Singapore Company & Business Set-up

There are a variety of different Singapore corporate entities and business vehicles to choose from, with the “Private Limited Company” being the most popular vehicle for both trading and investment holding activities. While the long-enjoyed favourable tax exemption scheme for start-up companies is now being phased out, the prevailing low corporate tax rate (17%) and partial tax exemption scheme, together with one-tier tax-exempt dividends remain attractive incentives to set up a company in Singapore. Shareholders (maximum 50) can be individuals and corporate or legal entities, foreign and/or local. Directors, however, must be “natural persons”, with at least one local Director on board who ordinarily resides in Singapore (this person can a Singaporean, Singapore Permanent Resident or an EntrePass/Employment Pass holder directly employed by the Company).

 

A “lighter” corporate entity – the Limited Liability Partnership (LLP), offers the advantages of lower compliance costs and statutory obligations, as well as limited liability for all partners – including protection from liabilities arising from a wrongful act or omission by another partner. An LLP can sue and be sued in its own name, acquire and hold property in its name, and do all other things in its name that a corporate body can lawfully do. When it comes to taxation, however, the LLP is treated as a partnership and is not taxed at the entity level. Each partner is taxed on their share of the profits from the LLP. Partners can be corporate bodies or individuals – local or foreign. If all partners are foreign, the LLP is required to have a Local Local Manager/Authorised Representative to take care of tax reporting and other obligation.

 

Lighter still, is a Limited Partnership (LP), consisting of at least one limited partner and one general partner. Unlike an LLP, a Limited Partnership does not have a separate legal entity from the partners, i.e. it cannot sue or be sued or own property in its own name. In terms of liability of the partners, it is something of a hybrid partnership-business vehicle. One partner (the investor) has limited liability – up to the amount they have contributed as capital (provided they do not take part in the management of the LP) – and the general partner is responsible for the actions of the LP and liable for all debts and obligations of the LP. The general partner is also responsible for reporting the LP’s profits and partnership profit share to the IRAS. Partners are taxed on their share of the LP’s profits.

 

The simplest and cheapest business vehicle to set up and maintain is a business – either a Sole Proprietorship business with just one owner (individual or corporate) or General Partnership (made up of two to twenty individual and/or corporate partners). Profits paid to the owner or partners are directly taxed at individual or corporate rates. Being responsible for themselves, there is a requirement for local individual owners/partners to have substantial CPF Medisave contributions in their CPF account. Unfortunately, foreign spouses holding a Dependant Pass are now no longer permitted to own a small business. They are encouraged to set up a Company/LLP instead, by applying for an EntrePass or Employment Pass.