Doing business in Singapore has several benefits, from its strategic location and reliable legal framework to political stability. If you want to expand your business globally, Singapore is definitely an attractive choice.
To help you choose the right path for your business growth, here are the common company registration options for foreign companies you can consider.
Do I Need to Register a Company?
Before even considering whether you want to set up a Singapore company, it is worth considering some other possible business structures for running a business in Singapore. We consider the possibilities below:
Sole Proprietorship
In most countries, the default setup for a business is known as a sole trader or sole proprietor structure. In this setup, there is no distinction under the law, or for liability purposes, between the individual personally, and their business. Also in most countries, it is a requirement that sole proprietors be residents in the country in which they wish to operate.
This is not the case in Singapore.
In Singapore, foreign individuals can operate as sole proprietors in Singapore via an authorized agent.
However, for most overseas businesses and entrepreneurs, a sole proprietorship is not a desirable structure, as it means unlimited personal liability for the person starting the business (both in terms of debts and being sued). Other disadvantages include being taxed at higher personal income tax rates (compared to a company), and only being appropriate for solo entrepreneurs.
Partnership
In a partnership, two or more individuals join together to run a business. All partners have joint and several liabilities for the activities of the business. As with sole proprietorship, this will be undesirable for most foreign businesses due to the unlimited liability for partners.
Limited Partnerships and Limited Liability Partnerships (LLPs)
In a limited partnership in Singapore, at least one partner is a general partner with unlimited liability, but one or more partners are ‘limited partners’, with limited liability. Singapore also allows limited liability partnerships (LLPs), where all partners have limited liability.
Limited Companies
The limited company is the most popular registration option for foreign businesses in Singapore. In a limited company, shareholders hold fractional ownership interests in the company, and directors have overall responsibility for managing the company. Directors and shareholders may be foreign (though at least one director must be local, and with appropriate status in Singapore, more on this below). While there are exceptions (such as where a director has personally guaranteed the debts of the company), directors and shareholders are not liable for the actions of the company.
We discuss this option in more detail below.
How Can a Company Be Registered in Singapore?
There are several options available for businesses to register their company in Singapore. We consider each in turn:
Representative Office
In a Representative Office (‘RO’), the international company opens premises in Singapore, which are strictly limited in the scope of their activities: They are limited to non-revenue generating activities, such as market research and negotiating with local businesses. Often, opening an RO is the ‘exploratory stage’ for incorporating in Singapore.
Branch (or ‘branch office’)
An international company can open up a branch office in Singapore: The branch must be registered with the authorities, and will usually be liable to pay corporate income tax in Singapore. This is because, even though the company does not have its headquarters in Singapore, it will usually be carrying out enough business in Singapore to constitute a ‘permanent establishment’, which attracts corporate tax liability.
The main disadvantage of opening up a branch office is that the international business will have unlimited liability for the activities of its Singapore branch: E.g., all debts entered into in Singapore will become enforceable debts against the international enterprise.
Incorporate a Company in Singapore
The third option is to incorporate a company in Singapore. Where the international enterprise has a majority ownership interest in the Singapore company, this is known as a subsidiary. Where the foreign Enterprise only has a minority interest, it is known as an affiliate. Where a foreign enterprise owns 100% of the shares in the Singapore company it is known as a ‘wholly-owned subsidiary'.
Whether through a minority or majority interest, incorporating a Singapore company can be a useful way of setting up a joint venture with a Singapore company or another company in Singapore. In that case, contracts between the joint venture partners, and the company constitution itself, will establish the powers and responsibilities of both parent companies for the joint venture.
Once incorporated, the Singapore company can set up bank and business accounts there, and begin operating.
Which Type of Company Should I Register in Singapore?
There are several different forms of company that you can incorporate in Singapore. We consider each in turn:
- The exempt private company. An exempt private company in Singapore can have between 1 and 20 shareholders: The shareholders may be all foreign. The company must have at least one Singapore director (resident there, and with the required visa status under the law), as well as a Singapore company secretary. The company must have a registered physical address and Singapore. Note, the exempt private company is not permitted to have corporate shareholders: All shareholders must be natural persons
- Private company limited by shares. This company may have between 1 and 50 shareholders. Unlike an exempt private company, they are permitted to have corporate shareholders. Furthermore, in most cases, these companies are required to prepare financial statements and have them audited every year
- Private company limited by guarantee. These companies have no shareholders and are usually only permitted for charitable and other non-profit purposes
- Public company limited by shares. A public limited company can have more than 50 shareholders but must be registered on an exchange, and meet a range of other compliance obligations.
Back to you
When registering a foreign company in Singapore, it is important to first consider which is the best business structure for your enterprise in Singapore. Next, consider how the company should be operated in Singapore, and whether a subsidiary is required. Finally, where a subsidiary is chosen, a business needs to consider which of the several corporate forms available in Singapore will be the most appropriate.
