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The Advantages and Disadvantages of Different Types of Company Registrations

Last modified: March 28, 2023
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The Advantages and Disadvantages of Different Types of Company Registrations

Are you searching for info on the different types of company registrations you can use to set up your business in Singapore? Yes! Your choice depends on your business needs and whether you are an individual or a corporate.

It is true that, like individuals, companies too register other companies. And your preferred business structure can affect your liability, taxation, and compliance.

Let us see the types of company registrations or legal business structures that you, as an individual business owner, can use to register company in Singapore.


Types of Company Registrations/Business Structures for Individuals

Before choosing a business structure, you must consider how it can impact your tax rates, liability, credibility, and growth opportunities. A wrong choice can drastically affect the execution of a business plan leading to the early demise of your business.

The following list informs the types of company registrations you can use to form a business in Singapore:

  • Private Limited Company
  • Limited Liability Partnerships
  • Sole proprietorship

In Singapore, you must be over the age of 18 years to qualify for company registration. The process is hassle-free. The official ACRA fee to register a new business is only $315.

Private Limited Company

You must apply to Accounting and Corporate Regulatory Authority (ACRA), the Company Registrar, to set up your private limited company. It is registered under the provisions of the Singapore Companies Act, Chapter 50.

A private limited company is tax-efficient, dynamic, and scalable. It also limits your liability to the amount of money you have invested in its shares. It is why many business owners prefer to register a company in Singapore.


Advantages of Company Registration in Singapore

A distinct legal entity: A company is a legal person and has a distinct identity from its shareholders. Shareholders cannot be held liable for their acts.

The company exists perpetually: The company’s existence does not depend on any of its shareholders or other stakeholders. It carries on unless dissolved.

A company can own property/assets: A company can own property or assets of its own for business purposes.

A company can sue and be sued: A company can sue and be sued in a court of law.

Double taxation: Singapore has signed Avoidance of Double Taxation Treaties. These simplify cross-border trade for companies in Singapore.

Ownership: Foreign business owners are allowed to own 100% shares in their Singapore company. And the transfer of ownership of shares is easy.

Easy to raise funding: A Singapore private limited company has credibility in the eyes of lenders and creditors. Raising funds is relatively easy for it.


Disadvantages of Incorporation of a Company

Initial setup cost: The initial cost of setting up a company is higher than a sole proprietorship or partnership. You may also have to hire a company registration services provider.

Loss of ownership: A company is run by a board of directors. Even if you are a majority shareholder, your authority is diluted.

Legal structure: You must follow ACRA rules while managing your company, fulfilling operational requirements and accounting for them.

Paperwork: Unless exempted, your company has to file accounting records, annual reports, tax returns, minutes of the meeting, etc. You must also acquire business licenses and permits to start your business activities.

Hard to dissolve: Dissolving a company takes months. It is also a costly and legally involved process.

Ultimate Beneficiary: You have to inform and update the details of the ultimate beneficiary in the company.


Sole Proprietorship

A sole proprietorship in Singapore does not have a separate identity from its owner. Its existence depends on the existence of its proprietor. It is a business firm and not an incorporated company.

Advantages of Sole Proprietorship

  • A sole proprietorship is the simplest form of business and is easy to set up
  • The proprietor makes all the decisions and is in total command
  • Tax compliance is not complicated
  • Sole proprietorship dissolves on the death of an owner
  • It is easy to dispose of its assets

Disadvantages of Sole Proprietorship

  • The proprietor has unlimited liabilities
  • Their assets can be used to pay the debts and losses of proprietorship
  • Raising money is not easy for a proprietorship
  • Fundraising depends on proprietors’ charisma
  • Proprietors have to use their savings and loans from friends or family to finance it
  • The proprietor pays personal income tax (0%-22%) on the proprietorship’s chargeable income. The company pays only 0%-17%
  • Proprietorship cannot own assets or properties in its name
  • The proprietor owns business properties and pays property tax on it


Limited Liability Partnership (LLP)

An LLP is a type of partnership business. It has the characteristics of a partnership and a private limited company. Two or more entities can form it to conduct their business activities.

Advantages of LLP

  • An LLP is a separate legal entity from its partners
  • It limits the liability of its partners towards LLP’s debts or losses based on their wrong actions or inactions
  • Partners who are not party to such actions are spared
  • An LLP exists perpetually. Changes in its partners have no effect on its rights, liabilities, or existence
  • Compliance is easy
  • They have to pay income tax but do not have to file annual returns

Disadvantages of LLP

  • LLP’s income is considered as that of its partners. They have to pay personal income tax (0%-22%) on it
  • Transfer of ownership is not easy
  • Lacks credible image when compared to a private limited company

You can choose one of the types of company registrations to start your Singapore business. Instead of the best, choose the proper business structure based on factors like credibility, funding, skill set, business risks, compliance requirements, operation scale, and type of business activities.

Call us at +65-6536 0036 or email us at info@sbsgroup.com.sg if you want to learn which structure is right for you.

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