How to start your business in Singapore

How to start your business in Singapore

A Corporation (i.e. a Company) is a legal entity created by law which exists separately and distinctly from its owners (the shareholders).

 

There are several benefits to carrying out business through a corporate structure including but not limited to the following:

 

    1. i. Perpetual succession
    1. ii. Limited liability
    1. iii. Ease of transferring ownership

 

Types of Companies

 

In Company Law, perpetual succession refers to the continuation of a corporation’s existence despite the death, change, or exit of its owner(s) or member(s). Briefly speaking, change in the membership of a company does not affect its status. This allows for great flexibility in the way the business can be run and whom it can be owned by.

 

One of the biggest advantages of incorporation is the concept of limited liability. This just means that the liability of members (shareholders) is restricted to the amount of investment put into the company, even if the corporation subsequently goes bankrupt and cannot fully repay its debts. However, members of the company are allowed to participate in the company’s growth and reap the corresponding benefits.

 

For smaller companies and start-ups, in particular, the ease of transferring ownership interest is also an important factor. Corporatizing allows for the owner of a company to sell it off to other investors in a fairly easy and straightforward way.

Corporate Forms

In Singapore, the main piece of legislation governing companies is the Companies Act (Chapter 50)(“CA”) along with the Limited Liability Partnership Act (Chapter 163A) (“LLPA”). Under these Acts, several corporate forms are allowed, such as the following:

 

    1. – Limited Liability Partnerships (“LLP”) and
    1. – Limited Liability Companies (“LLC”).

LLCs usually have a “Pte Ltd” or “LLC” at the back of their names.

 

Each of these corporate forms has their benefits and detriments. In this article, two of the most popular forms will be discussed in in greater detail: the LLP (Private Companies) and LLC.

Limited Liability Partnerships

An LLP is a hybrid and combines the features of a partnership and company. It allows the owners to enjoy the flexibility of a partnership while still benefitting from the advantages that come along with corporatization.

 

An LLP is best suited for those practising a profession (e.g., lawyers and accountants) where two or more such practitioners would like to come together to build a joint practice in a particular area.

 

Some brief features and registration requirements are set out below:

 

i. Features of an LLP

 

  • The individual partner’s liability is limited
  • Separate legal entity; distinct from its partners
  • Can own property
  • Partners not personally liable for losses/debts incurred by other partners
  • Perpetual Succession

 

ii. Registration Requirements

 

  • At least two (2) partners (can be individuals (of at least 18 years old) or corporate entities)
  • At least one manager who is an individual ordinarily resident in Singapore (at least 18 years old and not disqualified under the Companies Act)

 

iii. Advantages of an LLP

 

  • Quick and easy to set up
  • Fewer formalities and procedures to comply with when compared to an LLC
  • Lower registration costs
  • Partners taxed at personal income tax rate

 

In brief, an LLP is best suited for professionals wishing to partner up with other professionals in a former corporate environment to advance their business together. The ease of registration and lack of formalities compared to LLCs make it an attractive option. However, an LLP cannot be sold as a whole in the way an LLC can.

 

It is also advisable to draw up an agreement between founding partners to set out how the LLP is to be run – management responsibilities, profit sharing, etc. This can be complicated and engage the services of a business/corporate lawyer to aid in drafting the agreement should be considered.

Limited Liability Companies (Private Companies)

A private limited company is the most common type of business entity registered in Singapore. A private limited company can only have a maximum of 50 shareholders.

 

Some brief features and registration requirements are set out below:

 

i. Features of a Pte Ltd Company

 

  • Separate Legal Entity
  • Can own property
  • Members not personally liable for the company’s debts and losses
  • Perpetual succession

 

ii. Registration Requirements

 

  • At least one shareholder
  • At least one director ordinarily resident in Singapore

 

iii. Advantages

 

  • Flexible; members can appoint any person to be a director and set up a company to trade in almost any business
  • Limited Liability – Shareholders are only liable up to the amount invested
  • Very tax efficient corporate body
  • Ease of raising capital

 

It must be noted that there are statutory requirements governing meetings, share allotments, etc. that a company must comply with under the Companies Act. It is also strongly recommended to have clearly drafted Articles of Association to ensure that the relationship between the members of a company is properly spelt out. For individual protection, shareholders may also opt to enter into a shareholders’ agreement, which is an agreement among shareholders to do, or not do a certain thing. A shareholders’ agreement may be enforced as a normal contract.

How we can help

I.R.B. Law LLP is a growing medium-sized law firm that aims to provide practical and timely advice to clients at a competitive rate.

 

We have several experienced lawyers skilled in corporate/commercial law and can assist in the drafting of commercial/corporate agreements, contracts, etc. We may also assist in the corporatization of your business and guide you through the registration process.

 

Additionally, we are also able to provide detailed advice on the formalities a company must comply with in accordance with the Companies Act and assist in providing solutions to resolve any disputes that may arise.

 

So contact us to receive advice on how we can assist you so that you can focus on your business. Our first consultation is usually free as we wish to focus on you and not on your wallet. So don’t hesitate and reach us at hello@irblaw.com.sg or call us at 6298 2537 and schedule an appointment with one of our experienced lawyers today.

 

The information contained in this article is provided for general information only and may not reflect current status in relation to applicable law, cases, settlements or judgements. Nothing contained on this website or article is intended to constitute legal advice, nor should it be construed as I.R.B Law LLP agreeing to provide legal services to you. You acknowledge and agree that your use of this website shall not create a lawyer-client relationship with I.R.B Law LLP.