Business Structures Options for Startups in Singapore

With its strategic location and dynamic business environment, Singapore is a prime destination for startups. However, choosing the right business structure is essential, as it affects your legal obligations, tax liabilities, and ability to raise capital. Below are some business structures you can consider for your startup in Singapore:

1. Sole Proprietorship: 1 owner – Register with Accounting and Corporate Regulatory Authority (ACRA) under the Business Names Registration Act 2014.

• Pros: Simple to set up if you are a Singapore citizen or PR. Foreigners will need to appoint a local resident manager.
• Cons: Unlimited personal liability for debts and obligations
• Suitability: Best suited for small-scale, low-risk startups that require minimal funding.

2. Partnership: 2 to 20 owners – Governed by the Partnership Act 1890. Register the business name under Business Names Registration Act 2014.

• Pros: Simple and cost-effective to set up.
• Cons: Partners are personally liable for debts and obligations.

Note: Limited Partnership (LP) limits liability to agreed contributions.

• Suitability: Suitable for small, low-risk businesses with minimal growth ambitions.

3. Limited Partnership (LP): 2 or more partners – At least 1 general partner (with unlimited personal liability) and one limited partner (with limited liability). Register under Limited Partnerships Act 2008.

• Pros: Flexible management and limited liability for limited partners.
• Cons: No separate legal entity and unlimited liability for general partners.
• Suitability: Suitable for small to medium-sized businesses, investment firms, and family-owned ventures.

4. Limited Liability Partnership (LLP): 2 or more partners – Register under Limited Liability Partnerships Act 2005.

• Pros: Flexible structure, limited liability for partners. 
• Cons: Taxation at individual partner level, compliance requirements like annual declarations.
• Suitability: Usually works best for professional services firms like law firms, accounting firms.

5. Private Limited Company (Pte Ltd): 50 members or less – Register under the Companies Act 1967.

• Pros: Separate legal entity, limited liability, tax benefits.
• Cons: Ongoing compliance requirements under the Companies Act.
• Suitability: Suitable for businesses that plan to scale quickly, raise capital, or limit personal liability.

6. Representative Office

• Pros: Allows market research and promotional activities.
• Cons: Cannot engage in profit-generating business.
• Suitability: For businesses seeking to explore the market and build relationships before fully committing to a permanent establishment in Singapore.

While generally most start-ups opt for the Pte Ltd or LLP model, specialised structures like VCC and BTC mentioned below are also available. Although these may not be ideal for all startups, they can be suitable for certain businesses.

7. Variable Capital Company (VCC): Register under Variable Capital Companies Act 2018.

• Pros: Flexible structure for investment funds, ability to pay dividends from capital.
• Cons: Requires MAS-regulated fund manager and adherence to specific compliance standards.
• Suitability:  Designed for collective investment schemes, such as hedge funds, private equity funds, venture capital funds, and other fund structures.

8. Business Trust Company (BTC): Register under Business Trusts Act 2004.

• Pros: Flexible fundraising through issuance of trust units.
• Cons: Compliance with MAS regulations and appointment of a trustee-manager.
• Suitability: Best suited for real estate investment trusts (REITs) or infrastructure trusts.

Key Considerations When Choosing a Business Structure:

• Do you prefer to own the business yourself or with partners?
• How do you plan to raise capital?
• Are you comfortable with unlimited liability or do you require limited liability protection?
• What are your long-term goals for the startup?
• What are the tax implications of the business structure?
• How do the pros and cons of different business structures align with the objectives of your startup?
• What are the tax implications of the structure?
• Are there any industry- specific structures that will benefit your start-up?
• Will you need to hire employees, and how does the structure impact payroll and benefits?
• What are the legal and regulatory requirements of the structure?

Regardless of the business structure you choose, ongoing regulatory compliance is crucial for your business. Komrisk is an advanced compliance management solution designed to streamline and simplify your compliance processes, ensuring you stay on track with regulatory requirements in Singapore.

Written by: Snigdha Sanganeria

Co-authored by: Swapna Umakanth

Disclaimer

The information provided on this blog is for general informational purposes only and is not a substitute for professional legal advice. We are not a law firm and are not authorized to practice law in your jurisdiction. Laws and regulations are complex and constantly changing, and information that may be true in one jurisdiction may not apply in another. Before acting on any information you read here, you should consult with a qualified lawyer practicing in the relevant jurisdiction for your specific legal issues or concerns. While we strive to provide accurate and up-to-date information, we make no guarantees that the information on this blog is completely current or error-free. We disclaim any liability for any actions taken or not taken based on the information on this blog.