Here in Singapore, business owners are offered a few options when it comes to registering for company formation based on their eligibility. The two most popular options are namely either a Sole Proprietorship formation or a Partnership formation.
A Sole Proprietorship setup is most ideal for an individual business owner as all profits earned in the business will go to them. However, they will be required to pay personal income tax. 6% – 8% of their trade profits will also be declared as a compulsory CPF medisave contribution.
In addition, to be eligible for the set up of a Sole Proprietorship business firm, one manager and one business owner is required. They can be registered under the same person, however the registrant has to be either a Singaporean or a Permanent resident that is above 18 years old.
Whereas a Partnership based setup is ideal for multiple business partners from a minimum of 2 partners to a maximum of 20. The profits of the business will then belong to all of the partners. However, members of a partnership based setup are also required to pay personal income taxes and contribute trade profits to CPF Medisave.
To be eligible for a Partnership based set up, at least one local or Permanent Resident manager that is 18 years old and above is required.
The difference between a Sole proprietorship set up and a Partnership based set up is that a partnership based company can be foreign owned completely.
However, Foreigners are always advised to consider setting up a Limited Liability Partnership, otherwise known as Private Limited Companies instead.
Limited Liability Partnership based companies are ideal in this case as they grant the permission for the company to be run as a partnership but allow individuals to hold the status separately. All partners who have registered under the LLP will be taxed based on their share of the business income instead.
Furthermore, there is a profit tax exemption for the first $100,000 in business profits for Singapore Exempt Private Limited companies, valid for the initial three years in which they have been set up.