Anyone hoping to start a business in Singapore should know the different types of company setup. Basically, there are four main types of companies in Singapore.
1. Limited Liability Company
A Limited Liability Company (LLC) is more often not limited by shares. The owners of the company are protected from liabilities that may arise from the business. An LLC usually operates as a separate legal entity, quite similar to a corporation. There are three types of LLCs in Singapore: Private Limited Company, Public Limited Company and Public Company Limited by Guarantee.
– Private Limited Company (Pte. Ltd.): This type of LLC is a preference for a lot of business entities in Singapore. The shareholders are not held responsible for company debt that surpasses share capital contributed. The company’s shares belong to 50 people or even much less. These shares are often owned by a corporate entity or an individual and are not available to the public at large. It is a preference for many because it is easier to manage. Shares can easily be transferred; it has easier means to raise capital, and offers a more credible image.
– Public Limited Company: This type of LLC is different from a Pte Ltd. The shares of a company are often available to the general public. These companies will be found in stock exchange. The number of shareholders is at a minimum of least 50 people. Given that these types of companies involve the public at large, there are more rules and regulations that avoid exploitation and the misuse of public funds. This option is best for large businesses.
– Public Company Limited by Guarantee: Unlike a Public Limited Company and a Private Limited Company, this type of company is set up for non-profitable reasons. It is a public company formed along the principle of limiting the liability to the amount that members contribute to the assets of the company. This set up is common with non-profit organizations.
2. Sole Proprietorship
Sole proprietorship is a very simple type of company and is the easiest to set up. Be that as it may, it is the riskiest type of business. Unlike with Limited Liability Companies, the owner of the company is seen as part and parcel of the company. They are thus, more liable to suffer risks that arise from the business. Personal assets and those of the company are under the owner’s name, meaning they are not protected. If the company is in debt, then personal assets are legally not beyond the reach of creditors.
A partnership company does not exist legally on its own without its partners. Membership ends upon death, retirement or insolvency. There are three types of partnership structures in Singapore: general partnership, limited partnership and limited liability partnership.
– General partnership: This business structure is similar to a sole proprietor. The business partners are personally liable for the business liabilities and debts. The partners share responsibility as one is held accountable for the actions of a fellow partner. It is not the best business structure in Singapore as it contains a lot of risks.
– Limited partnership: In Singapore, this the most common type of partnership structure in company. This is because the liabilities are limited to the company’s investments. The risks to all the partner’s personal assets are thus limited to how much they invest into the business. The partners cannot however manage the business.
– Limited Liability Partnership (LLP): This is basically a structure where a registered LLP gives the partners the freedom to run the business and contribute to its management. This company comes along with benefits similar to those found in a private limited company. This partnership is best for business where professionals have a joint practice. It requires a great deal of organization and planning beforehand. With this in regard, it more often than not required that a lawyer draws up the agreement.
All the business entities and structures are best suitable for different scenarios. A local in Singapore would for instance work best with a Sole Proprietorship if they are the only owner and if the products and services do not present risks and liabilities. If you are a professional who is looking for starting a business with several partners in your field, then you can consider a Limited Liability Partnership. The best choice for a lot of business people and entrepreneurs is a private limited company.