The Different Business Structures in Singapore
Before you even think of how to register a business, you need to decide the kind of structure that fits your company. Your business structure is the backbone of your business; it holds your business together and guides you about your business’ taxation, liability, asset, and succession.
In today’s article, we will have a closer look at the five popular business structures in Singapore, namely sole proprietorship, partnership, company, limited liability partnership, and limited partnership.
This type of business structure is ideal for small to medium-sized companies wherein one person or entity manages the business. As the name entails, this is a kind of business where you have an absolute control and don’t have to rely upon, consult, nor consider a business partner regarding how you run the company.
The downside of this structure is that you are also fully responsible for all the company operations, debts, taxation, and other obligations.
The partnership is another type of business structure that is usually formed by two or more partners. The highest number of partners for partnership is around twenty partners. This business structure is recommended when both parties can rely on and benefit from each other. If you plan to have this type of business structure, it is best to ensure the qualifications of your partner because your partner’s personal debts and losses are also your liabilities.
A private limited company is a type of business structure that is preferred by most large businesses. Wherein a number of people will come together and work on the same business goal. The distinct feature of this is that the officers, directors, and stockholders are a separate entity and are not liable for the debts and losses of the company. Moreover, your shares can be transferred, and the operation still continues even if one shareholder dies or pulls out his shares.
Limited Liability Partnership (LLP)
An LLP is another popular business structure in Singapore. It is, more or less, a combination of a partnership and limited company. You can choose to operate the business as a partnership while having a distinct entity like a that of a limited company. This means that one partner will not be held liable for the other partner’s wrongful actions and negligence, unlike the conventional unlimited partnership.
This business structure requires one general partner and one limited partner. The general partner can be liable for the debts and losses of the limited partnership while the limited partner is not held responsible for the debts and losses of the limited partnership that exceeds his agreed contribution, given that he takes no part in managing the business.
Knowing the different business structures will help you build a strong foundation and choose the right structure for your business. This will also help you understand better the type of business that you want to build while considering your personal resources and comfort level on taking different business risks.