There are several options for setting up a company in Singapore, namely a sole proprietorship, a limited liability company (LLC), and a limited liability partnership (LLP). Each of the three company types mentioned above brings its benefits and drawbacks discussed below. We hope we can help you decide which kind of company best suits your needs.
Different Types of Companies in Singapore
This type of business is when you have complete control of running and operating the business yourself. It is not an incorporated legal entity, meaning that your personal finance is entangled in the company. If someone sues your business, they can make claims against your personal bank accounts, statements, and wealth. You are personally responsible for everything that happens in the business.
When you opt for a sole proprietorship, you must come up with funds yourself for expansion and growth purposes. Not only that, you will be taxed via your personal income tax, and the business will lack a line of succession if something bad happens to you. That being said, a sole proprietorship is the easiest to register for. You only need to pay a $65 annual fee after filing the paperwork at the beginning.
Limited liability company (LLC)
Unlike a sole proprietorship, a limited liability company (LLC) is a separate legal entity from its owners. This means that if the company is sued, the personal wealth of the members of the limited liability company will not be liable; only the amount of investment to the company is. Essentially, your personal wealth is protected, and only your investments are exposed for scrutiny.
In a limited liability company, managers, not shareholders or investors, run the day-to-day business operations. As an LLC, the business will pay the corporate tax instead of taxing the personal income of its shareholders. The incorporation process is more complex than a sole proprietorship, as we have explained previously.
Limited liability partnership (LLP)
Similar to an LLC, a limited liability partnership is a separate legal entity from its owners. The same liabilities that apply to an LLC are also applicable to an LLP; partners only lose and are liable for what they have invested into the business. They are not responsible for the negligence of the other partners unless the negligence is caused by him or herself.
However, unlike an LLC, having the partners own and run the business is common; they do not have a separate management team. That is why they can be personally liable for mismanagement.
When it comes to taxes, their earnings from the business will be taxable as part of the partners’ personal income tax returns. And registering for an LLP is relatively simpler than an LLC. You need to pay a $165 registration fee and a legal partnership agreement. You will also need to submit an annual declaration of solvency or insolvency to the authorities in terms of compliance.
There is no denying that setting up a business in Singapore is an attractive preposition. However, you must choose which type of entity is best for your business structure according to your budget and other resources.
Are you looking to incorporate your company in Singapore today? Look no further; start it with Lanturn.