Singapore Business Structures for Foreigners

Singapore Business Structures for Foreigners

Singapore is the preferred choice for many who wish to establish a strategic presence for a multitude of reasons. Consistently ranked as one of the leading pro-business countries in the world, many foreigners make a mark in the diverse economy with a Singapore corporate presence.

In a Singapore company formation, deciding on your choice of a business structure depends on your scope of business and cross-border transactions.

When you appoint us as the specialist for your Singapore company registration, you need not visit Singapore for the setup. In setting up a company in Singapore, a foreigner can still choose to operate the business anywhere in the world.

Sole Proprietorship

A sole proprietorship is the simplest form of business structure in Singapore and it is fully owned by an individual or company. Under the law, the business is not a separate entity from its owner. Hence, the performance of the business has a direct impact on business owners’ personal assets.

For this reason, the sole proprietorship business is perceived to be one of the riskiest business structures and it is harder to attract capital investments. However, there are advantages of a sole proprietorship; such as all profits going directly to the sole proprietor and its set up cost being the lowest among all business structures.

Foreigners residing outside Singapore must appoint at least one local resident manager and a registered filing agent to submit a BizFile+ application.

Private Limited Company (Pte. Ltd)

A private limited company is a popular choice of most foreigners who wish to set up a new office in Singapore. Under the law, it is a separate legal entity from its owners, directors, and shareholders. This allows the company to enter into contracts and agreements, sue or be sued in its own rights and own properties.

Company shareholders are not liable for debts beyond the capital they invested in and ownership can easily be transferred by selling of shares. It is also relatively easier to obtain loans from financial institutions and acquire investors. As a private limited company is entitled to tax benefits and incentives and as Singapore does not have a capital gains tax, it can be a highly tax-efficient entity when properly structured.

Foreigners can own 100% of the private limited company shares. It is, however, a statutory requirement to have a minimum of one local resident director, a local registered company address and a registered filing agent (corporate secretary).

Limited Liability Partnership (LLP)

Formed by at least two partners, the LLP is an attractive structure for business owners as its legal entity is separate from its partners and its partners have limited liability. It allows for the change of partners without affecting its rights and liabilities. Like a private limited company, it can sue or be sued as well as own properties.

A partner is not personally held liable for debts and wrongful acts of other partners while profits are taxed at partners' personal income tax rate (individual partner) or corporate tax rate (corporate partner). As partners may not be obligated to consult other partners in business affairs, it might be more challenging to attract capital investments and disagreements may arise often.

When setting up an office in Singapore, it is a statutory requirement to have one local resident as a partner, a local registered filing agent and a local address.

Limited Partnership (LP)

A Limited Partnership is a business organisation with two or more partners consisting of at least one general partner and one limited partner. Partners in the LP arrangement can be either individuals or corporations.

A general partner has unlimited liability and is personally liable for the business’ debts and losses. A general partner is hence responsible for the actions, operations and management of the Limited Partnership and profits will be taxed at partners’ personal income tax rates.

A limited partner, on the other hand, has limited liability to the business, not beyond their contribution to the partnership. A limited partner does not actively participate in the management of the company and can be an individual, company or a foreign registered company.

If all general partners are residing outside Singapore, it will be mandatory to appoint a local manager. It is not a separate legal entity from its partners and cannot own properties.

Should you have an existing company overseas (foreign company) and looking to expand into Singapore, you can consider the 3 types of business structures to set up your office in Singapore.

1. Branch Office

A branch office in Singapore is not considered as a separate legal entity but just an extension of its parent foreign company. Since a branch is considered as a foreign company non-resident, it is not included in Singapore’s double taxation tax treaties and tax exemptions for new companies. The Singapore corporate tax rate is 17%.

A Branch office must appoint at least one authorised representative who is either a Singapore citizen, a Singapore permanent resident or a Branch Office employee with a valid employment pass.

2. Subsidiary Office

Most foreign companies set up a subsidiary office in Singapore for its flexible structure and the parent foreign company can even be the sole shareholder. Also, a subsidiary company is a separate legal entity which means that it can bear a different name and conduct different activities, not necessarily like its parent company.

The separate legal status of a subsidiary office in Singapore also does not affect its parent company in terms of liabilities and debts. In this manner, it provides protection for the parent company and is taxed at the local Singapore corporate tax rates (as its own entity) and benefits from tax incentives by the Singapore Government.

3. Representative Office

Unlike a branch office in Singapore, a representative office cannot conduct direct sales or revenue-generating activities. The primary purpose of a representative branch is for product research, promotion of the parent company, after-sales or customer support, and research and development of the parent company’s products. Its liabilities extend to the parent company.

A foreign company in Singapore can conduct business only by registering as a branch office or setting up a subsidiary company (limited liability company). Since a representative office in Singapore has no legal status as a temporary administrative arrangement, it does not generate income and is not taxed.

Importantly, a representative company must be renewed every year and be converted into a branch structure after three years of operating in Singapore.

Do you know the limitations and requirements of each business structure?

Lexico Business Solutions, as a corporate specialist based in Singapore, can advise according to your business and personal needs. We have a track record of successful Singapore incorporation with Accounting and Corporate Regulatory Authority (ACRA) within hours because we know the Singapore regulations inside-out.

Talk to us for a free confidential consultation.