Since 2010, Singapore has been encouraging its people to start their own business and the government offers strong support with many initiatives and grants to incentivise and provide financial support for start-ups, making Singapore an excellent place for entrepreneurship.
Infrastructures such as Incubators, co-working places, can be found in every corner of the island including tertiary institutions to ignite passion and ideals into entrepreneurship journeys. It wouldn’t be a surprise to us that some, if not most, of you who are reading this may already be working on an innovation and working hard to bring it to market.
The prospect of being your own boss may be alluring but starting a new business can be challenging. Over the last 10 years, the number one question which every entrepreneur-to-be has been asking SOAS is, “Should I be starting a Sole Proprietorship/Partnership or Company?”. Let us help you with this decision.
Sole Proprietorship/Partnership or Company?
There are 5 different types of business entities you can register in Singapore and choosing a right one is probably the first and most important business decision you’ll need to make. For easy reference, they are:
One of the easiest way to determine a suitable type of entity depends on what you want to do and your business model. The following table is a simple guide for your reference.
Type of Business
Recommended Type of Entity
|Small-Time/ Online Trading||One individual owner||Sole Proprietorship|
|Two individual owners and above||Partnership|
(eg. Accounting/ Consultancy/ Dentist, etc)
|One individual owner||Sole Proprietorship|
|Two individual owners and above||Partnership/ Limited Liability Partnership|
|Import/Export, Mid to Large Scale Trading, Manufacturing, Professional Services or any business with high risk factor||One or more individual or corporate owners||Limited Liability Company|
|Import/Export, Mid to Large Scale Trading, Manufacturing, Professional Services or any business with high risk factor||More than 50 individuals or corporate shareholders||Public Limited Liability Company|
What does Limited Liability Means?
A Limited Liability Company is recognised as a legal entity on its own, separate and distinct from the owners. The liability of members and directors of the company on the debts and losses of the company is limited to the capital that they invested. The company can own property, sue and can be sued in company’s own name.
This also means that both Sole Proprietorship and Partnership businesses are not separate legal entities from the business owners. The business owner(s) is/are personally liable for all debts and losses of the business and can sue or be sued in the owner’s own or business name.
The Limited Liability Partnership is a hybrid model where the General Partner (GP) assumes the full responsibilities/liabilities of the business whilst the Limited Partner (LP) is not personally liable for the debts or obligations of LP beyond amount of his agreed contribution.
Business owners can potentially save a lot by avoiding corporate taxes as a Sole Proprietorship, Partnership and Limited Liability Partnerships are not recognised as tax entities. Business owners are only required to report all business incomes or losses in their personal income tax.
Private or Public Limited Companies are taxable entities and are subjected to existing corporate tax rates.
The statutory requirements for a business is considerably much lesser than that of a company. It is not a requirement for a business to audit their accounts or file annual returns with ACRA as any profits will be taxed as personal taxes.
Conversely, a company has to fulfill their statutory compliance requirement to the various authorities such as Accounting and Corporate Regulatory Authority (ACRA) and Inland Revenue Authority of Singapore (IRAS). Such compliances include filing of AGM, submission of annual returns and other mandatory submissions, some unique to the nature of the business.
Whether you are a solo-preneur or a group of people coming together to form a startup, at SOAS our recommendation is to incorporate a Company in Singapore. A private limited liability company limits the owner’s liability to only the company’s assets and as such is the safest form of legal entity in Singapore. In addition, a company has better credibility when dealing with investors, customers, and banks when you need a loan. It is also more flexible and sustainable due to the wider options of ownership transferring and growth. Another important consideration is that newly incorporated qualifying private limited liability companies are exempted from paying corporate tax for the first 100,000 SGD profit and are only required to pay half the tax (from 17% to 8.5%) for the next 200,000 SGD for the first 3 years.
SOAS is currently offering a no-frills $350 company incorporation package (inclusive of ACRA fees) to help any business owner incorporate their company! To sweeten the deal even further, companies who are incorporated under SOAS are entitled to a $1,250 Corporate Secretarial and Accounting package to make sure that you fulfil your statutory compliance! Email us at firstname.lastname@example.org to find out more!
SOAS Trust Limited offers consultancy services for companies to be incorporated in Labuan to take advantage of low tax benefits from off-shore trading, setting up of Labuan foundations, trust funds or private funds and wealth management.