How to choose the right business structure for your company in Singapore

If you plan on launching a business in Singapore your first step will be to get to grips with the types of companies in Singapore, to allow you to pick the right one to register.

Different business entity types suit very different business needs, and while you can change your entity type in the future if you need to, picking the right business structure for your needs is also important.

We'll cover:

Plus, we’ll also touch on Wise Business and how it can support your expansion plans even as your business grows and transitions through different structures.

4 main business types of business entities in Singapore

Anyone doing business in Singapore must register with ACRA¹ - the Accounting and Corporate Regulatory Authority. When you register you’ll need to pick a business entity type, which will usually be one of the following²:

• Private Limited Company (Pte Ltd)
• Sole Proprietorship
• Limited Partnership (LP)
• Limited Liability Partnership (LLP)

Different business entity types have different features and must follow different rules in terms of reporting and tax. That means that choosing the best fit is a crucial first step on your journey to running a successful Singapore business. We’ll dive into each entity type in detail in a moment - first, an overview:

As you can see, there are many points of difference between these business types. Let’s take a closer look.

Private Limited Company (Pte Ltd)

A Private Limited Company is probably the most common of all the business entity types available in Singapore. A Pte Ltd business offers the benefit of limited liability for the directors and shareholders.

Your Private Limited Company must have:

• at least one registered director and
• one shareholder, and
• can have up to 50 members in total.

The fact that a Private Limited Company offers limited liability, and can be a flexible option for businesses with 2 to 50 owners and shareholders makes it a popular choice.

However, the fee to register is higher than for most other entity types, and a Private Limited Company has more complicated record keeping, accounting and tax requirements compared to some other entity choices.

Sole Proprietorship

A Sole Proprietorship is the most simple of all Singapore business entity types.

In this you’ll work alone, and your personal and business finances are not legally separate. This means that if you run up a debt as part of your business, you are personally liable for it.

Sole Proprietorships have the advantage that they’re extremely simple and cheap to register and run, but the key disadvantage is that you may end up taking on the debts or liabilities of your business personally. As the name suggests, a Sole Proprietorship can only be owned by one individual, leaving little room for expansion.

Limited Partnership (LP)

In a Limited Partnership there must be at least one general partner who becomes personally liable for company debts, alongside any number of limited partners who are only personally liable up to the amount that they invest in the business.

A Limited Partnership has the advantage that you can bring in limited partners who want to invest but who do not want to be involved in the day to day running of the business. However, there is always the downside that the general partner or partners will bear the full liability for the business should anything go wrong.

Limited Liability Partnership (LLP)

In a Limited Liability Partnership, individual partners have only limited liability unless they’re personally at fault for something.

This means that usually they risk only the amount of money they're invested into the business. The exception to this is if the partner is personally at fault - for example if you have a law firm and one partner is sued for malpractice. In this case, liability for that partner is unlimited.

Factors to consider when choosing the business structure

ACRA suggests that you think carefully about the following questions before deciding on a business entity structure:

How much capital are you prepared to invest?
Sole proprietorships are very low capital, but other entity types may need more of a commitment.

How many owners will there be in the business?
Pte Ltd businesses are flexible to 50 owners, while partnerships may have unlimited numbers in some cases.

What liabilities and responsibilities are you prepared to assume?
Basic business entity types will view the individual and business as one in the same from the perspective of liability, increasing the risk that you must pay personally to settle business debts.

What risks are you prepared to take?
Choosing a limited liability structure may cost more and increase some complexity, but it also reduces the risk you face.

Frequently asked questions

Limited Partnership vs Limited Liability Partnership - what’s the difference?

In a Limited Partnership there must be at least 1 general partner who has unlimited liability for the business, alongside 1 or more limited partners who do not share full liability.

In a Limited Liability Partnership, all partners are only liable to the amount of their investment unless they’re personally at fault.

Is Sole Proprietorship a company?

A Sole Proprietorship is not a company, but a business entity of only 1 person. When you hear someone talk about a company, the chances are it’s a Private Limited Company (Pte Ltd) that they’re thinking of.

Can I change my business structure as my company grows?

Yes, you can change your business entity type as long as you update ACRA on the changes you have made³. The right entity type depends on the business size, and the scale of your operations as you mature - so having the flexibility to change and pivot is handy for business owners.

Conclusion

The 4 main business structures in Singapore cover the needs of the majority of enterprises here - but ultimately, what’s right for you will depend on your unique business needs. It’s always good to know that you can change entity type as your business scales.

If you’re considering changing your entity type to accommodate growth into international markets, check out the Wise Business account. Wise Business can help support your business growth and expansion with cost-effective international payment solutions with the mid-market exchange rate, and low, transparent fees.

Get Started with Wise Business