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Company Formation in Singapore – FAQs

1) How is a Limited Liability Partnership (LLP) and a Private Limited Company different?

A Limited Liability Partnership can only be owned by a Singapore national or resident, and foreign nationals and enterprises are permitted only if one local manager is appointed or hired. A Private Limited Company can be fully foreign or 100% locally-owned; however, there should be at least one Singapore Resident Director. A Limited Liability Partnership can have any number of members and there is no limit on that, whereas a Private Limited Company can only have a maximum of 20 members in case of exempt companies.

2) What are the various types of business entities?

The business entities that one can form in Singapore are sole proprietorship, partnership, limited partnership and Limited Liability Company. Out of these, private limited liability company is the most commonly found form of legal structure in Singapore.

3) What are the pros and cons of a Limited Liability Partnership (LLP)?

There are many advantages of setting up a company as a Limited Liability Partnership in Singapore. These are as follows:

  • It’s a separate legal entity; therefore the partners don’t have to personally bear the losses or debts, or even wrongful acts of other partners.
  • It has a perpetual succession. Any amendment in the partners does not change or affect its status, rights or even liabilities.
  • The compliance requirements that an LLP has to follow are much simpler, when compared to those in case of a private limited company.
  • An LLP is not required to file annual returns, except for income tax.

There are also some disadvantages of an LLP in Singapore:

  • Limitations in ownership transfer
  • Does not have a well-known image like a private limited company would have

4) Who has the role to run the company?

The Managing Director(s) usually have the task of running the company. Shareholders could also but it’s not necessary that they be the directors of the company.

5) What is a share certificate?

The share certificate is a proof of share ownership. Anyone who owns shares in a particular company are known as its “shareholders”.

6) What are the various types of Singapore Companies options for foreign companies?

If you are a foreign national who represents companies out of Singapore, you could register a private limited company or a limited liability corporation, which could either be a subsidiary, a branch or a representative office, depending on the company’s requirements.

7) As a foreign entity, is registering a subsidiary better than a branch office in Singapore?

Most of the small and medium enterprise owners opt to incorporate a Subsidiary in Singapore rather than setting up a branch office. This is because a subsidiary has various advantages such as:

  • The liabilities of a subsidiary are not extended or passed on to its parent company;
  • A subsidiary company is not limited or constrained to the business activities of its parent company;
  • A subsidiary is counted as a local entity and can also enjoy the tax breaks and incentives available to local Singapore companies;
  • A subsidiary does not have to file financial accounts of its parent company.

In addition, a subsidiary in Singapore becomes a tax resident whereas a branch office is not a tax resident. The control and management of a branch office are fully under the influence of the parent company.

8) What are the benefits of opening a Branch Office?

If you register your business as a branch office in Singapore, your branch office will not be considered as a local company. It is counted as the extension of the foreign parent company. The management will have to abide by the Memorandum and Articles of Association (MAA) of the parent company while managing with things related to shareholding, operational activities, and deciding the structure etc. As a branch office is not considered as a separate legal entity from its parent company, the responsibility of its debts and losses lie with the parent company.

9) Why is a Representative Office opened?

Many foreign companies like to survey new market to check the avenues before they move their resources and set up their presence in it. Registering a representative office in Singapore will help in carrying out these activities.

Though a representative office bears no legal status, it is considered as just a temporary or administrative arrangement for its parent company. As per the Singapore Companies Act, this form of a business structure cannot carry out any business activities.