Types of Business Entities in Singapore

Download a copy of our business guide or checklist to find out how you can manage your business more effectively and compliance with local regulations.

Of all the choices you make when deciding on incorporating an entity in Singapore, one of the most important factors is the type of business structure (i.e. legal entity) you choose for your business. Your decision can affect the amount you pay in taxes, the image and perception of your business among your clients and suppliers, the amount of paperwork your business is required to do, the personal liability you face, the ability to borrow money, and the possibility to expand your business.

The following are the main business entity types in Singapore:

Private Limited Company

A private limited company is limited by shares and has a separate legal entity from its shareholders. Company shares are held by less than 50 persons and are not available to general public. It is recognised as a taxable entity in its own right. As a result, shareholders of a Singapore private limited company are not liable for its debts and losses beyond their amount of share capital.

Most privately incorporated businesses in Singapore are registered as private limited companies. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd. For example, our company, Allied Corporate Services Pte Ltd, is incorporated as a private limited company. The shareholders of a private limited company can either be individuals or corporate entities or both.

A private limited company is the most advanced, flexible, and scalable type of business form in Singapore. It’s also the most preferred type of Singapore business entity for serious entrepreneurs (as opposed to sole proprietorship or limited liability partnership). 

Public Limited Company

A public limited company is a limited liability company that may offer shares to the general public. A public limited company must have at least 50 shareholders and is subject to significantly more stringent rules and regulations since they have the power to raise funds from the public. A public limited company is usually listed on a stock exchange. However, a public company must register a prospectus with the ACRA before offering shares and debentures. A public company seeking listing on the Stock Exchange has to obtain the approval from the Singapore Exchange Limited (SGX) and the Monetary Authority of Singapore (MAS).

Public Company Limited by Guarantee

A public company limited by guarantee is a type of business entity meant for non-profit purposes. For more information, refer to setting up a non-profit entity in Singapore.

Sole Proprietorship

A sole proprietorship is the simplest but the riskiest type of business form in Singapore. From a legal perspective, sole proprietorship is not a separately incorporated entity and therefore the owner and the business are one and the same. The owner personally owns all assets and liabilities of the business. There is no protection of personal assets from business risks and liabilities. As the sole proprietor of a business, you have unlimited liability, meaning that if your business can’t pay all its liabilities, the creditors to whom your business owes money can come after your personal assets. Many entrepreneurs are usually unaware of this enormous financial risk. If the business is sued or can’t pay its bills, the owner is personally responsible for the business’s liabilities. We consider this a serious drawback and hence do not recommend sole proprietorship to inspiring entrepreneurs.

Partnership

The partnership type of business structure attempts to address the limited-expansion constraint faced by a sole proprietorship by allowing two or more people to establish and co-own a business. A partnership firm has no legal existence separate from its partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership. A partnership type of business structure may make sense only in very limited number of situations. We generally don’t recommend this type of business structure to business owners.

Partnerships in Singapore can be of three types:

General partnership

A general partnership is formed by a minimum of 2 persons and maximum of 20 persons. Partners pay their taxes as personal income tax, based on their share of income from the partnership.

A general partnership is not a very attractive way to structure a business in Singapore due to the following reasons:

• Similar to a sole proprietorship, partners are personally liable for the debts and liabilities of the business.
• Each partner can be held responsible for the actions of another partner.

Limited Partnership

Limited partnership is an alternative to the general partnership type of business form in Singapore. It introduces the concept of a limited partner in addition to a general partner. The liabilities of limited partners are limited to their investment in the partnership (capital or property). However, limited partners are unable to participate in the management of the business. In a nutshell, even a limited partnership in Singapore is not a very attractive vehicle for setting up a business for most people.

Limited Liability Partnership

Among the three types of partnership business entities, LLP is the most recent and most advanced business incorporation structure. It combines the features of partnerships and companies. LLP was introduced in Singapore in 2005 through enactment of Limited Liability Partnership Act. Registering an LLP gives owners the flexibility of operating as a partnership while enjoying many of the benefits that come with a corporate body like a private limited company. It is important to note, however, that a LLP must have at least two partners at all times.

A LLP is primarily meant for carrying a profession (e.g. accountants, law firms, architects, etc.) where two or more professionals would like to build a joint practice in a common field, and is not suited for businesses that carry a trade. The owners must enter into detailed agreements about how the profits and management responsibilities are divided. It can get very complicated and generally requires the services of a lawyer to draw up the agreement. Partners in a limited liability partnership are  usually responsible for cultivating their own clients based on the partner’s specific area of focus