Introduction to Business Entity Types in Singapore for Hong Kong People
Similar to the regime of Hong Kong’s business registration regime, Singapore offers two types of business entities: unincorporated body and incorporated body. The registered incorporated business body outnumbers the unincorporated one. Among the majority, the “Limited Liability Company” is the most popular business in Singapore, followed by “Limited Liability Partnership”.
Why business people prefer incorporated bodies? It is because this type of business entity is a separated legal entity from its owner(s). As your business can own its name to carry on business activities, other people deal with your business, instead of you. When your business engages in any contracts such as buy/sell and employment, people are trading with your business.
The separation between acts as a firewall to protect your assets from unlimited liability from your business. In case that your business goes wrong, the incurred debt and legal risk are under your business name. Otherwise, if your business is an unincorporated body, you are liable to unlimited loss and legal risk of your business.
When you are wholly liable to your business, you are at risk of being sued by other parties, to compensate for the loss incurred in the course of your business. In case that the court unfavourably orders you to bear their loss, you are bound to selling your asset for repayment of your debt and even goes bankrupt.
Being that said, unincorporated entities are simpler and faster to register and maintain. Choosing the right business entity is merely the first step to start your business, you’d better focus on writing your business plan and opening of your business bank account the sooner, the better.
Let’s get back to the topic; we are going to brief all business entities available in Singapore for non-Singapore residents. You may be surprised that Singapore Government requires a high-level of locality on the regime of business entities registration, comparing that to different international business hubs like Hong Kong.
Firstly, Singapore Government requires at least one of the business owners is a Singapore Permanent Resident or Singapore Citizen.
Secondly, you need to appoint a Singapore Citizen or Permanent Resident who is residing in Singapore as the authorized representative of your Singaporean entity if the owners are usually residing outside Singapore.
Last but not least, you are very likely to complete the registration by employing a Filing Agent as the transaction intermediary between you and the Registrar of Singapore for time-saving and error-proof. If none of the owners is currently residing in Singapore, hiring a Filing Agent for such procedure is a must.
A sole proprietorship is a business that is owned and controlled by an individual. There are no partners. The sole-proprietor has an absolute say in the running of the business.
As you are the sole owner, you must be a Singapore Citizen or Permanent Resident.
A Partnership is an unincorporated business which is owned by 2 to 20 individuals. Once there are more than twenty partners, the partnership must be registered as a company under the Companies Act.
Limited Partnership (LP)
A Limited Partnership (LP) is a partnership consisting of a minimum of two partners, with at least one general partner and one limited partner. LP does not have a separate legal entity from the partners. A general partner is responsible for the actions of LP and is personally liable for all debts and obligations of the LP. In contrast, a limited partner is not liable for debts and obligations of the LP beyond his agreed contribution, given that the partner does not take part in the management of the LP.
Limited Liability Partnership (LLP)
Comparing to the Limited Partnership, a Limited Liability Partnership (LLP) is a business entity provide the partners for the flexibility of operating as a partnership and the protection of having a business body as a separate legal identity, like a company.
Therefore, the LLP has the right to own property, has perpetual succession and can sue or be sued in its own name. The partners of the LLP will not be held personally liable for any business debts incurred by the LLP. A partner may, however, be held personally liable for claims from losses resulting from his own wrongful act or omission, but will not be held personally liable for such wrongful acts or omissions of other partner of the LLP.
A local company is a business entity incorporated in Singapore. A company has the right to own property, has perpetual succession and can sue or be sued in its own name. Companies have different setups and are distinguished by the company type:
- Private Company Limited by Shares (LLC)
- an Exempt Private Company
- Public Company Limited by Shares
- Public Company Limited by Guarantee
A foreign company is a company, corporation, association or any other body incorporated outside Singapore. A foreign company may carry on business in Singapore by incorporating a local company or registering as a foreign branch under the Companies Act. The foreign company is required to have a registered name, at least one local authorized representative and a registered office in Singapore.
We are going to talk about the registration and maintenance of the Private Company Limited by Shares, on our next post.