COMPARISON OF DIFFERENT BUSINESS ENTITIES IN SINGAPORE

COMPARISON OF DIFFERENT BUSINESS ENTITIES IN SINGAPORE

Key Considerations When Choosing a Singapore Business Structure What is the nature of the business you want to undertake? How many owners will be there? How much capital will you invest? What risks are you able to take? What is the long term plan for your business? What are the advantages and disadvantages of the different business entities? Is the business easy to close?

Sole Proprietorship Partnership Limited Partnership (LP) Limited Liability Partnership (LLP) Definition A sole-proprietorship is a business owned by one person. The sole-proprietor has the absolute say in the running of the business. A partnership is a business firm formed by a minimum of 2 partners. The maximum number of partners allowed is 20. A partnership consisting of 2 or more partners where at least 1 partner is a General Partner (GP) and 1 is a Limited Partner (LP). No limit on numbers of partners. Partnership where the partners liabilities are generally limited. No limit on numbers of partners. A business registered under the Companies Act, Chapter 50. Exempt Private 20 members or less and no corporation holds beneficial interest in the company s shares Private 50 members or less Public can have more than 50 members Who can set up Singapore Citizen/ Singapore Permanent Resident/Employment Pass /Dependant Pass Holder/Foreigner. A foreigner must appoint a local At least 2 Singapore Citizens/Singapore Permanent Residents/ Employment Pass / Dependant Pass Holders/Foreigners. A foreigner must appoint a local Must appoint a local manager if all General Partners reside outside Singapore. Must appoint a local Must have a local director. If a foreigner wishes to act as a local director of the company, he can apply for an Employment Pass. Suitable For Low risk business to be run by an individual Professional firms like accountants, lawyers etc. N.B. professionals like lawyers and accountants can also set up a company to provide services Where one partner is ready to bear unlimited risk. The newest business incorporation structure in Singapore combining the features of partnerships and companies. The biggest difference with a company is that the partners are taxed at their individual personal tax and are not eligible to the tax exemptions available for a Most advanced and flexible business. Most popular option Legal Status Sepa legal Sepa legal Personal Liability Owner has unlimited Partners have unlimited General partner has unlimited Limited partners have limited Partners personally liable for debts and losses resulting from their own actions Partners not personally liable for debts and losses of LLP incurred by other partners Members have limited Owing Property Owner can own property Cannot own property in firm s name Cannot own property in firm s name Can own property in LLP s name Can own property in company s name

Tax Tax Exemptions Available Sole Proprietorship Partnership Limited Partnership (LP) Limited Liability Partnership (LLP) Taxed at owner s personal tax Personal Tax Relief if applicable Taxed at owner s personal tax Personal Tax Relief if applicable Taxed at partners personal/corpo tax Personal Tax Relief if applicable. Corpo Tax Relief if the Corpo Partner is eligible. Taxed at partners personal/corpo tax Personal Tax Relief if applicable. Corpo Tax Relief if the Corpo Partner is eligible. Taxed at corpo tax Start Tax Exemption Partial Tax Exemption Dividends tax exempt in the hands of shareholders in Singapore Formalities Quick and Easy to Set Easier to Administer compared to a One time registration Annual declaration of solvency must be lodged by one of the managers More costly to set up More formalities to administer Must appoint a company secretary within 6 months of incorporation Must appoint an auditor within 3 months of incorporation 9unless exempt) Various books of records need to be maintained Annual Returns to be filed Continuity in Law As long as the owner is alive and wished to carry on the business Subject to partnership agreement Subject to partnership agreement Perpetual succession unless wound up or struck off Perpetual succession unless wound up or struck off Closing the Business By Owner - Termination or Cessation of business By Owner - Termination or Cessation of business By general partner - cessation of LP Winding Voluntarily by members or creditors, Compulsorily by the High Court Striking Off Winding Voluntarily by members or creditors, Compulsorily by the High Court Striking Off

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