Quick refresher on Corporate laws to start a business in Singapore
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This is a series on setting up business in Singapore and the legal landscape that one has to navigate in the process. In this segment we examine the typical business structures that are available for a foreigner/ foreign entity to set up a business in Singapore.
Singapore has good infrastructure and strategic geographic location which serve as significant advantages for businesses operating in the region. From company registration to ongoing compliance requirements, it provides a favourable environment for entrepreneurs and is consistently ranked very high in the ease of doing business. However, it is essential to be aware of the legal landscape one has to navigate. Choosing the appropriate business structure that suits your business needs constitutes an initial step.
Choose the right business structure: Singapore offers numerous business structures, each carrying its own set of advantages and obligations. The most widely recognised options include:
(i) Private Limited Company (Pte Ltd): This is the most common and preferred business structure in Singapore for locals and foreigners alike. Private Limited Companies offer limited liability protection and separate legal entity status. This structure also offers tax benefits. The Companies Act 1967 provides for the company registration process and its ongoing obligations in detail.
(ii) Limited Liability Partnerships (LLPs): LLPs offers the advantages of both a private limited company and a traditional partnership scheme, providing maximum flexibility while maintaining the separate legal identity of each partner. LLPs are set up under the Limited Liability Partnerships Act 2005
(iii) Partnerships: Under the Partnership Act 1890, commencing business as a Partnership is also an option where partnership is the arrangement between individuals engaged in a common business to make profit. However, partners here are responsible both individually and collectively as part of the firm’s operations for the liabilities. There is also a Limited Partnership structure introduced by the Limited Partnership Act in 2009 which limits the liability of a Partner to the amount of his or her agree contribution.
(iv) Branch Office: Foreign companies can also establish a branch office Singapore to carry out business activities. A branch office must have a local Singapore resident as an authorised representative and comply with the statutory and disclosure obligations under the Companies Act. It is also subject to a higher tax rate as it is treated as a non-resident entity.
Apart from the familiar options Singapore offers business structures that have unique features for investment funds. These include:
(v) Variable Capital Company (VCC): This is an investment fund structure and can be set up under the Variable Capital Companies Act. A VCC is a corporate entity with variable capital, which means that it provides flexibility in the issuance and redemption of its shares. Additionally, it can pay dividends from its capital, providing fund managers with the flexibility to fulfil dividend payment commitments. VCCs are administered by ACRA, and it must appoint a fund manager that is regulated by MAS to manage its investments.
(vi) Business Trust Company (BTC): This is a set up as a trust and is an alternative to using companies as a business structure. It allows businesses to raise funds from investors by selling units in the trust which can be set up under the Business Trust Act. Unlike the other business structures, the BTC is registered with the Monetary Authority of Singapore
Once the right business structure is chosen, the necessary documents will have to prepared (choosing a name, identification and address proof, memorandum and articles of association, and details of shareholders and directors). This will be required to register the business with the Accounting and Corporate Regulatory Authority (ACRA). ACRA is the regulator of business registration, financial reporting, public accountants, and corporate service providers.The ACRA website provides for online registration of a business and contains detailed information on the process of setting up a business.
Singapore has a favourable tax regime which is a key attraction to start an operation in this region. From low corporate tax rates to tax incentives for new businesses which entrepreneurs can utilize while maximizing profitability. Additionally, Avoidance of Double Taxation Agreements facilitates international operations and mitigates tax risks depending on the type of business structure one chooses.
Setting up an operation in Singapore entails a significant commitment in terms of the ongoing legal and compliance requirements but it provides a favourable environment. As discussed in this post based on the nature of business, an entrepreneur can opt for Limited Liability Partnership or start off as a traditional Partnership, can register itself as a company, set up a branch office or look at the unique structures like VCC and BTC that Singapore offers. Each structure has its own advantages and responsibilities. By understanding the requirements of a business and the business structure, one can make an informed decision.
In subsequent posts we will highlight the salient features of these structures and the corporate laws essential for setting up a business in Singapore.
Written by: Sanchita Agarwal
Co-authored by: Antara Dasgupta
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.