COMPARISON OF DIFFERENT BUSINESS ENTITIES IN SINGAPORE

Copyright © 2014 Rikvin Pte LtdLast updated June 20, 2014 4:37 PM

DIFFERENT BUSINESS ENTITIES IN SINGAPORE: A COMPARISON

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?

• Whataretheadvantagesanddisadvantagesofthedifferentbusinessentities?

• Isthebusinessentityeasytoclose?

Copyright © 2014 Rikvin Pte LtdLast updated June 20, 2014 4:37 PM

Sole Proprietorship Partnership Limited Partnership (LP) Limited Liability

Partnership (LLP)Company

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 businessfirmformedby a minimum of 2 partners.

• The maximum number of partners allowed is 20.

• A partnership consistingof2ormore 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’liabilitiesaregenerally limited.

• No limit on numbers of partners.

• Abusinessentityregistered under the Companies Act, Chapter 50.

• Exempt Private Company –20 members or less and nocorporationholdsbeneficialinterestinthe company’s shares

• Private Company – 50 members or less

• Public Company – can have more than 50 members

Who can set up • SingaporeCitizen/Singapore Permanent Resident/EmploymentPass/DependantPassHolder/Foreigner.

• A foreigner must appoint a local manager.

• At least 2 Singapore Citizens/SingaporePermanentResidents/EmploymentPass/DependantPassHolders/Foreigners.

• A foreigner must appoint a local manager.

• Anyforeignand/orlocalindividualand/orcompany.

• Must appoint a local manager if all General Partners reside outside Singapore.

• Anyforeignand/orlocalindividualand/orcompany.

• Must appoint a local manager.

• Anyforeignand/orlocalindividualand/orcompany.

• 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

Professionalfirmslikeaccountants, 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 incorporationstructure in Singapore combining the features of partnerships and companies.

• Thebiggestdifferencewith a company is that the partners are taxed at their individual personal tax rate and are not eligible to the tax exemptionsavailablefor a company.

• Most advanced and flexiblebusinessentity.

• Mostpopularoption

Legal Status Not a separate legal entity

Not a separate legal entity

Not a separate legal entity

Separatelegalentity Separatelegalentity

Personal Liability Owner has unlimited liability

Partners have unlimited liability

General partner has unlimited liability Limited partners have limited liability

• Partners personally liable for debts and lossesresultingfromtheirownactions

• Partners not personally liable for debts and losses of LLP incurred by other partners

Members have limited liability

Owing Property Owner can own property Cannot own property in firm’sname

Cannot own property in firm’sname

Can own property in LLP’s name

Can own property in company’s name

DIFFERENT BUSINESS ENTITIES IN SINGAPORE: A COMPARISON

Copyright © 2014 Rikvin Pte LtdLast updated June 20, 2014 4:37 PM

Sole Proprietorship Partnership Limited Partnership (LP) Limited Liability

Partnership (LLP)Company

Tax Taxed at owner’s personal tax rate

Taxed at owner’s personal tax rate

Taxed at partners’ personal/corporatetaxrate

Taxed at partners’ personal/corporatetaxrate

Taxed at corporate tax rate

Tax Exemptions Available

Personal Tax Relief if applicable

Personal Tax Relief if applicable

• Personal Tax Relief if applicable.

• Corporate Tax Relief if the Corporate Partner is eligible.

• Personal Tax Relief if applicable.

• Corporate Tax Relief if the Corporate Partner is eligible.

• Start Up Tax Exemption

• PartialTaxExemption• Dividendstax

exempt in the hands of shareholders in Singapore

Formalities • Quick and Easy to Set Up

• Easy to Administer • MinimalRegistration

Cost• Registrationtobe

renewed annually

• Quick and Easy to Set Up

• Easy to Administer • MinimalRegistration

Cost• Registrationtobe

renewed annually

• Quick and Easy to Set Up

• Easy to Administer • MinimalRegistration

Cost• Registrationtobe

renewed annually

• Quick and Easy to Set Up

• Easier to Administer compared to a Company

• Onetimeregistration• Annualdeclaration

of solvency must be lodged by one of the managers

• More costly to set up• Moreformalitiesto

administer• Must appoint a

company secretary within 6 months of incorporation

• Must appoint an auditor within 3 months of incorporation9unlessexempt)

• 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 struckoff

Perpetual succession unless wound up or struckoff

Closing the Business

• By Owner - TerminationorCessationofbusiness

• By Registrar – if theregistrationhasexpired and has not been renewed

• By Owner - TerminationorCessationofbusiness

• By Registrar – if theregistrationhasexpired and has not been renewed

• By general partner - cessationofLP

• By Registrar – if theregistrationhasexpired and has not been renewed

• Winding Up – Voluntarily by members or creditors, Compulsorily by the High Court

• StrikingOff

• Winding Up – Voluntarily by members or creditors, Compulsorily by the High Court

• StrikingOff

DIFFERENT BUSINESS ENTITIES IN SINGAPORE: A COMPARISON

Copyright © 2015 Rikvin Pte Ltd

RIKVIN PTE LTD

30 Cecil Street, #19-08 Prudential Tower, Singapore 049712

Main Line : (+65) 6320 1888 Fax : (+65) 6438 2436 Email : info@rikvin.com Website : www.rikvin.com

Reg No 200100602K EA License No 11C3030

The information contained herein is intended for general information purposes only and shall not be regarded as professional advice. Readers are therefore advised that before acting on any matter arising from these notes, they should discuss their particular situation with the Firm. No liability can be accepted for any action taken as result of reading the notes without prior consultation with regard to all relevant factors.

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