016-17 years of assessment, the Subsidiary can get a one-time rebate of 30% (but no more than 20k SGD per the company’s financial year).

After the Subsidiary pays the corporate tax from its revenue, no capital gain and dividend taxes are imposed. If the Subsidiary earned a profit abroad through its professional business activity, the income doesn’t undergo taxation in Singapore unless it was transferred to Singapore.
Annual filing. All subsidiaries (without exemption because they have shareholders which are corporate bodies) must file their tax returns (using the Form C) and audited accounts every year before November, 30 based on the principle of preceding year (for the financial year that ends in the preceding calendar year). Each Subsidiary decides about its financial year on its own. 3 months after the accounting period ends, the Estimated Chargeable Income must be filed. The Subsidiary must maintain its documentation (bank statements, financial transactions, source documents, and so on) for each accounting period during 5 years.

Registration Requirements

  • For opening a Subsidiary, the government insists on the appointment of 1 local director and 1 secretary who are real individuals aged 18 or older ordinarily residing in Singapore. A foreign director doesn’t necessarily have to relocate to Singapore; however, if he wishes to hold the reins in the Subsidiary, one of the available business passes (EP or EntrePass) must be obtained by him. He cannot work in Singapore without a working pass.
  • Subsidiary ought to have a unique name. It mustn’t be obscene or imitate other Singaporean company’s name. The suggested name must be checked by an incorporation consultant beforehand.
  • New firm must have a real address in Singapore.
  • Registration doesn’t require a physical presence.
  • Although the registration is brief and usually takes a day or so, the preparation (strategizing, name check, getting the physical address, and paperwork) will take additional time (up to 1 week).

Branch Office

If you are seeking for establishing a presence of your overseas company in Singapore and saving on taxes, the Branch Office is the option for you. Unlike the Subsidiary, the Branch doesn’t belong to the group of companies with a limited liability, and therefore, such business formation suits only low-risk businesses. The parent firm is responsible for actions of its Singaporean Branch because legally the Branch is its extension.

Features and Advantages of Branch Office

Share capital. A foreign company wishing to establish a Branch Office in Singapore doesn’t have to lay down a huge paid-up capital: 1 SGD is enough for the BO registration. There is no highest limit, as well as any nationality restrictions. All shares of the BO belong to the parent firm.
Legal status & powers. Being only an extension, the Branch Office is legally attached to its parent firm. The latter is fully responsible for all actions of the BO including any brushes with the law. As the Branch is under Singapore’s jurisdiction, in case of debts, legal prosecutions, and loses, the company-founder is vulnerable and answers with its own assets. That is why this legal structure doesn’t suit businesses whose activity is connected with the risk. Unlike the Subsidiary, which enjoys its own legal entity, the Branch is obliged to operate within the scope of its parent firm’s activity and cannot buy property, receive loans or sign contracts on its own behalf.
Image. As the Branch Office isn’t an independent company, it cannot build up its own image. The parent firm’s performance defines how the Branch is perceived. Investors aren’t likely to invest in the Branch Office because of the “unlimited” liability that exposes their individual assets to risk.
Ownership/membership. The Branch is owned by the parent company. Membership/ownership can be changed by selling the shares.
Taxing. The Branch office has a complicated scheme of taxation. Being only an addition to its parent firm, the BO isn’t treated as a tax resident. One the one hand, it is a relief: if the company earns a profit abroad, Singapore doesn’t impose taxes on it. On the other hand, if this profit was brought or transmitted to Singapore, it becomes subject to taxes, and no exemptions and rebates common for the companies-residents are applied. The same is about incomes earned inside or from Singapore.
Annual filing. All Branch Offices (without exemption because they are founded by corporate bodies) must file their tax return (using the Form C) and audited accounts every year. Peculiarity of filing for the Branch is that the Office must file audited accounts both for its overseas parent firm and itself; this way the IRAS will track the source of the Branch’s income (as taxing varies depending on the source). The filing must be handled annually before November, 30 based on the principle of the preceding year (for the financial year that ends in the preceding calendar year). Each Branch decides about its financial year on its own. 3 months after the accounting period ends, the Branch ought to file its Estimated Chargeable Income. Documentation for each accounting period (bank statements, financial transactions, source documents, and so on) must be maintained during 5 years.

Registration Requirements

  • For opening a Branch Office, the government requires an appointment of 2 local agents (real Singaporeans/PRs older than 18 YO). A foreign director doesn’t necessarily have to relocate to Singapore; however, if he wishes to take the full charge of the Branch, he needs to qualify for one of the available business passes (EP or EntrePass).
  • Branch Office must have a name that is similar to the parent firm’s name, unique (doesn’t copy the name of an already existing firm in Singapore) and isn’t obscene. The suggested name must be checked by an incorporation consultant beforehand. If the parent firm’s name is “engaged” in Singapore, the authorities may offer a compromise.
  • New Branch must have a real address in Singapore for business correspondence and other purposes.
  • Registration doesn’t require a physical presence.
  • Although the registration of the BO is brief and usually takes a day or so, the preparation (strategizing, name check, getting the physical address, and paperwork) will take additional time (up to 1 week).

Representative Office

If you plan to start a business in Singapore or expand your existing company’s influence to the region and you need to study the business surroundings and potential in Singapore before making a serious investment, the Representative Office is a right option for you. This business structure implies no traditional legal status, and, therefore, it cannot be used for a profitable activity, but it perfectly caters for such goal as exploring potential market opportunities. This provisional (3-year) business formation is the cheapest incorporation option as you are freed from paying the taxes and bothering with annual filing.

Features and Advantages of Representative Office

Share capital. A foreign company wishing to set up a Representative Office in Singapore doesn’t have to form a big paid-up capital: in Singapore, it is possible to register the RO even with the share capital of only 1 SGD. There is neither highest limit, nor nationality restrictions for the share capital.
Durability. The Representative Office is the only temporary business formation: it is valid during the maximum of 3 years and must undergo renewals every year. Before the RO expires, the parent company must decide whether to launch a full-scale profit-targeted company and upgrade the RO to any other business legal structure that allows earning profit.
Legal status & powers. The Representative office possesses no legal status, and, therefore, any profitable activity through the Representative Office is strictly prohibited. The office is permitted to be engaged into such activities as market research, studies on feasibility and other business matters.
Image.  As the Representative Office isn’t a traditional corporate entity, it cannot deal with clients, suppliers, bankers or investors. Through its representative activity, it works for the image of its parent firm.
Taxing. Possessing no legal status and being banned from a profitable activity, the Representative Office is a tax exempt in Singapore.
Annual filing. As the RO neither performs as a corporate body nor earns profit, it is freed from maintaining any statutory documentation and annual filing.

Registration Requirements

  • Only foreign companies whose sales turnover is more than 250k SGD and that have operated successfully during the last 3 years qualify for registering the RO in Singapore.
  • Overseas parent company must relocate to Singapore one representative who will take the charge of the Office’s activity. The foreign candidate needs to obtain the Employment Pass for such relocation. Except the representative, the office can hire the maximum of 5 local employees.
  • RO must have a name that sounds similar to the parent firm’s name but doesn’t copy the name of any other local firm or sound obscene. The suggested name must be checked by the incorporation consultant beforehand. If the parent firm’s name is “engaged” in Singapore, the authorities may offer a tailor-made version.
  • New RO must have a real address in Singapore for business correspondence and other purposes. The office must produce various communication materials (e.g. name plaques, staff name cards and so on) that witness to the fact of the Singaporean registration of this RO.
  • Registration doesn’t require a physical presence.
  • Although the registration of the BO is brief and usually takes a day or so, the preparation (strategising, name check, getting the physical address, and paperwork) will take additional time (up to 1 week).
  • When the registration is finalised, the Representative Office obtains its central registration number. The number cannot be utilised for trading, but only for exporting and importing materials or sample products.
  • RO must undergo renewals every year and keep the authorities updated on any changes in the Office’s activity, address, or structure. If the RO fails to meet the terms of the authorities or becomes dormant, it gets de-registered.

All legal entities differ and require a careful and far-seeing strategising. It is essential to bear every detail in mind and get your business idea professionally assessed in order to determine the most winning legal form for it. Most foreign businesses and entrepreneurs reasonably seek competent advice of local incorporation experts. It is especially beneficial if they are also pros in visa processing: rarely does founding a company in Singapore go without the relocation of the key staff. Another benefit of enlisting a professional incorporation backup is in handling the paperwork which is plentiful and complex for such procedure because Singapore’s company registrar is very demanding to the quality of business documentation. Rare assessment and competent strategising are the main pillars of successful incorporating in Singapore.

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